How to start up a milk round business

If you can cope with the early morning start, you'll find that many people still appreciate having their milk (and other essentials) delivered to their doorsteps. Our practical guide will help you start up and run your own milk round.

• Research your target market
• Who will buy products from your milk round?
• What services will your milk round offer?
• What will you sell on your milk round?
• Buy an existing milk round

Research your target market

Estimating the number of customers

Whether you are going to buy an existing milk round or start one up from scratch it is essential that you have enough customers to make your business viable.

An average milk round has around 475 customers according to DairyUK, and you will need to check out the area in which you are planning to operate to see if you are likely to be able to sell to this many customers on a regular basis.

Why will customers order their milk from you

The main challenge that the delivered milk sector faces is that supermarkets and other retail outlets have taken a large slice of the milk market away from roundsmen. People have become used to picking up milk with the rest of the shopping, and, of course, the supermarkets and their convenience store chains offer milk for sale at very low prices.

You will need to find enough customers who would welcome a home delivery service. These customers might be:

• the elderly
• young families who have difficulty in getting to the shops
• anyone who is housebound or who has mobility problems

Look closely at your local area to identify whether or not enough potential customers live there. Ideal places include new housing developments, sheltered housing complexes and blocks of flats.

Don't forget that some people might welcome having groceries delivered along with the milk - a recent survey showed that the average milk round sells more than one hundred different products. In fact Dairy Crest's Milk&more doorstep delivery service offers customers more than 250 products.

Trade customers

As well as delivering milk and other products to householders you might also have some trade, or wholesale customers. These are known as semi-retail customers and might include:

• corner shops, petrol filling stations and other retail outlets
• caravan and camp sites
• catering establishments
• hotels and guest houses
• nursing and residential homes
• hospitals
• play schools, schools, nurseries

Local businesses might also welcome a regular delivery for staff use, particularly if they are located on business or enterprise parks with few shops nearby. Why not offer a range of tea and coffee making products and perhaps some snacks like biscuits and cookies? Don't forget that many large employers have an on-site canteen that is likely to use milk and dairy products every day.

If you plan to target trade customers:

• count the number of suitable businesses in your area
• work out what products you will offer them
• work out how much discount you will offer them - 10% is common
• approach them to see if they would be interested - don't forget if they are already being supplied you will have to give them a good reason to change. This might be lower prices, a better service or a more attractive and wider range of products

Research current trends, plus legal and tax issues

• Sector trends for milk round businesses
• Legal issues for milk round businesses
• VAT rules concerning milk round businesses

Who will buy products from your milk round?

Your market

You will probably have several different types of customer, for example:

• domestic households
• convenience stores and other retailers
• hotels, guest houses, bed and breakfasts, hostels, caravan sites
• schools, nurseries, crèches, playschools and childminders
• nursing and residential homes
• local businesses, for staff use and canteens

If you decide to operate a retail dairy as well as a milk round your customers will also include passing trade, and you might also supply milk to other roundsmen.

Falling customer numbers

Bear in mind that in some areas milk rounds are suffering from a lack of new customers as their elderly customers pass away. Younger generations are less likely to have milk delivered, although the mid 2010s saw a trend in some big city areas amongst 'millennial hipsters' wanting 'craft milk' and other 'craft' products. Doorstep deliveries increased from 800,000 in 2016 to 1 million in 2018, thought to be driven by growing concern about the impact of plastic packaging on the environment. As the number of customers has fallen the size of a typical round has increased, often with about 300 customers over a range of 100 miles.

What services will your milk round offer?

Organising the day

An early start is a must for a milk roundsman because the milk may have to be collected from the depot or you may have to load the float from your own store before you can start out on your round. Some roundsmen start work before 2.00 am or even earlier.

Your domestic customers will want their milk delivered in time for breakfast or, at the very latest, before they leave for work. No one wants their milk sitting on the doorstep all day!

Your trade or wholesale customers may not require such an early delivery and you may be able to service them later in the morning.

Once the daily round is over there will still be things to do such as:

• sorting out the empties
• ordering stock
• making loading, delivery and collection lists
• doing the other paperwork
• targeting new customers, distributing leaflets and so on

Collecting payment

At the end of each week you will have to try to collect payment from your customers. Catching everyone in can be a problem, so you may need to go out on, for example, Thursday and Friday evenings as well as Saturday morning. You will need good record-keeping systems to tell you how much each customer owes and when they pay. If you accept Healthy Start vouchers you'll need to send them to the Healthy Start Reimbursement Unit to be reimbursed. You must claim within six months of a voucher's use by date.

Some dairies have their own websites which let their customers order online and pay their bill by direct debit. This provides the dairy with a record of orders as well as the ease of collecting payment. Customers like it because they can change their orders easily, suspend deliveries while they're on holiday and they don't have to wait in to pay their bill, worrying that if they miss the milkman their bills will mount up.

Daily deliveries?

A franchisee of a major dairy would normally be expected to make deliveries six days a week, from Monday to Saturday inclusive. A double quantity would be left on Saturday so that Sunday could be a day off.

In some rural areas milk roundsmen have kept costs down by delivering every other day and customers are happy with this if it means that their delivery service can survive. You will have to decide how frequently you will deliver. It may be you could offer a combination of daily deliveries to trade customers and every other day to domestic households.

What will you sell on your milk round?

What products will you sell?

Most of your income will probably come from sales of milk, but this may include:

• whole milk
• semi-skimmed milk
• skimmed milk
• Channel Islands milk
• UHT and sterilised milk
• organic milk
• flavoured milk
• filtered milk
• milkshakes and smoothies
• soya and goat's milk and other non-dairy alternatives

Semi-skimmed milk is now more popular than any other type.

As well as milk you will also sell dairy products such as:

• cream
• yoghurt and probiotic drinks
• butter and spreads like Flora
• cheese

Many roundsmen carry organic milk and dairy ranges. Some rounds have introduced organic fruit and veg box delivery.

Because milk consumption is falling and more and more people are buying milk from the supermarket, milkmen need to be able to offer a range of other products in order to boost their income. These vary, but might include products such as eggs, soft drinks, fruit juice, smoothies, vegetables, bread, food and refuse bags, foil and film, pet food and garden products. It can be worthwhile offering a range of special goods at Christmas time such as food hampers and chocolates. As part of your market research you could ask people what goods they would like you to deliver.

If you plan to sell lots of items other than milk and dairy products you will need to consider:

• where will you store the products
• will you have enough room on the milk float - particularly if you offer many chilled items that need to be kept cool
• how will customers let you know what they want
• where will you buy the products from
• will wastage be a problem
• will theft be a problem

How much income will come from non-milk sales

Many milkmen are trying to persuade their customers to have many more items other than milk delivered each day - so that they can continue to run a viable business. It is likely that income from non-milk sales will be around 10% to 15% of your total income, but you could aim to increase this over time as you build up a long term relationship with your customers.

Industry research shows that, on average, each customer buys about eight pints of milk per week from the milkman. If you have 300 customers and charge 81p per pint, your income from milk sales will be just over £1,900 each week. On top of this you might sell around £300 worth of other goods (figures used for illustrative purposes only).

Seasonal peaks and troughs

You are likely to find that your income varies at certain times of the year because:

• domestic customers go away on holiday, particularly in the summer, cancelling the milk order
• your trade customers include caravan and camp sites, which buy lots of milk during the summer months, or schools which close three times a year plus half-terms
• you sell seasonal goods at Christmas time as well as extra milk, cream, eggs and so on

Buy an existing milk round

You might decide to buy an existing milk retailing business rather than start your own venture from scratch. Buying a going concern can mean that:

• the premises, vehicles and equipment are already in place
• there are established rounds and customers
• the business can generate income immediately
• suppliers have been identified and relationships established with them
• the business has a track record which can help if you are looking for finance
• staff may already be in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.

Other matters to consider include:

• the state of the premises, vehicles, equipment and so on. Will you have to spend money refurbishing or replacing assets
• the condition of any stock you are buying. Check this over carefully before agreeing a price as most of it will be perishable
• existing staff rights
• how to retain key personnel once you've taken over
• does the business owe money that you will be responsible for
• if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Franchises

Franchising can be a good 'halfway house' between starting out from scratch and buying an existing business. If you purchase a franchise you'll still be setting up your own business, but you should benefit from the experience, resources and perhaps the name of a business that is already successful. Large dairies like Dairy Crest offer franchise opportunities for milk roundsmen.

Although different franchise schemes vary in detail, most feature the following key points:

• as a franchise holder, you will remain self-employed but will use the identity (corporate colours, logos, trade name and so on) of the franchisor
• in return, you will pay the franchisor a fee
• both you and your franchisor will have to fulfil certain obligations - the franchisor might, for example, allocate you an existing round, while you will probably agree to purchase milk and a range of other products from your franchisor

Many franchisors will provide you with any specialist training you require, as well as advice and support on a range of business and technical matters.

Details of the above points are set out in the franchise agreement or contract, which both you and your franchisor will sign. The agreement will also deal with other matters, for example the minimum period for which the franchise will run.

Before entering into a franchise agreement, it is advisable to check the terms carefully to be sure that you are getting a reasonable deal. Go through the contract with your solicitor before signing anything. More information about franchising is available on the Franchise Info website. Information is also available from the British Franchise Association (BFA).

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.