How to start a logistics business in India: A step-by-step guide

How to start a logistics business in India: A step-by-step guide

Business

The business ecosystem in India has changed drastically in the last few years. The main reason is the advent of digital technology, which has changed the way business is being done and has also boost up many businesses that have also made their presence in the e-commerce platforms.

The logistics business is one of the businesses that has benefitted a lot due to the plethora of products sold on e-commerce platforms. The companies that sell from these third-party e-commerce platforms or have their e-commerce platform have to also tie-up with the logistics partners to deliver products to the end consumers. The demand for logistics partners has increased for delivering the products in local, national, and international markets. This has resulted in a strong inclination for the people to start the logistics business.

Today, in this blog we will get to know the step to step guide to start a logistic business in India.

Step 1: Research

To start a logistic venture, thorough research needs to be done regarding the various direct and indirect expenses such as to permit fees, license expenses, maintenance, fuel prices, various laws, estimates of operating costs, vehicle performance criteria, etc. Hence before starting the entrepreneur should be clear about the project cost

Step 2: Obtaining funding

The first step to start a logistic business is to arrange for the capital. The would-be entrepreneur has to convince the investors with the business plan that the business will be able to make a profit. The entrepreneur can also visit commercial banks, NBFCs, and public sector banks and look for the business loan available at a lower rate of interest.

Step 3: Obtaining equipment

The second step is to purchase loading equipment, storage facilities, and well-built vehicles that are capable enough to move large quantities of freights and carriers.

Getting this equipment and vehicles cost a good amount of money and can add to the liability when the firm has just started, it is a better idea to rent the assets till the business becomes profitable and then slowly start investing in acquiring.

Alternatively, It is also a good idea to partner with the person who already has a logistic business which is not doing good and you can transform the business with your ideas, skill, and expertise.

Step 4:  Registration of the business with the entities

The registration of the business will be done through the following entities:

  • International Air Transport Association (IATA)
  • Air Cargo Agent Association of India (ACAAI)
  • Directorate General of Foreign Trade (DGFT)
  • Registrar of Companies
  • Income Tax Department

Step 5: Application for various licenses/permits

Post-registration of the business as a Private Limited Entity, your company will be requiring the following:

  • Import Export Code (IEC)
  • GST Registration
  • Employees State Insurance (ESI) or Provident Fund (PF)
  • Trademark Registration
  • Client Insurance Services

If you are not starting from scratch and getting a franchisee of the existing logistic company then follow the following steps:

Step 1: Minimum requirements and the following conditions need to be fulfilled:

  • A legal entity registered for necessary taxes
  • Office space should be according to the legal requirements.
  • Have to submit a certain amount of security deposit
  • Financial capability proof such as bank statements, ITR, etc.

Step 2:  Setting up Business

  • Once the application for the franchise is shared and approved by the Logistics Company, then the company will provide all the branding and promotional materials and any other support as specified in the agreement.

Entering the logistic business is simple, but the difficulty lies in sustaining it as the operating cost keeps on increasing if not utilized in a smart possible manner. However, the scope of requirements varies as per the scale. For example, the business can be started with one or two trucks or with multiple trucks. The best option is when you are new to the logistic business, you should start with a few trucks and as you start making profits then you can slowly add the trucks on the existing fleet based on the orders or the requirement and if there is a temporary increase in the demand of the orders then you can rent the truck service from another vendor and complete your orders.

The logistic business is in a very competitive space and as the competition is increasing the level of margins is going down, so it becomes difficult for the entrepreneurs to convince the investors when there are so many players operating in a similar space.

The cost of operations is also increasing as it is highly regulated because there are huge requirements for certificates, licenses, and insurances in every section of the business.

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