Anytime any day, the taxi business will always remain a profitable business that conveys passengers to and from locations of their choice. The taxi business is not like other modes of public transport where the service provider determines the pick-up and drop-off location.
This unique business can be started small with a few cars and drivers, and be expanded gradually as you grow. Starting a taxi business is a logical consideration for a lot of people because a lot of us grew up using taxis and, at face value, making money seems a bit easier in this sort of industry.
Before you venture into this business, you need to decide if your taxi business will be centered on metered taxis or minibus taxis, and you need to be aware of the regulatory environment that governs the transport industry. Let’s assume your taxi business will be a minibus taxi, you’ll need to apply for an operating permit, which allows you to transport passengers legally.
These permits are issued by licensing departments and even though they are relatively inexpensive, not having one could be problematic, so try to secure a permit before you begin operating. We also advice that you do your research around which routes will be more lucrative.
You need to find out how much you are likely to pay in fees in order to operate along your chosen route and whether this makes business sense. To start this business in south africa, we believe a huge sum of R800, 000 is enough to buy two or three new minibus taxis, but it depends on which brands you prefer.
Note that the upside of buying a taxi with cash is that you will have no installments to pay because you have invested your own money. But it is important to set a realistic financial management process that will enable you to recoup that investment and start making a profit or even grow your business.
You should also consider operating costs such as fuel, service or maintenance costs and even insurance. We believe that most taxi owners don’t put the necessary measures in place to help the business succeed. Try not to make the same mistake or you might end up losing your life savings.
Register your business with the Companies and Intellectual Property Commission and open a business account so that you have records (financial and otherwise) that will help you run a sustainable business.
18 Steps to Starting a Taxi Business in South Africa
Table of Content
- 1. Understand the Industry
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 6. Know the Possible Threats and Challenges You Will Face
- 7. Choose the Most Suitable Legal Entity
- 8. Choose a Catchy Business Name
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Iron-clad Competitive Strategies to Help You Win
- 18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
1. Understand the Industry
Businesses in this industry provide passenger transportation by automobiles not operated over regular routes or on regular schedules. Reports have shown that the revenue and income of the taxi industry is driven by business and leisure travel.
The profitability of individual companies rest entirely on innovation and good marketing. In the taxi business, small companies can effectively compete with the large ones because there are few economies of scale in operation.
Also note that major services in the taxi industry includes the transporting of passengers in taxis; renting of limousines, luxury cars, vans, and other automobiles with drivers; and hearse rentals with drivers. The vast majority of industry revenues come from local passenger transportation services.
Taxis transport passengers after being dispatched per customer request or reservation; they also pick passengers that hail or flag them down while driving on city streets or at taxi stands. Companies typically have a central dispatching office, own a fleet of vehicles, may own fuel tanks and pumps, and may operate a maintenance and repair shop.
Industry reports have it that between 70% and 80% of South Africa’s population is totally dependent on public transport for its mobility needs and the most popular choice, the minibus taxi, has an annual turnover of between R60bn and R90bn.
Experts estimate that within this informal, unregulated sector there are 150,000 minibus taxi owners, 300,000 drivers, 100,000 rank marshals, 100,000 car washers and 150,000 informal traders at taxi ranks. In the bus services industry, 19,000 buses provide 912 million passenger trips per annum while travelling an estimated 1.4 billion kilometres.
This section of the industry provides direct employment to about 34,200 people throughout the country. Reports have it that by 2050 eight out of ten people in South Africa will live in an urban area and it will in turn increase the dependence on taxis for daily movement.
We strongly believe that advancement in technology and ‘Big Data’ in particular are expected to positively impact the sector and improve transport operations, easing the transit flows for millions of daily commuters.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
We all can agree that taxis are major or rather daily amenities needed by all individuals ranging from the high and mighty down to school kids. Almost all average earning families in South Africa have car(s) but do the cars see to all their mobility needs at the same time?
It is a fact that all adults and most teenagers have boarded taxis in their lifetime not putting into consideration the many times, intervals or frequency. We believe that the taxi business serves both the able-bodied and the physically challenged, and the taxi industry has no specified age bracket or social status.
3. Decide Which Niche to Concentrate On
You have to understand that this business is very lucrative with good niche ideas for focused individuals. A lot of individuals who venture into this business target the normal plying of customers from location to location without considering other niches that can put foods on their tables. The taxi business in this age has gone far beyond the normal taxi calls and services we all are accustomed to. Niches in this industry include;
- Kid’s taxi services
- Health taxi
- Water taxi service
- Car rental
- Limousine service
- Minibus taxi etc.
The Level of Competition in the Industry
Note that our research focuses on the South African metered taxi industry, a sector that complements other route-based bus, minibus taxi and commuter rail services. Reports have shown that the taxi industry as a whole accounts for approximately 70% of South Africa’s public transport usage.
But then industry experts estimate that 90% of South African taxis are minibus taxis and only 10% are metered taxis. Since there is no reliable data, it is difficult to provide relevant statistics for the industry but a finance company estimates that there are approximately 20,000 metered taxis on the road.
Aside from the negative impact on the current economic climate on demand for services, metered taxi operators have had to survive the disruptive effects of the smartphone-based e-hailing technology introduced by Uber Technologies. We believe that the Uber concept is revolutionizing the industry, changing the way people think about transportation.
Presently, Traditional metered taxi operators see Uber as engaging in unfair competitive practices by operating illegally without permits and charging below-cost rates. Another cause for worry is the rising number of other services that are in direct competition to some of the traditional 24-hour services offered by the metered taxi industry.
You need to note that the National Land Transport Amendment Bill of 2015 is expected to transform and restructure the national land transport system. We believe that the bill includes provisions for e-hailing transport services and in terms of the legislation, drivers who use Uber as a technology partner will need taxi operating licences and will be subject to regulations by authorities in line with other metered taxi operations.
4. Know Your Major Competitors in the Industry
The taxi industry just like many industries in the world is filled with competition and the struggle for survival. Listed below are few known names in the taxi business
- Uber – united states
- J21 – united kingdom
- Ace cab – United States
- Comfort taxi – Singapore
- Red Cab – Nigeria
- AAA cab – United States
- Ascot taxi service – Australia
- OLA cabs – india
- Dididache – China
- Toplimo – Belgium
- Asociación Radio Taxi Iluchmajor Arenal – Spain
- South Kerry taxi – Ireland
- Belek Transfers – Turkey
- Taxi Alessandro – Italy
- Airtrail Slovenia – Slovenia
The taxi business is a very crucial part of the economy of any given location. As a visitor in a place for the first time, it doesn’t matter if you came by road, sea or air, there is a high probability that the first person you will meet in the new city is a taxi driver whom you must have employed to take you to your destination and the attitude and carriage of the taxi driver automatically creates a general first impression of the attitude of the residents of that area on your mind.
The economy of a place in turn affects the taxi business through fares, fuel price and good roads. Note that the multi-billion Rand minibus taxi industry carries over 60% of South Africa’s commuters. We believe that these commuters are all of the lower economic class.
You also need to note that the industry is almost entirely made up of 16-seater commuter Toyota Hiace buses, which are sometimes unsafe or not roadworthy. Minibus taxi drivers are well known for their disregard for road rules and their proclivity for dangerously overloading their vehicles with passengers.
Due to the effectively unregulated market and the fierceness of competition for passengers and lucrative routes in South Africa, taxi operators band together to form local and national associations. These associations soon exhibited mafia-like tactics, including the hiring of hit-men and all-out gang warfare.
5. Decide Whether to Buy a Franchise or Start from Scratch
In this business and especially in South Africa, a lot of taxi business owners started from the scratch but it is not a guarantee for success. Starting a business from the scratch or buying a franchise has its own advantages and disadvantages.
You need to understand that the taxi business is a goal oriented business where bigger companies are swimming deeper and the little ones are struggling to grow bigger. Innovation, commitment and brand popularity are important incentives that can guarantee success in this industry and buying into a franchise can provide that easily.
We greatly concur that starting from the scratch gives you 100% control over your business but it will take more time, struggling and commitments. Taxi business has gone beyond cabs plying the cities in search of passengers, and buying a franchise will give a focused individual a befitting foundation to be able to build a business that can grow through time amidst its competitors.
6. Know the Possible Threats and Challenges You Will Face
Every business has its own threats and challenges that require careful planning to scale through. To be successful in any business endeavour, you need calculated research, struggles and innovation. The taxi business is a business for individuals who are strong willed, patient and calculative.
When starting this business, the price of gas and vehicles are in fact the key problems especially in this part of the world. The every rising cost of petrol, diesel or whatever it is vehicles run on these days, is high but the introduction of fuel savers in vehicles can help reduce fuel consumption. Also fees and taxes paid by drivers and companies can also be a challenge to someone hoping to start a taxi business.
Another likely threat when starting this business is the cost of keeping the cars in good condition. It’s your job as a taxi business owner to maintain your taxis regularly and this costs money. In the same vein, cars break down unexpectedly sometimes and this might just mean goodbye to that day’s income.
Another key threat in this business is finding good and honest drivers. A lot of drivers in South Africa are simply not straight-forward and would look for ways to short change you with every chance they get.
There have even been cases of drivers running away with their employer’s vehicles. To guard against such events, you must make sure each driver you employ has a guarantor who would be held responsible for any damages. You can also install car tracking devices on all your taxis.
7. Choose the Most Suitable Legal Entity
A lot of factors should be considered when choosing the best form legal entity for your taxi business. The type of legal entity you choose will affect the way you file paperwork, face personal liability, pay taxes and, if necessary, file for bankruptcy protection. Most taxi business owners in South Africa form their business as a sole trader, but for the sake of this article, the Closed Cooperation is the best legal entity for your taxi business.
Closed corporations (CCs) have been designed especially for small businesses. It is a legal entity more separated from its owners than a partnership or sole proprietorship, and more flexible than a company. A CC is regarded as a separate and distinct legal person and is formed and owned by its members but exists independently from them.
A CC may be formed with one or more members but may not have more than 10. Have it in mind that only individuals can be members of a CC. We believe that it is different from a company, which can have other companies as shareholders.
CCs must be registered at the Registrar of Close Corporations. It is usually quicker to do the registration through a lawyer or an accountant, in which case registration can cost up to R1 000. Also note that a CC can own assets and enter into agreements. The members are not liable for the debts of the Cc. However, the members may be liable jointly with the CC in the following circumstances:
- If the number of members exceeds 10
- If a company holds a member’s interest
- If a member who is disqualified from taking part in the management of the CC, does so
- If the name of the close corporation is used without the abbreviation “CC”
- If a member fails to give their initial contribution to the CC
8. Choose a Catchy Business Name
- Pick-me-up cabs
- 24/7 cabs
- Pick and drop motors
- Blue express
- Metro cabs
- Safe drivers
9. Discuss with an Agent to Know the Best Insurance Policies for You
When running a taxi business, you must have some basic insurance to cover your customers in case one of your drivers causes an injury or property damage. Operating in this high risk industry, insurance provides a safety net in case an accident or some other unfortunate incident happens.
- Drivers’ liability
You must have insurance for drivers’ liability for injury to others, including passengers, and for damage to other people’s property resulting from the use of a vehicle on a road.
- Comprehensive insurance
This insurance covers damage to vehicles as well as third-party liability, fire and theft, as well as sufficient cover for the goods transported in terms of damage and theft.
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
Intellectual property protection in the taxi industry is about protecting the time, money and effort you put into your business. It helps you to protect what’s yours, mould your handwork and ingenuity into profitable returns, place yourself up for growth or business expansion, keep competitors away, ensure you’re not fringing in anyone’s right, prevent employees from aiding your competitors, attract investors and also promote your business to investors.
A lot of taxi business owners believe that intellectual property protection is just for big companies, but as an entrepreneur who have worked hard to create and manage your taxi business; it should be in your best interest to make sure your intellectual properties are for you – both now and in the future. Intellectual properties in the taxi industry may include
- Registered and Unregistered trademarks – Your brands name of logo.
- Patents – typically a new way, process or material invented as a business innovation
- Company secrets
- Secrecy agreements – contracts that keep valuable information safe
11. Get the Necessary Professional Certification
In South Africa, the most important certificate for a taxi operator to have is a route license. The taxi association will upload the driver and vehicle details on a database, which will then show if the route is profitable or not. If there are too many taxi’s on the same route, then the likelihood of the driver making a profit will be reduced.
Note that routes in the country are allocated and controlled by local governments, but the taxi association’s task is to be very careful in making sure that there aren’t too many drivers running the same route. Note that management or owners of a taxi business should have qualifications such as the National Certificate in Professional Driving, as this qualification offers a broad range of skills including:
- Customer relations
- Freight loading
- Crane operation
- Occupational health and safety
- Abnormal loads
- Financial planning
- Operating a vehicle combination.
- The Transport Education and Training Authority (TETA) accredit training providers countrywide.
12. Get the Necessary Legal Documents You Need to Operate
In South Africa, your business must be registered with the appropriate South African agencies, including the Companies and Intellectual Property Registration Office (CIPRO), the Department of Labour and the Department of Transport. Once registration is completed and licensed taxi drivers are hired, the business is free to operate.
You should start by registering the preferred business name by visiting CIPRO’s website and filing the Application For Name form. The form can also be submitted in person at the CIPRO office in Pretoria. The approved name will be automatically reserved for two months. You then have to submit a completed Certificate to Commence Business form to CIPRO so that the business can begin to get capital or trade shares.
Note that you need to include the following completed documents: a CIPRO letter showing that the company name was approved, a copy of the Certificate of Incorporation, a copy of the Memorandum and one copy of the Articles of Association, which must include a signature page. A fee must also be included.
The minimum cost can be ZAR 415 (USD $53). Additionally, the following forms must be submitted: Form CM22, CM27, CM29, CM31, CM46 and CM49. All forms are available at the CIPRO website. Once all required forms, documents and fees are submitted, CIPRO will take five to seven days to complete incorporation.
You also have to register for tax purposes by submitting the needed forms to the South African Revenue Service. We believe that the proper form will rest on the type of business, but all forms are available at the SARS website. The business must then register as an employer using the EMP101e Form, which is also available at the SARS website. For Value-Added Taxes (VAT) purposes, the business must submit the name of its public officer to SARS and this person must be a resident of South Africa. The tax registration process will take 12 days.
Note that you have to register with the South African Department of Labour. To do this, submit Forms U18 and U19 and wait for the department to approve the application. The forms are available at the Department of Labour website. After approval, the department will issue a reference number to the business.
Don’t forget to employ taxi drivers with professional driving permits obtained from the Department of Transport. All taxi drivers must have a driver’s license and a professional driving permit to operate in South Africa. The taxi driver must go to a provincial Department of Transport to apply for a permit.
13. Raise the Needed Startup Capital
In South Africa, the commonly used vehicles are Toyota or Nissan taxis. These are called the premium vehicles in the taxi industry because of their reliability. These taxies retail from about R100 000 to about R340 000, but for the overall cost that would include paying your license and taxi association fees, the total cost can amount up to R350 000 to start a taxi business.
Indeed every industry has its flaws, and every business comes with financial gains and losses. It now falls on you as a business owner to make the business run smoothly. Although minibus taxis are a familiar sight on South Africa’s roads, the inner workings of the business are not generally well-known, which is why we strongly advice you perform a concrete research before you dive into the industry.
Reports have shown that the general transport business has a ‘low barrier to entry’ at the bottom of the market, meaning that anyone with a minibus can start offering transport services. This results in a flood of competition at the bottom end of the market.
In some cases, the entrepreneur starts a business with little to no capital, depending solely on revenue derived from the business to cover all overheads from day one. This lack of capital curtails marketing activities that may result in increased income. Where to get finance in this industry may include…
- Commercial Banks
They now finance vehicles used in the transport industry. But before you walk into the bank for funding you must be able to show the bank that you have the necessary expertise to run a business by producing a well-constructed business plan. You will need security (personal surety and or assets) to cover the loan amount that you need.
- Khula Start-up Fund
This Fund was created to empower South Africa’s historically disadvantaged entrepreneurs to build new enterprises. Individual solutions are structured after having assessed the potential return of the venture and level of risk. Loans are repaid over a 5-8 year period and SME’s can apply for finance between R150 000 to R3 million.
- IDC Metal, Transport and Machinery Fund
The Industrial Development Corporation helps South African entrepreneurs to finance vehicles, components and accessories as well as diverse transport products such as boats, planes and trains. Repayment is usually made over 5-10 years depending on the risk profile.
14. Choose a Suitable Location for your Business
In this business, one of the key decisions you have to make is to choose a suitable location for your business. You should be able to look at the benefits which each area have to offer as well as any government help which might be available.
We believe that a suitable location for your taxi business should have easy access to all major routes in your area and enough parking space to safely store all your vehicles. A location for a taxi business or a dispatch office for your taxi business should be easy to locate, convenient for the taxis to be refuelled and repaired. We strongly believe that centralized located sites are best if you will be serving your entire city.
15. Hire Employees for your Technical and Manpower Needs
We agree that this lucrative business can be started and run by an individual, probably the owner, but it doesn’t necessarily mean that the taxi business is a business for just one individual. But we believe that the manpower you will need to run your taxi business will depend on the size of your business.
Have it in mind that the advent of technology have in a long way affect the need for manpower in the business world. For instance, with the introduction of mobile applications into the taxi industry, customer care representatives are being replaced by programmers and Web designers.
Reports have shown that this business is gradually being override with technology and science. It is no longer the old human to car industry we are accustomed to but now an industry that is going through positive change to be able to provide unadulterated services. Few equipment are needed to start a taxi business include
- Dispatch systems
- Top lights
- Taxi meters
- Electronic transaction systems
- Taxi driver protection screens
- Safety cameras for taxis
- Decals, labels and livery
The Service Delivery Process of the Business
This business has no means of production or raw materials to manufacture but only peculiar services to render. This necessary service is built on the movement of man from a location to another. Taxis don’t only transport able bodied humans but also sick individuals in terms of health taxis.
Taxis also function in the various transport methods like the water and air taxis. Indeed the service offered by businesses in this industry is of high demand in our country.
The customer can simply wave/flag down a taxi, call a taxi company, stand at a taxi stand, or use the technology inclined taxi app to ask for services. Then the information is processed and a taxi driver picks up the passenger and drops at the agreed location. But then note that metered taxis are graded in South Africa. There are three grades.
- Grade A: Vehicles not more than five years old as determined by their first date of registration. They have air conditioning, advanced braking systems, electric windows and other attributes determined by the grading board.
- Grade B: Vehicles not more than eight years old as determined by their first date of registration, with air conditioning and other attributes as stated by the grading board.
- Grade C: These are smaller and or older vehicles of types, standards and attributes determined by the grading board.
16. Write a Marketing Plan Packed with ideas & Strategies
It’s very important to state that intense competition and growth in technology have moved the taxi industry to another level. You need to understand that creativity pushes you to search for ways to make a difference in business. When starting this business, you should consider creating business cards you can give out so people will have your number handy when the time comes for a taxi to be called.
We believe if you establish concrete relationships with repeat customers and with people who call taxis often (like bar owners or hotel managers) and maintain those relationships, you’ll likely find yourself with a steady stream of business.
You should also have it in mind that the most common times people need a taxi is after drinking. We suggest you talk to local bar owners and see if you can make a deal with them to be “on-call” for customers who have had too much to drink. Give the bar owners your card and perhaps offer a special promotion to customers or a commission to the bar owner if they will call you first when someone needs a taxi trip home.
Also people also need taxis at hotels and airports. You have to find out if you can drive your taxi to these locations and join the line of waiting taxis or if there are special requirements. In this part of the world, sometimes airports have specific airport taxi services, but this is not always the case.
You can look for ways to make you taxi unique and attractive to be able to attract the attention of customers. We advise you stay creative when thinking about people who might use taxis, like senior citizens who may need special handicapped transportation.
17. Develop Iron-clad Competitive Strategies to Help You Win
You need to understand that competition is what brings about ideas and creativity. Void of competition, the taxi business would be boring and will lack new ideas and no one will work hard to satisfy the general public. We believe that possible ways to win your competitors in the taxi business involve finding a void or an opening in the business and filling it.
A business doesn’t necessarily have to be revolutionary in order to succeed. Rather than struggling to come up with a brand new idea, take a look at the industry and see where there’s a void to be filled.
Indeed the void you plan to fill or the services you hope to offer may be similar in many aspects to that of the competition except for a few defining factors. Those are the key to everything. You should be great at all the basics, and then put your energy and focus on being exceptional at what makes you different.
We also suggest you establish a customer-centric culture by teaching your drivers to show hospitality and friendly personality, to understand customers need and listen to complains. People might be happy to pay cheap fares but most people would take into consideration their comfort and happiness to the price they pay.
Have it in mind that a competitive and crowded industry indicates that customer demand exists, and that the market is viable. If you carve and grow your ideas, there will be room for your taxi business.
18. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Starting a taxi business is not just enough as it needs more than just vehicles and drivers to establish yourself in this business. To win over customers, you need to make sure you shout about your brand and get your name in front of as many eyeballs as possible.
Indeed it won’t be an easy task as it takes planning and innovation to be able to push your taxi business to a point where people can easily identify it and patronize you. Ways of boosting your brand awareness and creating a corporate identity in the taxi business may include;
- Make use of the web
In this new technology age, homes and businesses all over the world are online, and mobile phones commonly have Internet access. We suggest you promote your business awareness by developing a website. You can also hire a search engine optimization company or learn the process on your own to ensure that your website appears high in web search results.
- Establish social media presence
Have it in mind that social media sites like Facebook and Twitter can be very crucial tools in building your brand awareness because they serve as forums where consumers discuss their lives, including their activities and items they like.
Anytime a customer enjoys the services you provide and tell people about it, she/he is doing free work to increase your brand awareness for you. The easier you can make it for people to provide a link to your company so others may follow, the more people will become aware of your brand.
Leveraging traditional methods
Indeed the use of print media may be reducing in the face of electronic communications, but a lot of consumers still read newspapers and magazines. You may be able to use the declining significance of print publications to your advantage by negotiating a lower advertising rate.
Don’t forget to create an attention-grabbing advertisement that prominently displays your taxi business and explain its services. Contact local or even national publications and work with their advertising departments to insert your ads in the most prominent way possible.
- Sponsor public events
We strongly believe that if you host or contribute to a charity event such as a golf tournament, you can prominently display the name of your company to consumers with disposable income. Apart from having your name or logo in front of these potential customers, your company and services may be seen in a favourable light for contributing to charity.
We suggest you contact local charities you support to gauge their level of interest in your sponsorship. Suggest events such as milestone celebrations for long-running institutions or weekend family events that would generate buzz and publicity both for the organization and your taxi business.