Most business owners agree that it’s important to keep shipping costs predictable. A recent study reported that for small packages weighing around 1-5 lbs, the average shipping cost in the US can vary from $5.52 to $9.06.
This range largely depends on the distance your package needs to travel and the shipping service you choose. Understanding how to calculate the costs of freight shipping for small businesses before hand can help you save money and improve your services. Let us know clearly how you can do this for your business.
Understand the Factors Influencing Shipping Costs
First of all, you must understand the factors that affect shipping costs. These factors include:
Weight and size of the package
The first step in calculating shipping costs is to consider the weight and dimensions of the package. Shipping carriers generally use dimensional weight (DIM), which takes into account both the size and weight of the package.
DIM is calculated by multiplying the length, width, and height of the package and dividing by a standard divisor provided by the carrier. This method helps carriers charge more accurately for the space your package occupies during transport.
The Distance the Package Will Travel
The further a package needs to go, the more it will cost to send. Carriers divide shipping routes into zones, each with a different rate based on the distance from the shipping origin. For example, shipping within your state will likely be cheaper than shipping nationwide.
Shipping Speed Required
How quickly does your package need to get to its destination? If your customer needs an item overnight or within a few days, expect to pay a premium for expedited shipping services. Standard shipping, which generally takes longer, will be more cost-effective if you and your customers can afford to wait.
Type of Shipping Service Used
Different carriers offer various shipping options at different price points. Each service has its specific benefits and limitations, such as weight limits, delivery times, and tracking capabilities. Compare these services to find the best balance of costs and features for your needs.
Insurance and Additional Services
If you’re shipping valuable items, you might consider purchasing insurance to protect against loss or damage. Also, some shipments might require signature confirmation or special handling, which can add to the cost. Be sure to factor these extra services into your overall shipping cost estimate.
Calculating Your Shipping Costs
This is how you can calculate your shipping costs after you’ve considered all the factors:
- Package Details: Measure the dimensions and weight of your package. Use a reliable scale for accuracy because this will directly influence the shipping cost.
- Choose your carrier and service: Choose the right carrier and service that fits your budget and delivery needs. Most carriers have an online calculator where you can input your package details to get a cost estimate.
- Consider Using Prepaid Shipping: Some carriers offer a discount for prepaid shipping labels, which you buy in bulk ahead of time. This can be a cost-effective option if you frequently ship packages of similar size and weight.
- Use Flat Rate Shipping When Possible: If your items fit into the carrier’s flat rate boxes and weigh under the limit, this can be an economical choice. Flat rate shipping simplifies cost calculation, as the price is predetermined regardless of the package’s weight or shipping distance.
- Check for Discounts and Negotiate Rates: As a small business, you might be eligible for discounted shipping rates based on your volume or through a business account with the carrier. Don’t hesitate to negotiate better terms as your shipping volume increases.
How to Save Cost on Shipping as a Small Business
To save on shipping, use the following techniques:
- Optimize Packaging: Use the smallest packaging possible that still protects your products. This can reduce both dimensional weight costs and material expenses.
- Consolidated Shipments: Whenever possible, consolidate multiple orders into one shipment reduce the per-item shipping cost.
- Educate Your Customers: Offer your customers different shipping options and costs. For example, provide a standard shipping rate and an expedited shipping rate. This lets customers choose based on their needs and may help reduce costs at your end.
- Monitor and Adjust: Keep track of your shipping costs and periodically review your shipping practices and carrier performance. As your business grows, your shipping strategies may need to evolve to stay cost-effective.
Wrapping Up
Calculating shipping costs doesn’t have to be complicated. You can manage your shipping expenses effectively by understanding the factors involved and making informed choices. With this, you can not only maintain your profit margins but also upgrade your customer service by offering reliable and affordable shipping options to your customers.
