If you want to set up a taxi firm remember that all your taxi vehicles and drivers must be licensed. Check out our practical guide for help with starting and running your taxi business.
- Research your target market
- The fare tariff
- Establish your customer profiles
- Decide which servies to offer
Research your target market
When you plan your taxi business it's very important to make a realistic estimate of the amount of demand for your services, and to think about how well that demand is already served.
In many areas the taxi trade is very competitive. As a licensed hackney carriage you will be able to accept hirings from people who hail you in the street, and also to stand on a taxi rank waiting for customers. But you can't just park anywhere to wait for a fare, and if your local taxi ranks are overcrowded you will have to cruise until you get a fare. This can use up a lot of fuel. Don't forget, you will be competing against:
- other hackney carriages (or taxis), minicabs/private hire vehicles, stretched limos
- public service vehicles (PSVs) such as minibuses offering transport to local airports, for example
- free supermarket buses
- local public transport systems
- pedicabs, or bicycle rickshaws
- car clubs, which enable members to locate an available car and hire it on a short term basis to get around a city
- Santander Cycles (known as 'Boris bikes' after Boris Johnson, who was the Mayor of London when the scheme was launched), the London public cycle hire scheme (and similar schemes in other towns and cities) - they're not for everyone, but they are very popular and some people use them as an alternative to taking a cab
A good first step would be to check out the competition. How many taxi and private hire businesses are already operating in your area? What are your local bus services like? Are any airport transport services offered? Are local taxi ranks crowded? If you are located outside London it would make sense to check whether or not your local licensing authority restricts the issue of new taxi licences to limit the number of hackney cabs operating in the area. Some local authorities do restrict numbers while others have no limit and leave it up to market forces. Check too whether your local authority is planning to introduce such a restriction if they don't currently have one in place.
Bear in mind that technology is creating new openings for competitors. For example, licensed hackney cab drivers - particularly those working in London - face growing competition from minicab drivers who use app-based services like Uber to operate in a very similar way to hackney cabs without breaking the law. In fact statistics show that minicabs/private hire vehicles now account for nearly 70% of all licensed cabs in England. Although Uber lost its licence to operate in London (for the second time) in November 2019, it has appealed the decision and can continue to operate while the appeals process continues. This could take a long time, possibly years, so they will continue to operate in London for the foreseeable future.
Finding a niche market
It may be that you will be able to provide a particular service that is not at present being offered. For example you might observe that there is a shortage of taxis in the early hours when the clubs shut down. You might be able to negotiate a regular contract to transport children in remote areas to and from school.
Your working day
A useful part of your market research would be to estimate the typical journey length you are likely to make. You could measure the distance from the shopping centre or station to various residential suburbs, or from your local airport to the centre of town. This will help you to get a feel for what your typical journey length might be and how much fuel it would use.
You will also be in a better position to estimate how long such a journey will take and so be able to work out how many journeys you can complete in a typical shift.
Research current trends, plus legal and tax issues
- Sector trends for taxi firms
- Legal issues for taxi firms
- VAT rules concerning taxi firms
The fare tariff
Your licensing authority will require you to install a taxi meter, which will be checked at regular intervals.
In London and in most other parts of the country the licensing authority will set the fares that you can charge. The tariff generally includes:
- an initial charge
- further amounts reflecting either the distance travelled, or waiting time (for example, in heavy traffic)
There are usually additional amounts payable for extra passengers or luggage, for soiling the cab or for journeys which take place at night, on the weekend or on a public holiday. Sometimes there is more than one tariff for different times of the day and night.
The tariff is reviewed and increased annually in London but may not be increased every year by licensing authorities in other parts of the country. This means that if fuel and licences go up significantly your margins will be squeezed because you won't be able to charge your customers any more. As part of your planning, obtain a copy of the current fare table for your area and work out how much you will earn from a typical fare. Many licensing authorities display the current taxi tariff on their website. The Private Hire and Taxi Monthly online journal carries out a regular review of taxi tariffs around the country which could also help you with your research.
Some of your customers may give you a tip, particularly if they feel that a good service has been provided. The amount will vary, from a few pence to 'round up' the fare to the nearest 50p or £1, to between 5% and 10% or so of the fare, depending on the customer. Some types of customer never tip though.
It's important to keep good records of the tips you receive.
Establish your customer profiles
As a licensed taxi you will be able to ply for hire (that is, pick up a customer who hails you in the street) or work off a rank, so your customers are likely to include a broad cross-section of the population such as:
- business people travelling during the day
- students - particularly for late work after pub and nightclub closing times
- other people going out in the evenings
Many of these will pay you at the end of the journey, and this is known as cash work. Some of these customers may give you a tip.
If you subscribe to a radio circuit, some of your bookings will be received over the radio. These customers might pay cash at the end of the journey or they might be account customers. The radio agency will usually collect the money due from account customers on your behalf and send it on to you, less any charges they make for the service. Taxi app networks generally work in the same way.
You might also have some account customers like local businesses that you deal with directly and that you invoice yourself.
Perhaps you will offer a local delivery/courier service - for example for documents that need to be delivered that day. This is sometimes referred to as 'unaccompanied delivery' work. You might also do some takeaway delivery work - this is sometimes done at a discounted rate in return for job referrals by the restaurants that need food delivered.
Many taxi firms find that Friday and Saturday nights are the busiest times of the week, but demand will depend to a certain extent on your location and your preferred working hours. Some areas become very busy during the summer months because lots of holiday makers visit - in other places demand is quite evenly spread throughout the year.
Decide which servies to offer
There are a number of different services provided by people who work in the taxi sector. Give some thought to how your particular business will operate.
Providing driver-only services
It may be that you are a licensed driver who does not own a vehicle, but who will drive a vehicle belonging to someone else, to whom you will pay a fee.
It would be a good idea to find out:
- if there are licensed taxi vehicle owners who are looking for drivers
- what shifts and days are available
- what is the fee and what this covers. For example, you might pay a fixed weekly rent and keep all the takings, or you might only keep a proportion of your takings plus tips. Make sure you know who is responsible for the cost of fuel and vehicle maintenance
You may be able to contact vehicle owners through a local taxi vehicle association, or in response to advertisements in a trade journal or local paper. Experienced owners may also be able to give you an idea of the level of income you can expect.
Operating as an owner-driver
You may decide to operate as an owner-driver. Don't forget that both you and your vehicle must be licensed.
You might like to consider whether you will hire your vehicle out to another driver (who must also be licensed) and what you would charge for this.
Subscribing to a radio circuit or taxi app network
You might decide to subscribe to a radio circuit. In return for a weekly fee, the operator supplies bookings over the radio. This can help to give you a steady flow of work. You might also sign up to a taxi app network. This enables people to get a black cab using their smartphone. You get alerted to the job on your own smartphone and you pay commission on each fare you accept rather than a weekly or monthly fee.
As well as standard taxi work carrying fare-paying passengers on short journeys, there are various other services that you could offer, depending on the type/s of vehicle you have available. These might include:
- chauffeur services - pre-booked car with driver for a specific job
- airport transfers
- minibus services
- unaccompanied delivery services and same-day local courier services
It is important to pay attention to your personal appearance and to the condition of your vehicle. Customers prefer to hire drivers who are smartly turned out and who provide a professional service. Your licensing authority will also require you to maintain your cab in a good condition.
Why not have your own website listing the services you offer. You could include details of your area and you might consider adding links to local hotels and visitor attractions.
Handling the cash
Most of your customers will pay you in cash and you will need a secure money bag in which to keep it as safe as possible. Be aware that taxi drivers can be the victims of violent theft so it's important to give some thought to how you will protect yourself and your takings.