A taxi services company is a business that provides comfortable and private transportation via automobiles (usually sedans cars) for passengers. Taxicab companies may be independently owned small businesses with only one taxicab and driver or have fleets of 100 or more taxicabs.
Drivers are rarely employees of the company, and usually, lease the taxicab on a per-shift basis. Cabs can also be owned by separately-incorporated small businesses that subscribe to a dispatch service.
The owner/driver will pay a monthly fee to the taxicab company; purchase and maintain his own vehicle, and may in turn lease shifts to other drivers. Data made available by the U.S. Department of Transportation shows that the total amount of taxi companies in the United States is 32,405. New York is the largest region with a 3% market share in the taxi industry (988).
Second is Long Island with 907 taxi companies in The United States (2%). The taxi market was valued at USD 159. 6 billion in 2020, and it is estimated to reach USD 327. 54 billion by 2026, at a rate of 8. 95 % over the forecast period (2022-2026).
Steps on How to Start a Taxi Business
Table of Content
Conduct Market Research
If you are considering starting a taxi business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your taxi business should be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source information that will help you maximize your business, give you reliable information of what your potential market will be looking out for from your taxi business, and also help you operate your taxi business with less stress and of course, build the business to profitability.
a. Who is the Target Market for Taxi Business?
- Tourist and visitors
- Everyone who lives and works in the city where you operate.
b. Is Taxi Business a Profitable Business?
Yes, the taxi business is a profitable business hence loads of people are operating in the industry. Available data show that there are over 47,241 Taxi Drivers currently employed in the United States.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the taxi business because the taxi business is a subset of the taxi and limousine services industry.
d. Who are the Major Competitors?
- United Cab
- Dallas Yellow Cab
- Alamo Cab
- Executive Cab
- Cowboy Cab
- Starcab
- United Independent Taxi
- Independent Taxi
- United Taxi of San Fernando Valley
- Yellow Cab
- Checker Cab
- United Checker Cab
- Bell Cab
- City Cab
- Beverly Hills Cab Company
- Flywheel Taxi
- Birmingham Yellow Cab
- BlueLine
- Boro Taxis (Boro Cabs)
- Easy Taxi
e. Are There County or State Regulations or Zoning Laws for Taxi Business?
Yes, there are county, state regulations, and zoning laws for taxi businesses. For example, to work as a taxi driver in the City of Dallas, a person must have no more than five moving violations and or accidents in the previous 36 months.
Also, they must be a citizen or otherwise authorized to work in the United States, have no felony convictions, and be 23 years of age or older. Please note that most U.S. cities have a licensing scheme that restricts the number of taxicabs allowed. In New York City and other cities, a “medallion” is required to legally pick up passengers flagging on the street.
Florida medallions sell for just $50.00 and the city requires yearly car inspections. Medallions, or CPNC (Certificate of Public Necessity and Convenience), may also be sold in Boston, or Chicago, but in San Francisco—one of the few other cities that have medallions—the sale of medallions became prohibited by Prop K in 1978.
The City of Boston (Massachusetts)’s Police Department issues Hackney Carriage (Taxi) Licenses. The BPD Hackney Carriage Unit handles the regulation of the city’s 1,825 medallion taxis. Some cities use “taxi medallions” as permits for taxicab drivers to pick up passengers because the medallion system is a government-created intentional constraint on the supply of taxicabs.
f. Is There a Franchise for Taxi Business?
Yes, there are franchise opportunities for the taxi business, and here are some of them;
- United Independent Taxi
- Independent Taxi
- United Taxi of San Fernando Valley
- Yellow Cab
- Checker Cab
- United Checker Cab
- Bell Cab
- City Cab
- Beverly Hills Cab Company.
g. What Do You Need to Start a Taxi Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- Cars (Taxis)
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- Insurance
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Hackney Carriage (Taxi) Licenses
- Employees
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a taxi business are;
Creative Taxi Business Name ideas
- We Move© Taxi Company, Inc.
- Danny Beck® Cab Company, LLC
- Greenish© Taxi Company, Inc.
- Trans Solutions® Taxi Company, Inc.
- Transport King™ Taxi Company, Inc.
- Green Line™ Cab Company, LLC.
- Brown Line© Cab Company, LLC
- Swift Guys® Cab Company, Inc.
- Star Line© Taxi Company, Inc.
- Done Deal© Cab Company, Inc.
- Safe Hands® Taxi Company, LLC
- Garry Line® Taxi Company, LLC
- Convoy™ Cab Company, LLC
- Zack Line© Cab Company, Inc.
- Sun Rise® Taxi Company, Inc.
- Tick Up™ Taxi Company, Inc.
- Speed Link™ Cab Company, Inc.
- Leapfrog© Cab Company, Inc.
- April Cabs® Taxi Company, LLC
- Jonah Honks™ Taxi Company, Inc.
Register Your Business
a. What Type of Business Structure is Best for Taxi Business?
When it comes to the business structure of a taxi business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Taxi Business?
- General Business License
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- Hackney Carriage (Taxi) Licenses
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections for your parking
d. What Type of Certification is Needed to Start a Taxi Business?
You don’t need any certifications to start a taxi business
e. What Documents are Needed to Open a Taxi Business?
These are some of the basic legal documents needed to legally run a taxi business in the United States of America;
- DBA
- EIN
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval (For your parking)
- Certificate of Incorporation
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- Hackney Carriage (Taxi) Licenses
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Online Terms of Use
- Online Privacy Policy Document
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting your own taxi business, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Taxi Business?
The startup cost for a taxi business is not uniform. But basically, a taxi business will cost from $200,000 – $600,000 to start and that can easily go higher depending on your overall business goals and objectives. For example, if you are looking to purchase the Kia Optima, then you should be ready to budget from $22,000, Toyota Corolla from $20,000, and Hyundai Elantra from $18,000.
b. What are the Costs Involved in Starting a Taxi Business?
- The total fee for registering the business in the United States of America – is $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,200.
- Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $80.
- The cost for hiring a business consultant (writing of business plans inclusive) – is $4,500.
- Insurance (general liability, workers’ compensation, and auto insurance) coverage at a total premium – $12,400.
- The cost of logistics software, accounting software, CRM software, and Payroll Software – $1,500
- The cost for leasing a facility (long-term lease agreement) – is $65,600.
- The cost for facility remodeling and installations – is $20,000.
- The cost for the purchase of taxis (cars): $250,000
- Other start-up expenses including stationery – $500
- Phone and utility deposits will cost – ($2,500)
- Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $50,000
- The cost for store equipment (cash register, security, ventilation, signage) – $3,150
- The cost for the purchase of office furniture and gadgets – $8,000.
- The cost of launching an official website – $600
- The cost for our grand opening party – $3,000
- Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Taxi Business?
- The size of taxi business (numbers of taxis and to start the business with)
- The choice of location
- The required licenses and permits
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the taxi business
- The cost for furnishing and equipping the taxi business – parking facility
- The cost for insurance policy covers
- The cost for registering the business
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the taxi business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your taxi business, but, if you have the required finance, it will pay you to build your own parking facility and administrative office. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business vision.
e. What are the Ongoing Expenses of a Taxi Business?
- Gas and lubricants
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
- Taxi maintenance and repairs
- Insurance
- Marketing costs
f. What is the Average Salary of your Staff?
- Chief Operating Officer (Owner) – $68,000 Per Year
- Admin and HR Manager – $48,000 Per Year
- Transport and Logistics Manager $48,000 Per Year
- Accountant $38,000 Per Year
- Cab Drivers – $36,800 Per Year
- Customer Service Officer (Call Center Executives) – $26,100 Per Year
- Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Taxi Business?
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
April Cabs® Taxi Company, LLC. is a registered and licensed taxi cab company that will be based in New York City, New York. We are in business to provide comfortable and private transportation via automobiles (usually sedans cars) for passengers.
April Cabs® Taxi Company, LLC. has been able to secure all relevant licenses and permits to operate throughout the United States. We will ensure that we abide by the rules and regulations guiding the taxi and limousine services industry and we will only hire experienced and qualified drivers with valid commercial driver’s licenses (CDL) to handle our taxis.
b. Products and Service
- Taxi services, taxi leasing, and other car services
- Mobile advertising.
c. Mission Statement
Our mission as a standard taxi services company is to develop a highly successful business that provides quality automobile transportation services in our city and to become the standard for an ideal taxi services business not only in New York but also throughout the United States of America and Canada where we intend selling our franchise.
Vision Statement
Our Vision is to become one of the preferred choices of individuals and organizations when it comes to the demand for taxi services in the whole of the United States of America.
d. Goals and Objectives
The goals and objectives of a taxi business are to transport people within short distances in urban centers without difficulty, making it the ideal option for comfortable and private transportation.
e. Organizational Structure
- Chief Operating Officer (Owner)
- Admin and HR Manager
- Transport and Logistics Manager
- Accountant
- Taxi Drivers
- Customer Service Officer (Call Center Executives)
Marketing Plan
a. SWOT Analysis
Strength:
- Excellent operational history
- Attention to detail.
- Accurate estimates with no hidden costs.
- Experience and trained professional drivers.
- Excellent customer testimonials.
- Reliable and efficient taxi cabs and service.
Weakness:
- Not enough existing clientele to run at full capacity immediately
- We will need a loan to build our parking facility and to purchase the latest taxi cabs
- The owner is currently running the business solo and will need to manage construction/build out the existing business
- Lack of economies of scale.
Opportunities:
- Growing population in the United States
- Build upon existing clientele
- Online market, new services, new technology, and of course the opening of new markets.
- Increase in the number of families and workers who would want to move without their cars.
Threat:
- Loans diminish profitability until they are paid off
- High cost of gasoline
- Insecurity
- First-year will be financially tight while we gain customers and pay off loans
- Competition in the area could increase
- Management of employees requires time, money, and efforts
- The transport department could change its regulatory status and decide to enforce strict regulations that can strangulate our new business.
b. How Do Taxi Companies Make Money?
Taxi businesses make money by charging clients for transporting them from one location to another and also by advertising on their taxi cabs.
c. Payment Options
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce Your taxi business by sending introductory letters alongside your brochure to corporate organizations, hotels, airport operators, travel and tour agencies, households, and key stakeholders in and around your city and state
- Print out fliers and business cards and strategically drop them in offices, libraries, public facilities, train stations et al.
- Use friends and family to spread the word about your business
- Post information about your company and the services we offer on bulletin boards in places like schools, libraries, and local coffee shops et al
- Place a small or classified advertisement in the newspaper, or local publication about your company and the services we offer
- Leverage on referral networks such as agencies that will attract clients who would need your customized services
- Advertise our business in relevant magazines, newspapers, TV and radio stations.
- Attend relevant expos, seminars, and business fairs et al to market our services
- Engage in direct marketing approach
- Encourage the use of word-of-mouth marketing
- Join local chambers of commerce and industry to market your services.
Financial Projection
a. How Much Should You Charge for your Product/Service?
The passenger is required to pay the amount on the taximeter plus any additional tolls or fees. The initial entry sometimes called a “meter drop” or “flag pull”, is $3.25 regardless of distance traveled. Each additional fraction of a mile charge is $.20 for each additional 1/9 of a mile.
Additionally, every 36 seconds that elapses, known as “wait time”, is $.20. This charge is in place to ensure the driver still makes money if the cab is stuck in bad traffic. There is a flat fee of $1.00 for the first additional passenger and another $.50 for each additional passenger after that unless the passenger is under 12 or over 65 years of age.
b. How Much Profit Do Taxi Business Owners Make a Year?
Top earners make about $142,592 per year and the average earning is $47,335 per year. But it is important to note that taxi drivers are mostly self-employed and so have the flexibility to choose their own working hours. Those that choose to work unsociable hours will benefit from the higher fare rates that occur in evenings and bank holidays. Taxi fares will vary considerably depending on the location that you are working in.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the taxi business (numbers of taxi cabs owned)
- The types of related services offerings (advertising et al)
- The location the taxi business is covering
- The management style of the taxi business
- The business approach of the taxi business
- The advertising and marketing strategies adopted by the taxi business.
- The number of years the taxi business is in business
d. What is the Profit Margin of a Taxi Business?
The profit margin of a taxi business is not fixed. It could range from 25 percent to 55 percent depending on the distance covered and other factors.
e. What is the Sales Forecast?
Below is the sales forecast for a taxi business. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year: $320,000
- Second Fiscal Year: $580,000
- Third Fiscal Year: $1.15 million
Set Up your Shop/Office
a. How Do You Choose a Perfect Location for Taxi Business?
- The demography of the location especially as it relates to the movement of people
- The purchasing power of businesses and residents of the location
- Accessibility of the location
- The number of taxi businesses in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Taxi business?
- New York City, New York
- Los Angeles, California
- Dallas, Texas
- Las Vegas Nevada
- Miami Florida
- Washington DC
- Columbus, Ohio
- Oklahoma City, Oklahoma
- Chicago, Illinois
- Boston, Massachusetts
c. What Equipment is Needed to Operate a Taxi Business?
- Taxi cabs
- Car tracker
- Booking software
- Dash Cam
Hire Employees
When it comes to hiring employees for a standard taxi business, you should make plans to hire a competent chief executive officer (you can occupy this position), admin and HR manager, transport and logistics manager, accountant, taxi cab drivers, and customer service officer (call center executives).
Launch the Business Proper
In recent times, no taxi business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
With a proper launching of the taxi business, you will be able to officially inform people in your city that your taxi business is open for business.
a. What Makes a Taxi Business Successful?
- Choose a good location and reliable taxi cabs to launch the business
- Hire only competent, hardworking, and trustworthy staff
- Throw a party before officially opening the taxi business
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your taxi business
- Leverage on all available online and offline platforms to promote your taxi business
b. What Happens During a Typical Day at a Taxi Business?
- The business is open for the day’s work
- The taxi cabs are washed, cleaned, and ready for work
- Customers request taxis and they are attended to
- Maintenance of taxi cabs are carried out
- Marketing/website upkeep
- Supply ordering
- Administrative duties
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Taxi Business?
- Good driving skills
- Customer services skills
- Interpersonal skill
- Logistics and material handling skills
- Business management skills
- Bargaining skill
- Work experience in the taxi and limousine services industry
- Experience in managing people
- Experience in business administration
- Experience in handling logistics and transportation software.