What Does it Take to Start a Social Delivery Service?

My first conversation was with another bakery owner (who I’ll call L) that does both local and long-distance deliveries. I knew that L had similar logistical challenges as Bread by Us – their deliveries can be complex and delicate. With delicate deliveries (think: decorated cakes) it’s incredibly difficult for us bakers to put our trust in someone who isn’t very invested in our success. So like many bakery owners, L does most of their deliveries themselves. This is time consuming and takes L away from baking and decorating, but it is so critical to the success of L’s business that it is worth their time.

As small business owners (myself included), we can feel quite stuck in patterns of taking everything on ourselves. This can come from a lot of places, but in my opinion, it mostly it boils down to two things:

1. A lack of confidence in someone else’s ability to complete a task as critical as the one we are holding onto.
2. Not being able to justify the cost required to hire someone to do the task with the care that it deserves. Think of your own feelings on shipping and delivery costs. As clients, we rarely feel good about paying more than a few bucks for shipping!

In speaking with L, we both acknowledged that loading and unloading product and driving long distances was not the best use of our time and skills as busy bakers and business owners. Additionally, we both struggled to put our finger on just how much time (and therefore money) we were dumping into taking this task on ourselves. We are both in the habit of volunteering a lot of our time to our businesses, and as a result, we often fail to put a dollar value on the work we are doing to drive our products around to customers. But we also both acknowledge that it would be a game-changer to have a delivery service we could truly trust, and that we could afford. 

The main questions that I left that conversation wondering about were: 

• For a small business like L’s and mine, how much are we willing to spend to have a trustworthy delivery service working for us so that we get this time back for ourselves? 
• How do I get another business owner to take a chance on this new idea with me when so many small businesses are just scraping by?

Conversation #2: A Passionate Entrepreneur with Badass Politics and Values

My second conversation was with someone I really look up to as a business mentor. They also happen to have experience sitting on the board of two different social enterprises. Let’s call this person T. We got into a deep conversation around how to think about the labour force and human resources for Fair Path. Something that I’ve been grappling with is: how do I build a new business or organization in which everyone involved is truly invested? It’s important to me that Fair Path is not only a place where drivers can earn decent wages, but that it is also a place where drivers take ownership of the care that goes into growing and maintaining an ambitious project. How do I build this enterprise differently so that I don’t replicate the same challenges that I have in my existing business?

T shared with me that many of the same human resources challenges that she experienced in her retail business are indeed present in the social enterprises she advised – despite those enterprises having strong social mandates. Fair wages and strong social mandates go a long way to reduce HR difficulties like turnover or lack of engagement, but they do not make us completely immune to them.

Cooperatives, however, employ corporate structures that are inherently differently from a typical enterprise with a social mandate. Cooperative owners share risk and reward, and have access to growth and development opportunities. Cooperative members can get involved in so many different ways: strategic planning, operations, financial management, HR, etc., as the cooperative grows and evolves. 

T suggested starting a worker cooperative, and I knew I wanted to explore this option more deeply. The idea of a co-op is both invigorating and a bit scary. It aligns well with my values and I love the idea of every person involved in the company being invested in it, in a big way. It is also boldly different, so much so that I feel a little out of my depth considering this idea.

These are the questions I’m pondering now:

• How does one start a co-operative and how do I know if it’s the right corporate structure for this project? 
• How do I find potential members/partners with the right kind of experience for this project? Do we need to take a leap of faith with other members or is there a way of feeling secure in the cooperative’s ownership?
• Is there another corporate structure that I should also be considering?

Conversation #3: A Farmer with a Delivery Side-Business

My third conversation was with a farmer who works very hard to deliver orders to his customers all across Ottawa & Gatineau. His story is very familiar. He and his business partners realized that investing in their own delivery system is essential to their ability to get their products into customers’ hands, but the economics of operating it are tricky.

My farmer friend–let’s call him S–decided to partner with his driver and start a stand-alone company that focuses solely on delivery logistics. Because of the magnitude of their investment in the vehicle (a refrigerated truck), and the cost of fuel and maintenance, they figured that to make it worthwhile, the truck needs to be in use several days a week. There would be no way to recover the costs of the investment with delivery demand from the farm alone, so they needed to find other delivery clients. At the moment, the delivery company serves three other companies (plus the farm) on a regular basis, plus two other companies for 6 months of the year. 

S and his partner operate a tight ship and they’ve honed the system over the years in an effort to recover costs. He explained to me in detail the variables that affect the cost of delivery:

• mileage
• volume of product
• weight of product
• and time

He stressed the importance of considering all of these factors when coming up with a pricing scheme. His delivery company charges a daily rate to the companies that hire them based on all 4 of these variables. So for instance, Company X hires the delivery service on Mondays, and is charged a daily rate accordingly. Company Y hires the delivery service on Tuesdays, Company Z on Wednesdays and the farm itself hires the company on Thursdays and Saturdays. By operating 5 days/week, the delivery company can hire a full time driver and make enough money to cover the costs of financing the vehicle as well as fuel and maintenance.

Even with years of tinkering with their system and a profound understanding of how it all works, S admits that delivery logistics is a very tough business that requires a lot of time and effort. He sometimes weighs out the option of moving away from it and opting to use a third-party. He explains that the market for last mile delivery companies is saturated and there are no shortage of options out there for a business looking for a last-mile delivery partner. But doing so would mean losing control over such an important part of his customers’ experience. Switching to an unknown delivery company would also mean not knowing if people working for him are well cared for, which is difficult for him as a deeply values-driven person. 

S’s advice for me was to be very specific about the niche my future delivery entity intends to serve. Having a narrow focus and tapping into an underserved community has multiple benefits. For one, it means that drivers can have a specific focus and develop skills around that focus, for example, handling fragile food products. Also, it means the delivery company is taking on a service that is not widely available to companies and filling a gap in the market. This is important when considering the growth potential of the delivery company. As I’ve explained before, it is difficult to find delivery companies that will take time to keep boxes upright, prevent things from shuffling around, take care not to squish loaves of bread, and so on. Delivering delicate prepared foods is a very different job than delivering a pizza box or a case of cat food. 

Here are some takeaways I’m left with following my conversation with S:

1. 1. 1. It sounds like a small business with underutilized delivery vehicles or drivers would be a natural fit as a partner. Do I know of any?
      2. Maximizing delivery efficiency will be important to keep costs down while meeting customers’ needs. This may determine the number of partners I involve and means volume is key to our exploratory conversations.

Conversation #4: A Professor and Social Impact Business Advisor

In all honesty, talking to my existing circle of business peers, while incredibly valuable, left me with as many questions as answers. So when I met with my next expert, a professor I will call G with plenty of experience on cooperatives, I appreciated the clarity he offered me on the topic.

I began by explaining the impetus for wanting to start a delivery service, and my desire to explore setting it up as a co-op. G generously took time to explain the value of co-ops in general and the variety of co-op models that are out there. Unlike a typical corporation whose primary mission is to maximize profits, the core mission of co-ops is to serve their members well. Members can be consumers, workers, producers, or a combination of all three (aka a multi-stakeholder co-op). G pointed out that given what I am trying to accomplish with the delivery service, a producer co-op is the most fitting model. In a producer co-op, members of the co-op are the businesses who are using the service.

For the first time since the inception of the project, I felt a sense of groundedness in the idea of the business model that was being proposed. G explained that producer co-ops have loads of potential: the structure of a producer co-op could serve as a platform for future collaboration between small businesses. For instance, while the co-op will start off as a delivery service to meet the members’ delivery needs, in the future it could negotiate better prices on raw ingredients or access group insurance benefits for employees of member companies. The thought is an exciting one. Small businesses are, by their nature, precarious entities. By collaborating through a formal co-op structure, there are countless ways to collaborate to meet needs, share risks, burdens and responsibilities, and access resources.

Where Fair Path is at now

These conversations opened up new considerations that I wasn’t aware of before. 

Things I have decided on for Fair Path Delivery: 

• Trustworthy delivery is mission critical for business owners of delicate goods like mine. Careful delivery can make or break the business. Outsourcing it will incur trade-offs that may conflict with my values or quality standards. Doing it ourselves is worth exploring but will not be a walk in the park. 
• Potential business owners with similar types of goods will understand the value of Fair Path. If the business is just scraping by, it will need to make a hard decision to join Fair Path or to outsource – but it might be what the business needs to uphold their reputation and values.   
• A producer or multi-stakeholder co-op is probably the model that makes the most sense for this project. 
•  I will need at least one other partner to start the co-op with, ideally someone with experience delivering their own goods, with a vehicle and with underutilized delivery capacity. Their delivery volume and patterns should be complementary (rather than identical) to maximize efficiency. 

 My next step is to engage potential partners that meet the above requirements. We will need time to get to know each other’s delivery volumes and patterns, and get a feel for each other as we will be working closely together. For more information on setting up a cooperative and getting expert advice, my partners and I will be approaching Cooperatives and Mutuals Canada. 

These conversations have taught me that setting up this project will be slower than I had originally envisioned. But going slow gives my future partners and I an opportunity to do things boldly and differently. While not simple, this direction does open up future benefits that go beyond careful deliveries and employee care.