Minimum Order Value: Cover the Cost of Small Orders

Small orders can take almost as much administration as large ones. This worksheet is for wholesalers and suppliers deciding how to handle that work. It doesn't presume a minimum order is the best answer: some regular customers may rely on being able to order small quantities.

Measure the work that happens once per order

List order entry, credit checks already part of your process, picking setup, packing, invoicing and dispatch administration. Use a time sample to estimate the cost. Keep product-linked costs and per-unit picking outside this fixed amount so they aren't counted twice.

Assume product and variable selling costs leave 35% of basket revenue. Fixed handling costs $14 per order. The owner wants another $7 contribution after handling. The revenue minimum is ($14 + $7) ÷ 0.35 = $60 on this internal GST basis.

Compare the same small baskets

Assumptions: Fictional Australian-dollar management-costing example. Amounts exclude GST that is assumed recoverable; any non-recoverable tax is already included in costs. These assumptions do not establish your GST entitlement. Contribution is before unallocated overheads and income tax.

Arrangement	Revenue received	Contribution before handling	Handling	Remaining contribution
Three separate orders, no fee	$60	$21	$42	−$21
$60 minimum; one combined order	$60	$21	$14	$7
Three separate orders, $7 fee each	$81	$42	$42	$0
One consolidated $60 order, no fee	$60	$21	$14	$7

Original ASBG worked example. All businesses, amounts and scenarios are fictional. The table contains the same figures as the visual.

The fee scenario assumes the entire $7 fee contributes to handling, with no additional payment fee or tax cost. It only breaks even on handling: each $20 basket contributes $7 from products plus $7 fee, then uses $14 in handling. To retain another $7 per separate order under these assumptions, the modelled fee would need to be $14, not $7. Whether customers would accept that is another question.

The minimum and consolidation rows have identical economics because both become one order. They differ in the service offered. A minimum might require the customer to buy more now; consolidation might let them collect several genuine requirements into one scheduled order. Neither creates demand automatically.

Check that consolidation really removes costs

If you still receive three orders, pick three parcels and deliver three times, changing the invoice format alone won't save the $28 shown in the example. Measure the actual activities removed. A combined delivery that requires storage and extra coordination may add a new cost.

If customers need items urgently, offer a realistic service choice with clear timing. Don't quietly hold an order that the customer expected you to send immediately. Compare customer retention and total contribution, not just the saving in your dispatch team.

Stress-test the minimum

A $60 basket at only 20% contribution produces $12 before handling and loses $2 after the $14 handling cost. A single minimum based on your average 35% can therefore fail on low-margin products. Try the cheapest-margin combination a customer could legitimately order.

Also test split deliveries, backorders and additional freight. Decide which costs are caused by the customer's request and which arise from your own stock availability. Document any proposed charge as a question for the actual agreement, not a right created by this worksheet.

Put the terms through a separate check

These figures are internal options. Before adding a charge, check the customer contract and the ACCC's price-display guidance. Business.gov.au's quote checklist helps identify the scope and price details that need to be written down. Check whether the agreement permits the proposed fee.

Choose the option with your pricing goals and customer service in mind. A regular ordering window might solve the cost problem more effectively than a fee customers see as unexpected.

Where to get help

Use volume-tier testing above the minimum and delivery-threshold testing where freight dominates. Check the overall break-even requirement, then browse pricing and profit.