“Traditional” careers on the decline. Office layoffs and furloughs are at an all‑time high, the job market is tenuous, and more and more people are flocking to their couches. You—and everyone else in the world—still need money, though.
Why not use this opportunity to set up that home business you’ve always dreamed of?
You’ve got the time. You’ve got the skill. You’ve got the products. The only thing you need to learn is how to manage your business finances.
We aren’t just talking about taxes or business expenses. Shipping costs are among the most overlooked financial details of home business startups. One of the biggest challenges is learning how to calculate shipping costs in an efficient, price-effective way.
To help you get started, we’ve compiled a few tips to help you learn how shipping fees work and how to estimate what shipping should cost.
How to Calculate Shipping Costs
Calculating shipping costs isn’t a “one size fits all” process. Different companies have different needs, and what works best for one seller may not be the best option for you. Here are a few of those options and a summary of when they work best.
If you already have a solid buyer base, free shipping might be your best pick. Free shipping attracts customers and inspires them to spend more, both of which are great for your sales. It’s also the easiest kind of shipping to calculate because you know you’ll always charge $0.
The only problem with offering free shipping to your customers is that you’ll have to pay the full amount yourself. Free shipping doesn’t mean free for the business. If your products typically cost less than $10 per item, this probably won’t be the most cost-effective choice for you.
For this reason, most companies only offer free shipping after a certain amount (i.e. they require a minimum purchase). To give you an example, most clothing and makeup retailers set free shipping for any orders equal to or greater than $50.
Another option if you want to avoid calculating shipping costs on your own is to offer flat rate shipping. Flat rate shipping is the term used for companies that have the same shipping price for all of their packages.
As long as you don’t charge an exorbitant amount (i.e. more than $6.50 per shipment), customers appreciate flat rate shipping almost as much as free shipping. It takes the stress off of them and off of you. Like free shipping, though, this can end up being very expensive for you if you tend to ship larger or heavier packages.
Commercial Shipping Rates
The traditional method for calculating shipping fees is to measure and weigh each of your packages and price them individually based on that. This is also why free shipping and flat rate shipping can end up costing you more than you make. Regardless of what you charge your customers, you still have to pay for shipping.
The good news is that most commercial shipping companies, including the United States Postal Services (USPS), have links on their websites that calculate shipping for you. All you have to do is input the measurements.
If you’d rather not deal with the hassle of determining shipping rates or packaging and mailing your products, you can hire a third-party company to take care of the hands-on work for you. This is also a great option if the business is booming and you find yourself getting overwhelmed with all of the details.
There are numerous shipping companies to choose from. Choose vendors that can design custom packing slips for your packages, and offer 1 to 2-day shipping for nearly ¾ of the USA. They’re also available in the UK.
Determining how to calculate shipping costs isn’t the only challenge for new businesses.
If you have other questions about getting your remote business off the ground, feel free to swing by our site.
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