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How Much Does It Cost to Start a Taxi Business?

Taxi Business

It will cost about $80,000 or more to start a taxi business in any city in the United States. A taxi business is a company that gives people rides from one place to another for money. They have cars with special signs that show they are taxis. These cars are driven by trained drivers.

Taxi companies pick up passengers who need a ride, and they can be hailed on the street, called for a pickup, or requested through a mobile app. Their main job is to take people where they want to go in cities and towns.

A taxi business is not a business you can start without properly planning and budgeting. It requires that you have the required funds to purchase or facilitate the purchase of standard cars that can be used for taxis.

Apart from that, you will be required to meet certain criteria like having the proper licenses and permits, having a parking facility for your taxis, and other mandatory requirements before you can be allowed to legally start the business.

Factors That Influence the Cost of Opening a Taxi Business

  1. Type of Cars or Niche Idea

Interestingly, for the taxi business, there are two niche ideas one can choose, e-hailing taxi services or conventional taxi. The choice between an e-hailing taxi or a conventional taxi will greatly affect your startup costs.

With e-hailing services, the company doesn’t need to purchase or own any car because e-hailing taxi services work through smartphone apps that connect passengers with nearby drivers who own their cars and subscribe under the company.

But, if you choose to operate a conventional taxi company, then you must be ready to spend money in acquiring fleets of standard cars, and also recruit drivers.

This goes to show that a conventional taxi business is more expensive to start when compared to an e-hailing taxi business.

Note that a taxi business may decide to operate both conventional and e-hailing taxi services, and of course, you know it will cost more to start such a business.

  1. Number of Taxis (Cars)

If you have settled for the type of taxi business you want to start, another major factor that can influence your taxi startup cost is the number of cars you want to start the business with; that is, the size and capacity of your fleet.

In essence, starting a standard taxi business that will operate a fleet of cars will be far more expensive than starting a taxi business with just a few taxis.

  1. Your Vehicle Acquisition Option

When we talk of vehicle acquisition options, we are talking about your choice of either purchasing new or used cars. Of course, you know that when you settle for new cars, you will spend far more than someone who decides to start with used cars.

Note that even though new cars are more costly upfront, they have fewer maintenance issues at the early stage of use. Whereas, used cars are cheaper but require more maintenance hence you will be spending more.

  1. Operating Licenses and Permits

To legally operate a taxi business in the United States, you will need various licenses and permits, and some of them are Business License, Taxi or For-Hire Vehicle License, Commercial Driver’s License (CDL) or Chauffeur’s License,

Vehicle Registration, Vehicle Inspection Certificate, Vehicle Insurance, Certificate of Public Convenience and Necessity (if required),

Federal Motor Carrier Safety Administration (FMCSA) Operating Authority (for interstate operations), City or County Permit, and Tax Identification Number (TIN) or Employer Identification Number (EIN).

So also, costs associated with complying with state and federal regulations, such as emissions standards, safety inspections, and compliance, should be factored in.

Note that these licenses and permits typically come with application fees and ongoing renewal costs which can form a significant part of your budget for starting a taxi business.

  1. The Cost of Insurance

Taxi business insurance is quite significant due to the risks involved in the business. For example, cars can be involved in an accident, or can be stolen in transit or anything can happen hence you need comprehensive insurance to protect you and your business.

You must budget for commercial auto liability insurance, physical damage insurance, general liability insurance, workers’ compensation insurance, umbrella/excess liability insurance, garage-keepers insurance (if operating a repair or parking facility), and business property insurance (for offices, equipment, etc.).

  1. Maintenance and Repairs

Apart from the fact you are required by the U.S. Department of Transportation to keep all the cars plying the road in good condition, regular maintenance of your cars is to your advantage because it will help keep them in good working condition.

  1. Marketing and Advertising

If you have plans to start a taxi business, then you should do all that it takes to get people to use your taxi. In essence, promoting your taxi business through marketing and advertising efforts is essential to attract clients.

Even though there are no specific costs attached to marketing and advertising a business, the bottom line is that if you want to launch a business that will win a fair share of the available market share in your location, then you must be ready to invest a significant amount to promote your taxi business.

  1. Your Staffing Cost

Starting a taxi business requires that you hire Drivers, Dispatchers, Fleet Managers, Mechanics, Customer Service Representatives, IT support staff, Accountants/Bookkeepers, and Marketing and Sales Representatives.

When planning for your staffing cost, you should take into consideration the salaries, benefits, and training for your employees. These costs will form a significant portion of your budget and you must be prepared for it.

The only reason why you may spend a very minimal amount on staffing costs is if you are operating only an e-hailing taxi service company.

  1. Fuel and Operational Expenses

Fuel costs for a taxi business can be quite significant, and you must have a budget for it before starting the business. Apart from fueling your taxis which is an operational expense, you will also spend on other operational costs like tolls, parking fees, contract staff, vehicle tracking systems, and administrative expenses.

  1. Storage and Parking

Lastly, another factor that can influence the cost of starting a taxi business is the amount it will cost you to rent, lease, or acquire a storage and parking facility big enough to accommodate not only your fleet of cars but also has a maintenance and servicing garage.

This is so because you cannot start a taxi business without having a secure location to park your vehicles when they are not in use.