Taxi services aren’t recent; they date back to the 16th century with the hackney carriages and the 18th century with modern taxicabs, respectively. People have used taxis for transportation for centuries. However, taxi rental services have significantly evolved in the last decade, especially due to the Uber wave.
The launch of Uber along with digital advancement sparked a tremendous change. It was Uber that made taxi booking as easy as a few clicks on the smartphone. The on-demand taxi booking service became a case study for drivers and taxi owners, showing that a taxi business could be run differently. All this has led to a constant rise in the demand for taxi services, making it a profitable business opportunity.
So, if you are thinking of getting into this thriving business, this blog is for you. Whether you want to know about “how to start a taxi business in 2024”, or “how to start a taxi business with one car”, this comprehensive guide will help.
Let’s get started.
Market Research and Foretell
Why Invest In A Taxi Business – Present & Future Prospects
Well, the simplest answer to this question is that it is highly profitable! It is a compelling opportunity, both now and in the future. According to Global Information, Inc., the global taxi market is projected to grow from 229.89 Billion in 2023 to USD 618.11 Billion by 2031, at a CAGR of 13.16%, during the forecast period (2024-2031)
This projection demonstrates strong potential for substantial returns. This growth is driven by increasing urbanization, a rising preference for convenient transportation, and the expanding use of app-based ride-hailing services.
Present Prospects
Market Size and Growth
The global taxi and limousine market is growing steadily. By the end of 2024, it is expected to generate a revenue of US$140.70 billion. In terms of user base, the number of users in the taxi booking market is expected to reach 1 billion by 2029, aligned with the projected user penetration rate of 14.5% in 2024. This robust growth indicates a healthy demand for taxi services, making it a lucrative investment.
Technology Integration
The integration of technology in the taxi business has revolutionized the industry. Giants like Uber and Lyft have demonstrated the scalability and profitability of app-based ride-hailing services. In 2023, the standalone revenue generated by Uber was $37.281B, a 16.95% increase from 2022. The convenience of booking rides through smartphones has attracted a broad customer base, increasing the overall market demand.
Urbanization and Population Growth
As more people move to cities, there’s an increase in the demand for reliable transportation. By 2050 68% of the world’s population is projected to live in urban areas, up from 55% in 2018. This shift creates a substantial opportunity for taxi services to the growing urban population.
Future Prospects
Growing Middle-Class In Emerging Markets
The rising middle-class section in emerging markets such as India, China, and Brazil presents a vast opportunity for the taxi industry. Increased disposable income and changing lifestyles are driving the demand for convenient transportation options.
Electric And Autonomous Vehicles
The future of the taxi industry will be driven by the adoption of electric and autonomous vehicles. Electric Vehicles (EVs) offer a sustainable and cost-effective alternative to traditional gasoline-powered cars.
With governments worldwide pushing for greener transportation solutions, the adoption of EVs in the taxi industry is expected to rise. For example, the global EV market is expected to reach a staggering US$623.3 billion in 2024.
Autonomous vehicles (AVs) are another transformative technology for the taxi industry. Brands like Tesla and Waymo are leading the development of self-driving cars. By 2030, the global autonomous vehicle market is expected to reach $1.6 trillion.
AVs have the potential to reduce operational costs, improve safety, and increase efficiency. These make them a valuable investment for the future of the taxi business.
Sustainable Urban Mobility
Running a taxi business aligns with the global push for sustainable urban mobility. City planners and governments are focusing on reducing traffic congestion and lowering carbon emissions. Taxi services, especially those incorporating EVs and AVs, can play a crucial role in achieving these goals.
For example, London aims to have an emission-free transport system by 2050. This presents a significant opportunity for green taxi services.
In a nutshell, investing in a taxi business today can offer strong prospects for growth and profitability. With the global market set to expand significantly, investors have the chance to capitalize on both opportunities and future advancements in sustainable urban mobility.
How To Start A Taxi Business- Step-by-Step Guide
If you have made up your mind to start a taxi startup but aren’t sure where to start, we have got you covered. If you have a business idea and are clear about your goals, you can use the below steps to kickstart your taxi business and lead it to success.
Let’s get started.
Set A Clear Business Idea
The very first step to starting a business is to have a solid business plan. Refine your business idea, understand what’s needed to make it happen, review the requirements, analyze them and start.
Remember that customer satisfaction and profitability should be at the core of your business plan. And that you should not take anything for granted.
In addition, your business plan should be created in a way that sets you apart from the competitors. For this, you would need thorough market research. It will help you understand what your competitors are doing and what the market demands.
Perform Market Research
Understanding the local dynamics can be the difference between success and failure. Start by analyzing the competition. Identify key players and their strengths. For example, if a major competitor offers app-based booking, consider how you can innovate or improve upon this.
By knowing who your competitors are, you can strategically position your taxi company, offer better services, and find ways to stand out in the market. This understanding will allow you to make informed decisions, tailor your marketing strategies, and ultimately boost your chance of success in the competitive taxi industry.
Look at the statistics: According to a Statista report, the global taxi market was valued at $159.6 billion in 2020, with an expected annual growth rate of 8.95% from 2021 to 2026. This indicates a growing demand.
Understanding customer demand is also important to determine the success ratio of your startup. Analyze trends to determine peak times for taxi usage and identify areas with high demand but low service availability.
Ask critical questions like:
- What are the common complaints from taxi drivers?
- What price strategies does the competition use?
- Are there underserved areas or times of high demand?
- Who is your target client base? What specific needs do they have?
- How satisfied are customers with current taxi services?
Gathering and analyzing this data helps in making informed decisions, setting competitive prices, and offering unique value propositions. Ultimately, this will ensure your business meets market demands effectively and attracts a loyal customer base.
Choose Appropriate Vehicle Fleet
The taxi business is all about the fleets. Hence, you should choose the vehicle fleet carefully. When doing so, think about the requirements of your target customers.
For example, if your target market includes business professionals who need reliable airport transfers, consider investing in comfortable sedans or executive cars with enough luggage space. Offering features like charging ports, Wi-Fi, and bottled water can further enhance customer service and set you apart from the competitors.
The next consideration when choosing the ideal fleet is fuel efficiency. This is crucial for ensuring lower operational costs. You can choose between conventional sedans, hybrids, or electric cars, depending on your budget and interests.
Additionally, make sure the vehicles you choose meet all legal and safety standards. Regular maintenance and cleaning are crucial for offering passengers a pleasant and memorable experience. Investing in a fleet of reliable and well-maintained cars can build a strong brand identity, earn customer trust, and set the stage for a successful and profitable taxi service.
Determine The Business Model For Your Taxi Company
Have you ever thought about what made Uber a global sensation? Well, they have a powerful and result-oriented business model.
A robust business model like Uber can be a breakthrough for your startup taxi business. Start by identifying your primary revenue sources – RIDES. To determine the average cost of a ride with your company, consider all expenses, including fuel, salaries, taxes, rent, and other fixed and variable costs.
For example, Uber’s dynamic pricing model adapts to demand, ensuring profitability during heavy traffic times. Your model should also consider upfront costs for fleet investments, marketing, and advertising.
Typically, the average cost to start a taxi business is around $30,000. Use a business cost calculator to estimate your specific needs and how much funding to raise for your launch.
It is obvious for a new taxi company to struggle with covering all expenses at first. To start earning a profit, your taxi service will need to grow a bit. Consider seasonality into your projections, as demand can fluctuate throughout the year.
Enquire About Your Legal Formalities
Driving a vehicle on the roads, both within and beyond your local boundaries, requires adherence to various legal regulations. Hence, before starting your taxi business, extensively analyze the essential legislation and license requirements. These regulations may include driver insurance, permits, and background checks.
Statistics show that regulatory compliance is crucial. According to a survey by the Small Business Administration, 36% of small businesses face penalties each year due to non-compliance issues. By adhering to these regulations, you not only avoid penalties but also streamline operations and build a reputable organization.
Get acquainted with any vehicle and safety regulations to ensure compliance. Further, establishing your company’s organizational structure, obtaining essential business licenses, and registering with appropriate authorities as crucial steps. For instance, in New York City, taxi businesses must obtain a Taxi and Limousine Commission (TLC) license, to ensure compliance with local regulations.
By proactively managing these guidelines and regulatory aspects, you can run your taxi business smoothly, gain customer trust, and establish a solid foundation for growth from the outset.
Hire And Train Drivers
Having the right crew plays a significant role in determining the success of your taxi business. Hence, when hiring drivers, find people with good experience and track record, driver licenses, and a customer-centric attitude. Also, check for their background to ensure they are trustworthy and reputable.
Once you have found the right people to team up with, provide them with comprehensive training including safe driving practices, customer interactions, and competencies like using the taxi app. Do not forget to train them on professionalism, courtesy, and punctuality. During training, provide feedback to help them get better.
A team of professional, well-trained, and courteous drivers can significantly improve your customer experience and enhance your brand’s image. Ultimately, this will lead to establishing a loyal customer base, bringing you long-term success in the aggressive market.
Create An Online Presence
Establishing an online presence is one of the most significant aspects of starting a taxi business. Having a strong online presence helps drive new consumers and sustain market competitiveness in the digital era.
To begin with, create an eye-catching and functional website for your company. Showcase your vehicles, services, pricing models, and contact information. Make sure you implement a user-friendly taxi booking system on your website so that customers can quickly order rides from their PCs or mobile devices.
Next, start building your community online by posting on social media channels about the launch of your taxi company, its USPs, benefits, etc., to create a pre-launch buzz. Launching targeted campaigns could also be a great start to spread the word about your business.
Expand your reach by leveraging popular ride-hailing apps to connect with a broader audience and attract new clients. Remember, establishing a strong presence online enables you to engage with customers more effectively, increase visibility, and position your taxi service for success in the digital age.
And once your company is launched, do not forget to add positive reviews and testimonials from your satisfied customers. This approach will drive more customers but also build trust, ultimately driving growth and ensuring long-term visibility.
Market Your Business Through Planned Strategies
Set your taxi booking business up for success by implementing effective marketing strategies. Start by defining your target market and catering to their preferences and needs. Utilize various channels like local ads, social media, digital marketing, and partnerships to reach potential customers effectively.
Offer special deals, discounts, or referral programs to attract new riders and encourage repeat business. Consider branding your taxi vehicles with your company logo and contact details to enhance visibility and brand recognition.
Monitor the outcomes of your marketing efforts and adjust strategies as necessary to optimize results. By building a strong brand, delivering excellent customer experiences, and consistently promoting your services, your taxi company can excel in a competitive market and achieve sustained growth.
Register & Insure Your Taxi Company
Starting a taxi business involves crucial steps like obtaining insurance and completing registration. Comprehensive insurance coverage is essential to protect your fleet, drivers, passengers, and the business from risks.
Commercial automobile insurance is paramount, covering injuries and property caused by your vehicles. Liability insurance shields against passengers or third-party lawsuits, while workers’ compensation covers employee accidents.
Additionally, insurance for your taxi fleet guards against theft, natural disasters, or vandalism. Consult insurance experts to tailor coverage to your needs and local regulations.
Simultaneously, navigating registration is vital. Establish a suitable legal structure, such as a sole proprietorship or LLC, and register with local government offices. Obtain necessary licenses, tax registrations, and permits, including an Employee Identification Number (EIN) if hiring employees.
Develop A Taxi App
Creating a taxi app can be a real game-changer for your business. A fully functional taxi app offers numerous benefits to drivers and consumers, boosting business efficiency, and consumer satisfaction.
A taxi app automates the business operations, reducing the burden of taxi business owners. While customers can book taxis, pay using the app, and leverage offers and discounts, drivers can receive bookings, schedule their rides and manage their earnings conveniently. Likewise, the business owner can keep track of the drivers, monthly and yearly income, customer ratings, and feedback within the app.
With the increasing demand for on-demand services, there’s a steep rise in taxi apps. You can hire a reliable mobile app development company and get a customized taxi app developed that caters to your specific needs. By developing a unique app, you can separate your business from competitors. Just make sure to take into account the specific needs of your car taxi business and the preferences of your target market.
A functional and easy-to-use taxi app improves customer experience, which raises happiness and loyalty. Embracing technology and delivering a better customer experience helps your taxi company to flourish and reach new heights.
Monitor And Optimize Operations
A taxi company’s long-term success depends on monitoring and optimizing operations. Keep track of your key performance indicators such as income, driver performance, customer satisfaction, and fleet upkeep.
Assess your company’s performance regularly to identify areas for improvement and cost-cutting options. Utilize technology to properly handle reservations and track vehicle movements and dispatching. Collect customer input to enhance decision-making and improve your services and operations. Always innovate and adapt to remain ahead of the competition and meet changing market expectations.
By constantly tracking and optimizing operations, you can build a more efficient and customer-focused taxi company that thrives in a competitive market.
Consider franchise and expansion potential.
For any business to sustain for years, it should have an expansion strategy, and your taxi business is no different! As your taxi business finds traction and success in your local market, set your foot ahead for finding growth and franchising options.
Investigate how you can expand your business into new cities and locations to widen your reach and generate more revenue. For this, look for demand for taxi services in target areas to assess growth viability.
Offering franchise opportunities boosts brand visibility without all operational duties. Franchising attracts entrepreneurs with a proven strategy, and support network, and brand awareness. Before expanding or franchising, ensure a strong foundation and established track record for long-term success.
Types Of Taxi Business
Before we delve into the process of starting a taxi business, it’s important to understand their types. Taxi services come in numerous forms to serve the needs and preferences of passengers. Some of the common types of taxi services:
Traditional Taxis
These are the standard taxis that charge on a meter basis. Passengers can hail them on the streets or book them in advance via phone or mobile app. The fare depends on the time and distance traveled.
Executive Taxis
These executive or premium taxis offer superior service and comfort over regular taxis. These taxis are usually more luxurious, featuring amenities such as Wi-Fi, leather seats, and bottled water. They are commonly used for business travel or special events.
Ride-Sharing Services
Companies like Uber, Lyft, and Grab provide ride-sharing services. Drivers use their own cars to transport passengers, who book rides via mobile apps. Fares depend on demand, distance, and time.
Bike Taxis
In some cities around the world, you can find bike taxis or pedicabs. These human-powered vehicles transport passengers short distances, ideal for crowded or pedestrian-heavy areas.
Parcel & Delivery Taxis
These taxis are specially booked for transporting packaging and parcels. These are primarily used for courier and delivery services.
Long-Distance/Outstation Taxis
These taxi services cater to passengers needing transportation between cities or states. They often offer more comfort and space than regular taxis.
Some other types of taxi services are pet-friendly taxis, green (electric) taxis, water taxis, luxurious taxis, and limousines (luxury cars for events like weddings).
What are the Revenue Models for a Successful Taxi Business Like Uber?
Now that you know what taxi business options you have, it’s time to explore how you can maximize profits in this venture.
When it comes to running a successful and profitable business, you must plan the working models carefully. Further, planning also helps create awareness of customer preferences and market conditions. Hence, choosing the right business model sets the stage for revenue generation.
So, let’s peek into the successful revenue models of the taxi business:
Boarding Fee
The primary revenue source for taxi booking companies involves charging a commission on each completed ride. This commission is a percentage deducted from the driver’s earnings.
For solo bookings, the commission is usually set at 20%, doubling the standard rate. However, for groups of five or more, the commission drops down to 25%, from 30%. In short, the more the passengers, the less the commission you need to pay under this revenue model.
Surcharge or Price Rise
Taxi rental companies often raise their prices during high-demand times or rains to ensure more drivers are available. This helps increase revenue and expand sales reach.
Revenues From Corporate Bookings
Under this model, clients of a company are provided dedicated cab facilities for traveling to airports or railway stations. A fixed percentage of about 25% of the total fare is charged as commission.
Subscription Model
Taxi rental companies provide premium subscriptions through their taxi booking apps, including extra features and benefits. These subscriptions charge a monthly or annual fee, ensuring a steady income for the business.
Commission From Credit Card Companies
Passengers often pay for their taxi rides using credit or debit cards. Every time a payment is made through a credit or debit card, the service provider gets a fixed amount of commission. The commission varies between 15% to 20% and is less than other models.
Advertisements
Another revenue model is earning through advertisement partnerships. Sponsored listings, banner ads, and local business promotions are some advertisements that are displayed within taxi booking apps like Uber. In return, the advisers pay you for these ad opportunities.
Data Analysis And Insights
Today, it’s all about the data. The customer data collected in the taxi booking apps can provide businesses with valuable insights into user preferences, demand, and travel patterns. Taxi booking app owners can earn a handsome amount by selling them to interested parties, such as advertisers, shipping companies, and city planners.
To ensure a bright future for your taxi business, you must implement these revenue models efficiently.
How To Start A Taxi Business With One Car?
While the taxi business seems lucrative, investing a handsome amount of money in buying or renting multiple fleets isn’t feasible for all.
But before you lose your heart, here’s the good news!
It is possible to start a taxi business with one car with careful planning and execution. Here’s how you can do it:
- Begin by conducting market research to understand the demand for taxi services in your area. Identify your target customers, be they daily commuters, business travelers, or tourists. This research will help you design a service that meets local needs.
- Next, focus on the legalities. Obtain the necessary permits and licenses to operate your taxi. This typically includes a commercial driver’s license (CDL), insurance, and vehicle registration.
- If you don’t already have a vehicle to use for your taxi business, invest in a reliable car that provides comfort and safety to the passengers. Equip your car with essential tools, such as a GPS system, signage indicating it’s a taxi, and a fare meter (not necessary). These investments may seem significant, but they are crucial for operational efficiency and customer trust.
- Invest as per your budget in promoting your taxi business, both online and offline. Start with simple steps like creating a website, and promoting on social media. Partnering with local businesses, hotels, and event organizers can also help.
- Lastly, delivering exceptional customer service is the key to setting your one-car taxi business apart. Be punctual, polite, and well-dressed, and ensure a clean, comfortable ride for your passengers. Positive reviews and word-of-mouth referrals are powerful tools for growing your business.
Starting small allows you to build a loyal customer base and gain valuable experience, which ultimately paves the way for future expansion.
Kickstart Your Uber-Like On Demand Taxi Business With iTechnolabs
By now, we hope our comprehensive blog has helped you gain enough insights about starting a taxi booking business. Despite belonging to the technical industry of mobile app development, we have tried our best to guide you through the intricacies of starting your own taxi business.
But this is not all that we could help you with on your journey! In fact, we could play a crucial role in taking away most of the hassle of launching your taxi business.
Wondering how?
Well, by creating your on demand taxi booking app!
As a leading mobile app development company, iTechnolabs has hands-on experience in developing robust and feature-rich taxi booking apps for hundreds of taxi startups. Whether you want to start a taxi business with one cab or a full-fledged venture, an on-demand taxi booking app can aid you significantly. From ride bookings to rider and payment management, our sophisticated apps can manage everything.
Our experts will customize the app to meet your unique needs, ensuring a seamless user experience for passengers and drivers. With advanced features like real-time tracking, secure payment gateways, deals and discounts and 24/7 support, you can offer a reliable and efficient service that stands out in the competitive market.
Additionally, our ongoing maintenance and support services ensure that your app remains up-to-date and operates smoothly. We also provide valuable insights and analytics to help you make informed decisions.
Now, if you are concerned about the cost of on-demand mobile app development, it is highly competitive yet affordable. We offer multiple pricing models to cater to the varying needs of our clients.
So, let iTechnolabs be your trusted partner in simplifying your taxi business launch and leading it on the path to success.
For a free quote, demo, or consultation, get in touch with us today: https://itechnolabs.ca/contact-us/
