Despite Amazon’s best efforts to prepare new DSPs, most launch with very little knowledge of what to expect. It can take a full year before an owner feels that they have a grasp on the details of their operation. This article will discuss the top 5 mistakes to avoid when launching to set yourself up for success.
Don’t Be Afraid to Hire Sufficient Management Staff
SCENARIO: You are launching in 2 weeks, and you are already watching your bank account start to dwindle. Rumor has it that you need to reach 15 to 20 routes before you can begin to break even, but that’s another 2 or 3 months away. Where can you cut cost? Maybe you think to yourself: “I better not waste money on management overhead – I can do that on my own.”
Don’t make this mistake! You want to grow and acquire as many route commitments as you can, and if you try to manage your team alone you will fail. Hire at least 2 people two weeks before you launch your DSP business: an operations manager and a human resources manager. Let your HR manager handle hiring, training and driver questions while your operations manager handles overseeing daily operations and manages vehicles and equipment. This frees you up to look for gaps to fill in your business by acting as the financial guru.
Investing in hiring the right management staff will push your DSP operation to the 15 to 20 routes you need to break even and continue to be successful.
Never Stop Hiring
Every DSP owner reaches the point where they are afraid to have too many drivers on the payroll, so they temporarily stop hiring. Sometimes it makes sense to lower the number of offers going out for a short period of time, but never stop hiring altogether. There are two reasons to keep hiring:
- On average, it takes 2 weeks to restart hiring after you have paused it. This means that the moment you realize you are short on drivers you will have to wait 2 more weeks before you can get your pipeline of new hires going again. Additionally, there is a waiting period for background checks, drug tests, and training before a driver can begin work. It is more beneficial to simply lower the number of offers you make to new drivers each week as needed.
- No matter how good your hiring instinct is, or how excellent your training program tends to be, you will always have bad drivers that need to be terminated. If you feel that you have too many drivers employed, view it as an opportunity to fire accordingly and give new hires a chance to prove themselves.
The only exception to this rule is after peak when volume takes a steep dive. Even in this case, keep interviewing in case you find your next star driver.
Stop Putting Too Much Emphasis on Growth
It is common for new DSP owners to focus only on growth to stop the hemorrhaging of their bank account each week in the time immediately after launch. However, there are three other things you cannot afford to ignore while working towards that growth:
- Track overtime every day and don’t let your drivers abuse it. It doesn’t matter how many routes you grow to if your drivers are milking the clock and cause you to lose money on each route.
- Track total hours per route drivers take each day from punch in to punch out. Do not get distracted by shipments per on-zone hour (SPH). SPH measures how fast a driver delivers packages. A driver with a high SPH can still take a 1-hour lunch and kill your profitability.
- Track damage to your vans that drivers cause each day and hold them accountable for those damages. To do this you need to have a bonus system in-place from day one because Amazon will not allow you to hold back hourly wages. If a driver damages your van, they will not receive their bonus for that week. Without a bonus system your drivers have no incentive to take care of your vehicles.
Pay Attention to Amazon’s Invoices
It can be tempting to ignore invoices to focus on growth and daily operations since Amazon will automatically deposit payment into your business checking account with no authorization needed. Ignoring invoices can end up costing you thousands. It is important to review each one as you receive it and look for common mistakes such as:
- Incorrect van counts
- Missing reduced route payments
- Missing station closure compensation (typically due to bad weather)
You can also ask your fellow DSP owners to help you identify other shortfalls. Remember, you only have one week to dispute an invoice after it is given, so don’t forget to go over them.
Do Not Ignore the Scorecard
The scorecard usually stays a mystery to you until your second or third month of operating. Amazon will usually hold a weekly meeting with you to go over your scorecard, but most new DSPs do not understand the importance of this document.
In a nutshell, you may make a little money with a mediocre score, but serious profit will not happen until you routinely score at the top each week. If you are not receiving a Fantastic Plus score, you are leaving hundreds to thousands of dollars each week unearned. It is not easy to get your first Fantastic Plus score, but once there you only need to maintain it. Take the time on your first scorecard (which comes out on your second week) and ask your Amazon support team to explain every detail so that you can work on achieving the Fantastic Plus score.