Dragons Den anyone?

Turnover v Profit- The Percentage game

An interesting topic highlighted week in and week out by those entrepreneurs collectively known as the Dragons from Dragons Den. Yet again i’ve witnessed someone turn down an offer from one of the Dragons because she felt the %age they wanted was too high. I’m the first to shake my head when this happens because they’ve missed the point. If you only plan to give away 15% of, let’s face it something that isn’t yet a business, and you get an offer but they want 40% you’ve let your emotions get in the way. You’re just not doing the maths.

It’s purely a numbers game.

What they bring to the table is the probability that with them, you’ll turnover bundles, and without them you won’t. So what would you rather have, 100% of nothing, or 60% of something?

Using the same analogy in my world, sameday couriers, you would probably expect me to be on the “charge less but get lots of it” side of the fence. However, you’d be wrong.

The simple facts are that big volume for small profit just doesn’t work in the sameday market. Quality of Service does, and that comes at a price.

There are some that do make it work, but generally at the cost to both the customer, and the courier being asked to collect and deliver whatever it is the customer has for them.

For example If i charge £1.25 per mile for a small van, and I can get it covered for 75p per mile, then I have a margin of 40%. If i only turnover £250,000 then i have a profit of £100,000 (Less costs) Not bad

However, if i reduce my charge to 90p per mile and still get it covered for 75p per mile, i now have a margin of just 16.67%, but i’ve trebled my turnover to £750,000, giving me a slightly higher profit of £125,000. But i’ve had to recruit more office help to do it, because it’s too much for one person to do, thereby lessening my profit.

What tends to happen in this scenario is, the courier is expected to cover the work for less. Much less. In some cases as low as 48p per mile!

If we redo the figures so that the courier gets 54p per mile, we’re back to a margin of 40% and a much healthier profit of £300,000. Ok more office bods to help, but still very worthwhile i think you’ll agree.

So by reducing my charge by almost 30% I treble my turnover and my profit. So what’s stopping me?

What’s stopping me is the 54p per mile i’m asking a courier to cover the job for. It’s not enough.

At this level you are opening yourself up to drivers who are uninsured, drivers who are co-loaded, and/or drivers who don’t care. And why should they. You clearly don’t care about them, so why should they care about you? Your service level drops, your customer complaints increase, so much so, you start losing them. In the short-term you may get away with it, but if you’re in this for the long haul, it’s a mistake.

Real customers know the difference.

I’m in business to make money, but i also have ethics, and i want every single job we do, to be done properly, by a professional courier, who understands what it is we do.

In my view it’s a partnership, I get the work, and the courier carries it out for me. I ask no-one to do something that i wouldn’t be prepared to do myself.

Can you all say the same?

Clearly Speed not all can say the same. Quality not quantity every time.

Well said Mr speed, at last some wise words on the forum, to repeat your words in a previous post - been there - done it and chucked the T shirt in the bin. 4 years ago we were a £1m turn over company, employing 30 staff and making a very small profit for all the hard work we put in, in the end it felt like I was working my arse off just to pay the staffs wages, anyway to cut a long story short our turn over is a lot less but we are a lot more profitable - its tough these days but we wont budge on price - I would rather have a van standing idle than running at suicidle rates. If a new potential customer calls for a price and I quote £100.00 and the customer says "Bob and his van" will do it for £60.00 I tell the to take "Bobs" quote, Bob and his van wont be around next year running at his rates. I dispair at some of the topics on here eg - what is GIT? Why do i need H&R insurance? How much should I charge per mile etc etc. Best advice to anyone in business "TURNOVER IS VANITY - PROFIT IS SANITY

Absolutely, and yes it is rather worrying the calibre of questions that crop up on an alarmingly increasing number of times. What riles me is the information is already out there, it's even on this forum if only they'd look before asking.

Getting very repetitive, i say it's getting very repetitive

At the risk of being repetetive it is becoming repetetive

And much like yourself Mr Parkway I wont run my van at 60pplm for anyone because I would be chasing my own ass for nothing.

I wish you lot would start a branch in Bristol.

Going back to the question Mr Speed asks 'Can you all say the same?' I think the answer is no. I quote regularly on work that is posted here at my normal trade rate of £1 plm for a LWB Boxer. I have had this rate from C Expert and two other members.

I focus on reducing empty miles but I won't go much below £1 even for a backload because it just encourages people to offer less and less.

I am lucky enough to have a very busy end user customer so I admit I am not as exposed as some to the market but I am bidding work every day and usually not getting it which is the clearest evidence that people are not as concerned about their subbies as Mr Speed obviously is.

Andy McTighe said:

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Going back to the question Mr Speed asks 'Can you all say the same?' I think the answer is no. I quote regularly on work that is posted here at my normal trade rate of £1 plm for a LWB Boxer. I have had this rate from C Expert and two other members.

I focus on reducing empty miles but I won't go much below £1 even for a backload because it just encourages people to offer less and less.

I am lucky enough to have a very busy end user customer so I admit I am not as exposed as some to the market but I am bidding work every day and usually not getting it which is the clearest evidence that people are not as concerned about their subbies as Mr Speed obviously is.

Why are you bidding on work every day, if as you say '

I am lucky enough to have a very busy end user customer so I admit I am not as exposed as some to the market'

I imagine you are 'testing' the water?

You are spot on though about not lowering your prices! If only everyone could see that by doing so, is the reason better prices are not offered in the first place! Even accepting peanuts for a backload is NOT in the best interest for all concerned!

Tut Tut Rob, thats the trade secret of business out and for free as well.. ;)

Backload prices should be banned imho... Yeah I know that's controversial but as Rob says its not in everyones interests and one of the biggest reasons for keeping prices low.

Whether you ban "backloads" or not, you'll never get away from the fact that a courier returning home empty will always be able to quote cheaper than a local guy who isn't. The whole concept of any of the exchange sites is to cut down on dead mileage, so whatever you call it, prices will reflect where that courier is going next.

For example.

Glasgow to London and there's a London driver clearing 10 miles from the collection point.

He knows roughly what ballpark the quotes are going to be, so goes in at a price he's pretty sure will guarantee that he gets it. Good business sense, and more profit for the vendor.

The downside is the local guys don't get a look in, but i don't think it sets a precident. It is surely what being a member of an exchange site is all about.

Selling a job as a backload is a different matter. It's suggesting to all that a cheap price is what's being looked for. Now that may be because it has a large window for the collection, or delivery, or both, and the vendor has priced it accordingly, but there are plenty of other sites for that kind of work, and i don't believe it should be here.

Increasingly a "backload" is a vendor trying to sell a an urgent sameday job on the cheap, but as i've already shown in my example, you may get cheaper quotes from those who are going back empty anyway so what's the point?

The more members of an exchange site, the more likelihood that a posted job will go to a "backloader" whether its posted as one or not so you can't ban it, If anything it merely highlights the fact that exchange sites are purely here to cut down on your dead mileage by giving you access to extra work. Note i say "extra". You need your own work, or to be attached to a company that has plenty of it, and at that point exchange sites do what they are designed to do. They are not, nor ever will be, a way to make a living. So yes by all means ban the abilty to post a "backload" but you won't stop couriers quoting as a backload.

So am I right in thinking that if I quoted a backload rate you would pass that saving on to your customer or would you rub your hands and take the saving yourself... Thats not aimed directly at you by the way. If that is the case there can only be one loser in the scheme of things. Now sat in Edinburgh waiting for something south.

Fastback Parcel Solutions said:

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So am I right in thinking that if I quoted a backload rate you would pass that saving on to your customer or would you rub your hands and take the saving yourself... Thats not aimed directly at you by the way. If that is the case there can only be one loser in the scheme of things. Now sat in Edinburgh waiting for something south.

Keep saying this, what the vendor charges THEIR customer is nothing to do with anyone else! All you should be concerned about is charging a price that is suitable for yourself!

Someone's "backload" rate can be someone elses "hotshot" rate, so it's all relative.

And no, any savings go into a pot for the odd occasion we have to pay more than we would ideally like. You know the time, when a lot of us have had enough for the day/week and decide to have a few sherbets thereby not able to help.

Dangerous to offer a discount cos it sets a precident and next time the "backloader" won't be there, but they'll still expect the lower rate.

Good luck getting out of Edinburgh with something 0:)

Ahhhh I love a good conundrum.

Haven't heard of that one. Is it a cognac? lol

What do you pay your subbies out of interest Mr Speed? I'm always looking for more work

SC Couriers Limited said:

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What do you pay your subbies out of interest Mr Speed? I'm always looking for more work

Small van 80 pence

Medium van 90 pence

Lwb/xlwb £1.10

AJM sameday Couriers said:

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SC Couriers Limited said:

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What do you pay your subbies out of interest Mr Speed? I'm always looking for more work

Small van 80 pence

Medium van 90 pence

Lwb/xlwb £1.10

Is that the rates you pay AJM or what Mr Speed pays?

SC Couriers Limited said:

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AJM sameday Couriers said:

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SC Couriers Limited said:

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What do you pay your subbies out of interest Mr Speed? I'm always looking for more work

Small van 80 pence

Medium van 90 pence

Lwb/xlwb £1.10

Is that the rates you pay AJM or what Mr Speed pays?

I have paid that, but this should be about what it should be, think Mr Speeed pays more

AJM sameday Couriers said:

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SC Couriers Limited said:

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AJM sameday Couriers said:

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SC Couriers Limited said:

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What do you pay your subbies out of interest Mr Speed? I'm always looking for more work

Small van 80 pence

Medium van 90 pence

Lwb/xlwb £1.10

Is that the rates you pay AJM or what Mr Speed pays?

I have paid that, but this should be about what it should be, think Mr Speeed pays more

Thanks AJM

Well thanks for speaking on my behalf Gary but i have no fixed rate. If i have a job that needs covering it goes on an exchange site and it'll go to whoever is the nearest, and/or whoever is competitive. To some its all about price, but if you can't hit my collection or delivery deadlines then being keenly priced is no good to me. I want it picking up quickly, and i want it to go directly to the delivery address.

I pay what i'm quoted, i rarely quibble, if you're way off you won't get it, if you're too far away you won't get it either. We're fair, we pay ontime, and all we ask is for uncomplicated because i particularly like uncomplicated.

So you don't have regular subbies that you contact before putting on an exchange site?

RAPID LIGHT TRANSPORT LTD. said:

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Andy McTighe said:

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Going back to the question Mr Speed asks 'Can you all say the same?' I think the answer is no. I quote regularly on work that is posted here at my normal trade rate of £1 plm for a LWB Boxer. I have had this rate from C Expert and two other members.

I focus on reducing empty miles but I won't go much below £1 even for a backload because it just encourages people to offer less and less.

I am lucky enough to have a very busy end user customer so I admit I am not as exposed as some to the market but I am bidding work every day and usually not getting it which is the clearest evidence that people are not as concerned about their subbies as Mr Speed obviously is.

Why are you bidding on work every day, if as you say '

I am lucky enough to have a very busy end user customer so I admit I am not as exposed as some to the market'

I imagine you are 'testing' the water?

You are spot on though about not lowering your prices! If only everyone could see that by doing so, is the reason better prices are not offered in the first place! Even accepting peanuts for a backload is NOT in the best interest for all concerned!

I do a fair bit of long distance stuff for my main customer so I am often bidding for 'backloads' but there is a price I won't go below and sometimes drive past jobs rather than give the 'vendor' the satisfaction. So I am not testing the water, I am trying to make additional profits - just not at any price.

Our own drivers you mean? Sure, we have some on a %age of each job they do, and some on day rates in our vehicles. Some subbies we ring before outsourcing because we know them and know their rates, and that they do the job well.

What i'm saying is nothing is written in stone. Its called being flexible, and i think you have to be. It works for us, and overall we get the margins we want. No one can say we rip them off, because we pay what they want.

That's what i keep on saying. It's easy if you want it to be, complicated if you don't.

I prefer easy

Well Rapid I agree its nothing to do with me what you charge YOUR customers, until that is, like some in this industry you either get greedy or try and nail some poor subbies ass to the ground with a low price.

SC Couriers Limited said:

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So you don't have regular subbies that you contact before putting on an exchange site?

I can vouch for speed nationwide. As a regular for them when i'm in the area, always pays me my rate without any quibble, and pays on time. I always let my regulars know when i've got a job going to there area, and a lot of the time I get a job going home. It's all about letting people know your in there area and who knows, you may get lucky. All it takes is a quick call or text when you leave for your job, then it keeps you in mind once you cleared if you give them a time once cleared. Works well for me, i'm that busy these days I don't even need the genuine exchange sites if i'm honest

East-Lancs Sameday Couriers Ltd said:

I always let my regulars know when i've got a job going to there area, and a lot of the time I get a job going home. It's all about letting people know your in there area and who knows, you may get lucky. All it takes is a quick call or text when you leave for your job, then it keeps you in mind once you cleared if you give them a time once cleared. Works well for me, i'm that busy these days I don't even need the genuine exchange sites if i'm honest

That my friend is called a daisy chain by networking, there are a few who thrive by doing this and do very well from it... networking is also a key factor to obtaining work, even if your new to the industry.. I would rather give work to someone I know and can do the Job to my standards than someone whom I dont know.

Fastback Parcel Solutions said:

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Well Rapid I agree its nothing to do with me what you charge YOUR customers, until that is, like some in this industry you either get greedy or try and nail some poor subbies ass to the ground with a low price.

As for Greed, not sure what you mean by that? please elaborate

Greed? To me it means taking the p***

Greed is simple, you make more money off the back of someone else ( again not referring to anyone in particular ) by forcing his/her rate down because you think the job should be done as a backload. Yep I have had experience of that, I quoted my price and was told I should be able to do it cheaper as I was going back that way, my reply was two fold, A you have no idea where I am going or was going and B my rates are my rates if you don't want the job done then fair enough.

Fastback Parcel Solutions said:

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Greed is simple, you make more money off the back of someone else ( again not referring to anyone in particular ) by forcing his/her rate down because you think the job should be done as a backload. Yep I have had experience of that, I quoted my price and was told I should be able to do it cheaper as I was going back that way, my reply was two fold, A you have no idea where I am going or was going and B my rates are my rates if you don't want the job done then fair enough.

How can you 'Force' someone's rates down? If I ask someone to do a job, if I like the price that's fine, if not I give it someone else!

All business profit is making money off someone else.

Primarily I seek quality, someone who has the ability to communicate, and does the job properly. If however someone offers to do the job for £!50 and another EQUALLY suitable driver offers to do it for £120, which am I going to use??

I am afraid the sole purpose of me being in business is to make as much money as possible, and yes we do pay well and on time!

Rates are naturally forced down if backload prices are expected or offered, agreed the sole purpose of my business is to make a living as well, I have no doubt about whether you pay well or on time.

Fastback Parcel Solutions said:

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Rates are naturally forced down if backload prices are expected or offered, agreed the sole purpose of my business is to make a living as well, I have no doubt about whether you pay well or on time.

Ahh, but I did say 'make as much money as possible' NOT just make a living!

But not at the expense of others

Fastback Parcel Solutions said:

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Rates are naturally forced down if backload prices are expected or offered, agreed the sole purpose of my business is to make a living as well, I have no doubt about whether you pay well or on time.

Rates need not be 'forced down' It is because people do not work out their costs propperly and offer to do work cheap that this seems to be the case!

It is not difficult! Quote on the basis that you will NOT get the dreaded 'backload' and if you do not get offered the job, move on. It is simple!

Speed Couriers Nationwide Ltd said:

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But not at the expense of others

On the same theme, if you were quoted £50 to change a tap washer or £120 by plumbers of equal ability and standing, which would you choose?

I get sick and tired of people asklng us 'what the going rate is' and how much do wqe pay

There is no such thing as a 'goiing rate' and every job is treated on it's own merits. No set price, If we do not like what a driver quotes, we use someone else providing that they meet the standards we require!

RAPID LIGHT TRANSPORT LTD. said:

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I get sick and tired of people asklng us 'what the going rate is' and how much do wqe pay

There is no such thing as a 'goiing rate' and every job is treated on it's own merits. No set price, If we do not like what a driver quotes, we use someone else providing that they meet the standards we require!

It's true.

We had a job last minute yesterday and the drivers mileage rate worked out at £2.00 per mile for a transit.

We needed it covering and we only just manages a small margin.

Job covered and everyone is happy.

I'd choose the £50, assuming both were available now. The point i'm making is that both rates are of their choosing.

Speed Couriers Nationwide Ltd said:

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Our own drivers you mean? Sure, we have some on a %age of each job they do, and some on day rates in our vehicles. Some subbies we ring before outsourcing because we know them and know their rates, and that they do the job well.

What i'm saying is nothing is written in stone. Its called being flexible, and i think you have to be. It works for us, and overall we get the margins we want. No one can say we rip them off, because we pay what they want.

That's what i keep on saying. It's easy if you want it to be, complicated if you don't.

I prefer easy

You're right in saying there is no "going rate" because everyone's needs are different. But there is a range. Afterall if you quote and never get anywhere then you have to assume you're quoting high. Equally if you're getting every job you quote for, but haven't got any money for the next van service, perhaps you're quoting too low.

Lots of assumptions are made, some true, some not.

Rapid has said it in a nut shell, we are all in business for one reason and one reason only, some do well from it because they have done their homework and want the cake plus cherry and others struggle but manage or go down the pan because theyve not done their homework as the OP has pointed out, Greed is not a word I would use, maybe P**s takers who pay low, and backloads is another topic and one I tend not to use as my work is priced to cover the return, if returning with one then its a bonus for whoever is doing the Job, but quality is foremost putting the customer first..

RAPID LIGHT TRANSPORT LTD. said:

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Fastback Parcel Solutions said:

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Greed is simple, you make more money off the back of someone else ( again not referring to anyone in particular ) by forcing his/her rate down because you think the job should be done as a backload. Yep I have had experience of that, I quoted my price and was told I should be able to do it cheaper as I was going back that way, my reply was two fold, A you have no idea where I am going or was going and B my rates are my rates if you don't want the job done then fair enough.

How can you 'Force' someone's rates down? If I ask someone to do a job, if I like the price that's fine, if not I give it someone else!

All business profit is making money off someone else.

Primarily I seek quality, someone who has the ability to communicate, and does the job properly. If however someone offers to do the job for £!50 and another EQUALLY suitable driver offers to do it for £120, which am I going to use??

I am afraid the sole purpose of me being in business is to make as much money as possible, and yes we do pay well and on time!

+1

I am not disagreeing with any of this and maybe I shudnt have used the word greed... But I believe in a fair price for a fair job and maybe I pricked a few consciences with using that word.

Fastback Parcel Solutions said:

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I am not disagreeing with any of this and maybe I shudnt have used the word greed... But I believe in a fair price for a fair job and maybe I pricked a few consciences with using that word.

Maybe rattled a few cages, but not everyone is the same.

Yet again its another one of those unsolveable situations. As long as your happy thats cool.

Why dont we call them Backshots and Hotloads

I aint taking a backshot, but I can do a good hotload first thing.

Pmsl

Fastback Parcel Solutions said:

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Greed is simple, you make more money off the back of someone else ( again not referring to anyone in particular ) by forcing his/her rate down because you think the job should be done as a backload. Yep I have had experience of that, I quoted my price and was told I should be able to do it cheaper as I was going back that way, my reply was two fold, A you have no idea where I am going or was going and B my rates are my rates if you don't want the job done then fair enough.

I agree with you on that. I don't care where i'm at. My rates are my rates, if they want someone doing it for peanuts then good luck to them, but don't moan when it goes wrong. I quoted a job on Courier Exchange 187 miles i gave him my quote, his reply was i'm still taking prices and been offered £160 for xlwb van. My reply was- i'm not doing it for that. Works out 85pplm, im not a mug.

I offered one on Friday on C Exchange 216 miles, the vendor was very apologetic but had taken an offer of £110 for the job despite openly admitting he had no idea why anyone would do it for that. Clearly a diesel money rate.

But he still sold it at that price and didn't question it further did he. Despite the fact he didn't know how it could be done for that sort of money, and that's what we as subbies are up against, this business has responsiblilities on both sides.

Fastback Parcel Solutions said:

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But he still sold it at that price and didn't question it further did he. Despite the fact he didn't know how it could be done for that sort of money, and that's what we as subbies are up against, this business has responsiblilities on both sides.

Couldn't agree more but I can understand vendors grabbing the extra profit if couriers are dim enough to offer stupidly low rates. Surely nobody else was going to bid under 80p even as a backload so why offer 50p? Made me look greedy because I wanted £1.20

Never feel embarrassed about your prices Andy as you have worked out what it costs you to run at, the dole que is far more embarrassing. Be safe in the knowledge that fools like that wont be around for long.

You cannot stop anyone quoting low, and you don't necessarily know the reasons behind why they do.

There are some out there, that quote low just to get out of the house, and it is them that then sit in service stations waiting for a load to take them home. Or there are those that work for vendors whose prices are so low that they too have to sit around waiting for something to take them home. So if they get an alert that they really really want, and have had little profit on the outbound, then they will quote low to ensure they get it. For those adamant they won't go lower than a particular price, then fine. Most of us make profit on the outbound so can take it or leave it. And there are plenty who are going around at 50p a mile, but they ensure EVERY mile, near as dammit, is paid.

I'm not saying i agree or disagree with why people quote low, just saying how it can happen.

My gripe is with those that are offering work at low rates, and that's a different matter altogether.

Indeed, in this case it wasn't offered low, it was merely offered and was then bid low so I take your point. We are all masters of our own destinies and in the end will conduct our businesses as we see fit. There are many ways to skin a cat.

So many topics on the same theme

I see myself in so much of this thread its just not funny. I really need to alter my work ethic.