Many small logistics businesses across African cities like Lagos, Nairobi, and Accra fail not from a lack of demand, but because they underprice their services.
Pricing based on competitor rates rather than actual operating expenses often leaves operators running at a loss.
To protect margins and ensure business survival, SME owners must accurately calculate cost per delivery logistics.
Defining the hidden costs in African logistics
To calculate cost per delivery logistics, a business must divide its total delivery-related expenses by the number of successful deliveries made over a specific period.
This calculation must include both fixed costs, which remain constant regardless of delivery volume, and variable costs, which fluctuate with every trip.
Fixed costs include driver salaries, office rent, tracking software subscriptions, and annual vehicle licensing.
Crucially, operators must also include vehicle depreciation as a fixed cost.
A motorcycle or delivery van loses value daily, especially when operating on poorly paved roads.
Variable costs change depending on distance and road conditions.
These include fuel, routine engine maintenance, tyre replacements, tolls, and daily local council tickets or informal transit levies.
The cost per delivery calculation formula
The standard formula is straightforward but requires meticulous record-keeping.
Cost per Delivery = Total Delivery Costs (Fixed + Variable) / Total Number of Successful DeliveriesUsing a monthly timeframe provides the most stable view of these expenses, as it accounts for monthly utility bills and salary cycles.
A practical business example in Nigeria
Consider a small logistics business in Lagos operating three dispatch motorbikes.
In a single month, the business successfully completes 600 deliveries.
The monthly operating expenses are detailed below.
| Cost Category | Monthly Expense (NGN) |
|---|---|
| Rider Base Salaries (3 riders) | 210,000 |
| Monthly Bike Depreciation | 100,000 |
| Admin and tracking software | 80,000 |
| Amortised Regulatory Permits | 20,000 |
| Fuel (1,080 Litres) | 1,080,000 |
| Routine Bike Maintenance | 120,000 |
| Tolls and Local Levies | 60,000 |
| Total Operating Cost | 1,670,000 |
To find the cost per delivery, divide the total operating cost of NGN 1,670,000 by the 600 successful deliveries.
The cost per delivery is NGN 2,783.
If this business charges customers a flat rate of NGN 2,500 per delivery, it loses NGN 283 on every transaction, quietly eroding its capital.
Three common mistakes that drain cash flow
First, many founders ignore vehicle depreciation.
When a bike needs replacement after two years of heavy use, the business often lacks the cash reserves to purchase a new asset.
Second, operators fail to account for the financial impact of failed deliveries.
If a rider makes a trip but the customer is unavailable, fuel and time are wasted, yet no revenue is generated.
These attempted trips must still be counted in your total costs, which ultimately raises the unit cost of your successful deliveries.
Third, small businesses frequently omit informal payments.
Daily payments to local transport unions or street collectors are common in major African commercial hubs.
If these daily expenses are not logged, the calculated cost per delivery will be artificially low, resulting in misleadingly optimistic profit margins.
To protect your margins, download your transaction data and build a basic tracking spreadsheet.
Calculate your actual cost per delivery at the end of every month, and adjust your pricing model to reflect changes in fuel prices and maintenance expenses.
