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How to Start a Car & Taxi Sharing Business

Do you want to start a shared car/taxi company? If YES, here is a complete guide to starting a shared car/taxi business with NO money and no experience. If you have a car and enjoy driving and sharing space with different strangers then starting a shared car/taxi business might just be the business for you. The business is one that is capital intensive but if you are serious and committed, you can make more than you initially invested into the business within a short period of time.

Just like any other business, there are several things that you would need to get right as the business is a bit more complicated than just the average taxi kind of business. The shared car/taxi company is one that has gained prominence during the last few years which means that more entrepreneurs have entered into this business. Also, the industry is relatively new and has not yet been regulated, which is why you must take time to conduct a thorough research about the business.

The fact that there are a lot of shared car/taxi businesses about does not mean that you cannot also start up the business and make a nice profit from it. What you need to do is study the locations where more people require your kind of services and then offer your services there. Also, you will need to determine a niche for your business because even though you can decide to carry just anyone, you can also have a dedicated set of customers from a certain segment of the target market.

Just like any business, developing a business plan for your shared car/taxi business is very necessary if you intend to start your business with as less hitches as possible. If you are going to be purchasing a fleet of cars for your shared car/taxi business, then it is necessary that you set the right rules for your drivers and staff as a whole. This is because this kind of business thrives on how your drivers treat their clients which leads to not only high ratings but repeat business.

Every driver should be drug and alcohol free especially when driving and any car used must be properly taken care of, from basic cleaning to preventive maintenance. Because clients will mostly interact with your drivers, it is essential that you treat your drivers’ right at all times.

17 Steps to Starting a Shared Car/Taxi Business

1. Understand the Industry

Nowadays, individuals in different urban areas move around in various ways depending on their choice, which has led to the growth of car sharing services. The shared car service industry is divided into two business categories; with one Business model focusing on coordinating rides through a platform, while the second business model own the fleet of cars that are then being shared among users.

The first business model category is the one that creates value especially as they have to work in connecting individuals to the cars they need. This does not mean however that the second business category is any less relevant as both depend on each other to be able to provide efficient service.

The shared car market has generated low revenue even as it has become an industry to contend with. According to a study by the Transportation Sustainability Research Center in 2014, there are more than 19,000 shared car businesses in the united states that has nearly 997,000 members.

The industry generated only about $400 million annually in the United States which when compared to the $24 billion revenue by the car rental industry is very small. Also, even though the shared car market has seen tremendous growth in the last five or six years, the industry has not yet experienced an explosion.

According to PwC, even though there are five main sharing sectors, transportation has been the largest and has been projected to generate $335 billion revenue globally by 2025. Transportation has therefore been said to be one of the most promising sectors that will allow for great investment opportunities.

Even though there are many people who own vehicles, ownership will drop as more people will prefer to use shared car services; therefore forcing the government to come up with policies that will ensure that the sector is highly regulated so that they can operate in fairness to the taxi companies that were already in existence.

Shared car services have received a lot of support from large corporations as well as startups. Also, customers have greatly adopted the idea which has led to the tremendous growth gotten by the industry even globally. However, while there have been tremendous support and growth for this market, there has also been great challenges as well as concerns regarding trust from both drivers and riders. According to a research, only 19 percent of Millenials trust most people, compared to 40 percent of baby boomers and 31 percent of GenXers who feel the same.

In order to deal with these trust issues, most shared car platforms have implemented features that allow both drivers and riders to give their feedbacks. This has worked because most people trust reviews and this has helped people have the confidence to enter the cars of strangers especially because of how strict the platforms are treating these feedback systems as drivers who have low reviews become deactivated.

However, no matter how strict these feedback systems are, there are still incidents that have occurred especially as most female drivers and riders have had to deal with sexual assault, assault and rape amongst other issues.

The membership rates for shared car services in the United States dropped by 4 percent between the periods of 2014 to 2015. According to IBISWorld, most of those who use the shared car services in the United States are young professionals between the ages of 35 to 44, and college students between the ages of 25 to 34, and they constituted close to 66 percent of the revenue in 2015. The other clients that patronized were in the age brackets of 18 to 24 which constituted around 26.9 percent while those that were more than 45 years old were just in the 6.7 percent.

The past few years have seen the shared car service market grow globally and have caused both negative and positive impact on several other industries. The shared car service is one that has influenced the behaviour of customers in the automotive industry.

According to a survey, 22 percent of shared car users in the United States were not interested in purchasing a car and this was due to the fact that they had access to shared car services. This number translates to nearly 4 million people between the ages of 17 to 64, who would not be buying any cars especially in an industry where close to 20 million cars are sold annually.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who use shared car services are not restricted strictly to only Millenials, as baby boomers and GenXers also use shared car services for various purposes. This is especially as shared car services is seen as the new cool as opposed to buying a car by young people and middle aged adults.

Therefore, in defining the demographics for your shared car service business, you should look towards targeting all ages of people and not restrict it to just the young people and middle aged adults.

3. Decide Which Niche to Concentrate On

The shared car service is a relatively new industry and as such there are very few niches in the industry which entrepreneurs can hope to focus on. A niche is an area of specialization where an entrepreneur can look into in order to sell products or offer services that will allow him or her get a fair share of the market and be able to compete fairly against other competitors in the industry.

Before choosing a niche for your business, it is important that you thoroughly research on the niche so that you don’t go into a niche that is not profitable. Therefore, some of the niche areas that you can look into when starting your shared car service business are;

  • General shared car services
  • Shared car coordinating platform
  • Shared car services for executives
  • Shared car services for college students
  • Shared car services for young professionals
The Level of Competition in the Industry

The level of competition in the shared car service market is dependent on the kind of service you intend offering. If you will be offering a coordinating platform, then you can fairly compete regardless of the location that you are in, but if you will be offering services via your fleet of cars, then you need to be physically present in order to compete.

Due to the fact that the coordinating platform is deemed very important and competitive, entrepreneurs going into this kind of business must be prepared enough to compete even on a global level, and this is because distance is not a barrier in this kind of business. What customers are concerned with when using your platform is that you are able to offer excellent services via the drivers you pick, and that you are able to promptly attend to issues that might arise during the course of using your services.

Therefore, if you are looking to start a shared car business in the United States of America, it is important to note that the industry has major players already in it, which therefore means that you should be prepared for the stiff competition you are going to meet not only in the United States of America but also all over the world. It should be noted that the market leaders are the trend determinants in the industry.

4. Know Your Major Competitors in the Industry

In every industry, there are brands that have stood out due to the kind of services they offer, how popular they are, excellent customer relationship, how creative and unique their marketing and promotional activities have been, and the shared car industry no matter how relatively young it is, is no different as it has some brands that have managed to distinguish itself in a short period of time.

Below are some of the brands that are well known in the shared car service industry regardless of the model category they are in.

  • Uber
  • Lyft
  • City Car Share
  • Zip Car
  • Car2go
  • Enterprise Car Share
  • Hertz 24/7
  • BlaBlaCar
Economic Analysis

Shared car businesses have started taking advantage of partnering with auto leasing companies as well as insurers in a non-traditional marketing effort which has become more effective than the usual traditional marketing efforts. Also, shared car companies are going into distribution by getting listed by travel agencies online in exchange for a commission in a bid to generate more money.

The growth in the shared car business globally has greatly reduced the market profitability for car rental businesses especially as there has been reduced demand. This has made these companies to get creative in order to be able to remain in business and compete successfully against the growing shared car businesses or partner with them. Also, due to the fact that rental companies have many cars and have to employ too many workers, profitability has really dropped.

Even though the shared car business industry has been in existence since 1948 in Switzerland, it has grown into large proportions only in the last 15 years in the United States of America. Within this period, the shared car market has grown tremendously from something that was largely subsidized into something that has become a full-fledged enterprise solely for the aim of making profit. The shared car industry is dominated by four major companies who control about 95 percent of the market share.

The growth in the industry has mostly been pioneered by four major market leaders but there has been also room for independents to thrive especially new entrants who have deep pockets. Shared car services have been able to grow due to limited taxi services in some areas. The fact that there has always been the need for mobility means that there will always be the need for shared car services.

5. Decide Whether to Buy a Franchise or Start from Scratch

Deciding if you prefer to buy a franchise or start your business from scratch is a decision that is likely to affect your business positively or negatively. If you decide on buying a franchise, it must be that you have thoroughly studied the capabilities of the franchise that is being offered so that you do not end up buying a franchise that will be a waste financially and time-wise. Most of the franchises offered in the transportation industry is yet to touch the shared car service business as partnerships are what is mostly practiced in this sector.

In starting your business from scratch, you will need to conduct a market survey in order to fully understand the business. There are several things you will need to take into cognizance such as how much you will generate your start-up capital, how your competitors are running their business and how you intend to run yours, what strategies you have in place to attract customers, and how you will retain these customers. If do not fully know how the system runs, then it might be best to start on a small level and grow once you have thoroughly understood the business.

6. Know the Possible Threats and Challenges You Will Face

In every business there are always threats and challenges that an entrepreneur would face and if you are not prepared enough, you might see your business fail before it even starts. Therefore, if you are looking to start a shared car service business, then you should be prepared for any threats and challenges that are likely to crop up and you should be aware that while some of these challenges might be controllable, others may not be and you may therefore need to be optimistic when faced with challenges or threats that you have no control over.

Therefore some of the challenges and threats that you are likely to face when starting your shared car business in the United States of America include; government policies and regulations that might have a negative impact on your business, economic downturn that might see people looking for free rides instead, competition from new entrants into the market as well as competition from already existing businesses.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

There are certain important factors that must be taken into consideration when choosing a legal entity for your business and these include; how flexible the legal entity is, the taxation structure, personal liability limit, the ease of starting the entity and ownership control.

Choosing a legal entity is something that can be very overwhelming for an entrepreneur especially those that do to have the legal knowledge required to start the business, which is why it is necessary to meet with a law attorney or accountant who has knowledge of the sector you are going into.

The reason why you need to form a legal entity when starting your shared car business as opposed to just allowing people drive your cars is due to liability because there are risks involved in this kind of business and not having any form of liability leaves you personally exposed.

You can therefore decide to form a intermediate legal entity such as a Limited Liability Company (LLC) or a nonprofit organization, which will not only help you solve the problem of liability but ownership as well. In the LLC kind of legal entity, the entity is recognized by law as separate from the owner and will therefore own, insure the vehicles and also administer how the cars will be shared. This means that no matter how many members come into or leave the program, the car belongs to the entity. Also, in an LLC, you can encourage private individuals or even businesses to invest in your business.

8. Choose a Catchy Business Name

When thinking of a business to start up, it is important that you choose a name that will be unique, eye catching, creative and indicative of the industry which you are in. While it might not be so easy to get a unique name for your shared car business, you can easily look at names of those that are already in the industry and then use this to form a name for your own shared car service business.

Below are some of the catchy business names you need to consider when starting your own shared car business in the United States of America;

  • Right Car Share
  • Riders CarShare
  • CoCarShare
  • Ziggy Shared Cars
  • Ryder Share

9. Discuss with an Agent to Know the Best Insurance Policies for You

Choosing the right insurance policies for your shared car service business is very important. This is because the business is one that is very risky as anything could happen to the car, driver or passenger during the course of transit and it is therefore important that you are duly protected from having to personally pay for whatever is likely to occur.

Asides from purchasing insurance policies to help protect your business, it is mandatory for businesses in the United States to get one. If you are confused about what insurance policies will be most appropriate for your shared car service business, you might need to get in touch with an insurance agent or broker who will point out which insurance policies will be best for your business.

Below are some of the insurance policies that you should consider purchasing whilst looking to start your shared car business in the United States of America;

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

The shared car business is one that is based on providing service and there is therefore no need to seek for an intellectual property protection. This is because the activities in this market involves linking riders to drivers and ensuring that the drivers get the riders to their destinations using the best routes possible.

However as long as an entity is in existence, there will always be a need to protect certain aspects of the business intellectually. Therefore as an entrepreneur looking to start this business, you can apply for intellectual property protection for your company name, logo or any other material concept you deem important. Ensure that you engage the services of a lawyer who understands IPP and trademarks well to help you apply with the USPTO.

11. Get the Necessary Professional Certification

This is a basic business that requires you ensuring that riders get picked up and dropped at their destinations using the best routes possible; there is no need to acquire professional certification of any sorts.

Asides from the drivers’ license that drivers need to get when running this business, drivers usually might be required to be able to offer CPR or basic first aid but these are just extra skills that might prove useful and is not usually what clients look out for.

12. Get the Necessary Legal Documents You Need to Operate

When starting your shared car business in the United States of America, it is expected of you to have all the necessary documents that will enable you run your business legally. While the shared car business can be run locally, it is usually risky as anything might occur that will bring your business to the attention of regulated authorities and not being to provide the legal documents for your business will get you in trouble with the law, as not only might you be banned from running the business in that region or in the country, you could also be penalized financially. If you are not sure of what legal documents you would need, it is best to consult an attorney to help you out.

Below are some of the legal documents that you would need to run your shard car service business in the United States of America;

  • Certificate of Incorporation
  • Operating Agreement
  • Business License
  • Business Permit
  • Business Plan
  • Insurance Policies
  • Driver’s License
  • Contract Documents
  • Employment Agreement
  • Employer Identification Number (EIN)
  • Federal Tax Identification Number

13. Raise the Needed Startup Capital

Starting a shared car service business is one that is capital intensive and therefore as an entrepreneur, you would either need to start your business with your own personal funds or source for funds externally. This is not usually an easy affair for an entrepreneur, which is why it is advised that a business plan be written as this is what will help convince investors on how serious you are about your business and how they will recover any amount invested in your business.

Below therefore are some of the options available to you to explore when sourcing for start-up capital for your shared car service business;

  • Raising part of your capital from personal savings and sale of properties
  • Sourcing for soft loan from family members and friends
  • Sourcing for startup capital from private investors, corporate organizations and business partners
  • Applying for loan from a commercial bank

14. Choose a Suitable Location for your Business

In choosing the location that would be most appropriate for your shared car business, it is essential that you consider several factors that will have great impact on your business. Factors such as how close you are to your target market, what overhead and running expenses are there to consider, how large your shared car business will be etc.

If you however intend to run a business where you get to be the coordinating platform, then you can run it from home especially if you are still starting off on a small scale where you can monitor and handle all the parts of the operation yourself. Because you will need to handle so many aspects, it is better if you create a space in your home where you will not be disturbed in order to be able to run your business.

However, if you look at all those who are running your kind of business that are well known and successful, you will find that running your business from home might severely limit the rate at which your company can grow and excel. Therefore it would be wise to lease or rent a facility to use in running your business.

Therefore if you are looking for a location to run your shared car business and you intend to own a fleet of cars for the business, it would be best to look for a location that is very convenient for your drivers to get to, conspicuous and one that has a large space where you can park as many cars as you want.

Another thing that might be helpful when looking to start your shared car service business is getting the help of a real estate agent who has good knowledge of the city you intend to operate in, to help you choose what location might be most appropriate for your business.

15. Hire Employees for your Technical and Manpower Needs

In starting a shared car business, there are many details that would need to be taken into consideration. While there may not be a lot of technical skills needed, manpower details will need to be sorted out for the business to run smoothly.

Whatever number of cars you will be getting, you will need to ensure that they are all registered with the DMV. You can decide to partner with a rental company, get used cars, or get new cars. You will also need a navigation device so as to be able to get to your riders and also drop them in their preferred destination. Asides from these major equipment, you will also need a computer, phones and software.

In starting and running a business successfully, it is essential that you take time to build your business structure by recruiting only those that you know fully understand your goals and objectives and are willing to ensure that you attain them.

Therefore the people that you will need in order to effectively run your business are; Chief Executive Officer (CEO), admin and human resources manager, customer care executive, accountant, business development and marketing executive, software and database manager, drivers, security guard and cleaner.

Therefore, if you are looking to start your shared car service business, you will need at least 12 people to be able to make your business a success.

The Service Delivery Process of the Business

The delivery process that is involved in starting and running this business is not so technical. Once you have decided to run this business, you will need to approach a lawyer who will help you as regards legal entity and an insurance agent as regards what policies you will need for your business.

If you intend running the backroom and front service yourself, you will need to develop a program that will allow clients order for your vehicles. Once you have developed this program and ensured that there are no hitches or bugs, you can proceed to aggressively market your business.

Once all is set up and customers are aware of your business, all they need to do is download your app and then use it whenever they need a service from you.

16. Write a Marketing Plan Packed with ideas & Strategies

There are several things that are considered vital when marketing your services to your target market and they are; pricing, affordability, quality of service and testimonials. This means that customers want to know that they are getting the right price for a service that has had received several positive reviews.

However, before you can create marketing strategies that would be deemed effective for your business, it is important that you conduct a market survey. A market survey helps you understand the business you are going into and what you will need to have a breakthrough in the business.

It will also help you know what marketing channels are best for your business as the means by which you want to advertise your business can sometimes be overwhelming and costly. You can also recruit marketing executives who have the expertise in the sector you are in to help promote your business to your target market.

Below are some of the platforms that you can utilize in order to market and advertise your shared car service business;

  • Ensure that you take out adverts in local newspapers and magazines as well as on radio and television stations
  • Ensure that your business is listed in online directories
  • Advertise your business on popular blogs and forums in a bid to get the attention you need for your business
  • Empower your marketing executives to market your shared car business in whatever way they can
  • Install flexi banners in strategic locations in order to enable people know about your business
  • Use your social media platforms such as Facebook, Twitter, Instagram and Linkedin to promote and advertise your shared car business

17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Having a brand that is well known not only within its area of operation but outside it as well is not easy as several steps have to be taken to ensure that the business is well known. This is why if your intentions are to run a business that is well known, then you must make efforts that will enable you to boost the image of your business and create a corporate identity.

Because of the dual attributes of publicity – creating awareness and also generating revenue that will grow and sustain the business – companies do not mind spending a huge fortune each year to achieve the publicity they need for their business.

There are several platforms in place that can be used to promote and boost awareness for your brand and the internet is one of the fastest ways by which this can be achieved. The internet not only gives a far and effective reach, it is also cheap as well.

Asides from the internet, you can also use offline methods such as sharing handbills and business cards and advertising in local and national newspapers.

Below are some of the platforms you can use to create awareness for your brand and also create a corporate identity for your shared car business;

  • Ensure that your cars carry your company name and logo in a conspicuous manner
  • Participate in certain community events so as to boost awareness for your shared car business
  • Distribute handbills and fliers in various strategic locations
  • Send out press releases to local newspapers in order to create awareness about your business
  • Participate in discussions online and on your social media platforms such as Facebook, Twitter, and Google Plus in order to educate and also create awareness for your business
  • Create a website and use this to create awareness about your business