How to start a taxi business

Are you thinking of starting a taxi business? You might love the idea of becoming your own boss and setting your own timetable for work. But are you wondering what you need to do to get started, or simply how to start a taxi service? If so, then keep reading! This guide outlines how to start a taxi business, starting with writing a business plan.


How to write a business plan for your taxi business

If you’re thinking of starting a taxi company, you should start by crafting a well-thought-out business plan. When done correctly, a business plan will help keep you on track through the turbulent early stages of your entrepreneurial journey.

The foundation of any business plan is the executive summary, which provides a brief overview of your business, its mission, and its goals. Here, you’ll want to highlight what sets your taxi service apart, whether it’s exceptional service quality, a strategic location, or any unique features of your vehicle.

Market analysis should be a core component of your plan. This involves researching the local market, understanding target demographics, analysing demand trends, and assessing the competitive landscape. It’s crucial to gauge the demand for taxi services in your chosen area and pinpoint any specific niches or customer segments you plan to serve.

The operational plan should outline the day-to-day workings of your business. Here you should detail how you’ll manage bookings, maintain your vehicle, handle driver schedules (if you employ drivers), and maintain high customer service standards. You’ll also need to include some financial projections here. These should include comprehensive forecasts for revenue, expenses, and profitability. You should also consider costs like vehicle purchase or lease, fuel, insurance, licensing, and marketing.

To attract and retain customers, you’ll also need to outline a solid marketing and promotion strategy within your business plan. You should describe your approach to branding, advertising, and any potential partnerships with hotels, businesses, or travel agencies.


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How much does starting a taxi firm cost?

When starting a taxi business, your biggest initial outlay is likely to be your car: without a suitable and reliable car you won’t be able to work as a taxi driver.

As with personal vehicles, taxi costs vary depending on the age, make and model you choose. But your first consideration needs to be what kind of vehicle you need for your taxi business. For example, if you’re planning on running a route involving many airport drop-offs, you’ll need a car with a good boot storage capacity. But if you want to cater to large groups, you’ll need a people carrier or even a minivan.

Buying a new vehicle outright isn’t the only option; if you don’t have the funds to buy new, you can always lease a vehicle. You might also be able to find a great deal on a second-hand cab – just watch out for high mileage, as they won’t last as long and might come with unexpected maintenance issues.

Once you have a vehicle, you’ll need to budget for ongoing costs like fuel, maintenance, and of course insurance. You might also need a sat-nav or a smart phone with GPS to help you to navigate your working area. And you’ll almost certainly need to set up a card payment facility so customers can pay using their credit or debit card.

You’ll also need to consider how to market your taxi services. Apps like MyTaxi or Gett charge a small fee, whereas Uber takes a commission from every journey in exchange for finding your continuous work. Alternatively, you could market your services through Google, Facebook, and other social media platforms for relatively little money. And finally, you’ll need to pay for your taxi licence.


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How much does it cost to get your taxi licence?

A taxi licence is a key requirement when starting a taxi business and every company must have one. To get a taxi licence, you may need to pass one or several tests depending on which area you live in. These include:

  • A medical test to prove you are fit and healthy enough to drive passengers.
  • A language test to ensure you can communicate in English well enough to handle any issues that may arise during the course of your business.
  • The knowledge – a requirement to drive a metered taxi in London. Other areas in the UK have similar tests covering their respective areas.
  • Disclosure and Barring Service (DBS) check, which shows any criminal convictions or cautions on your record that might prevent you working with members of the public.


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What are the different ways taxi firms can make money?

Corporate clients: providing transport services to local business can offer a steady, consistent revenue stream – which is vital when starting a taxi company.

Regular customers: building a loyal customer base takes time, but it’s worth it. Give it time, and those regulars will become the lifeblood of your business.

Commercial services: transporting goods or handling deliveries can be a great way to supplement the income from your taxi business during quiet periods, especially in urban areas.

Airport runs: people travel abroad every day of the year, and many people going to and from the airport don’t want to lug their suitcases on the underground or on trains, which provides an excellent business opportunity for a fledgling taxi firm.

School/ college/ university transportation: school and student runs can provide consistent income for a new taxi firm, especially in suburban areas with a high-density population.


How much can I earn as a taxi driver?

The amount you can earn varies on how many hours you work, where you work, and when you work. The National Careers Service estimates taxi drivers can earn about £30,000 pa. But remember that the amount you make in fares is only half the story. To maximise your income, you’ll also need to look at controlling your overheads, like the costs of your insurance.


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What are the benefits of starting your own taxi business?

  1. Independence: running your own business lets you choose your own schedule and working hours, and you don’t answer to anyone.
  2. Potentially lucrative earnings: although earnings vary, a successful taxi business can be quite profitable, especially in areas with high demand.
  3. Diverse clientele: by running your own taxi firm, you get to work with a wide range of different clients, from everyday folk to corporate clients, tourists, and families.
  4. Scalable business model: if there’s unfulfilled demand in your area, you could expand your business and hire other drivers to help fill demand.


What insurance do I need for my taxi business, and how much does it cost?

When starting a taxi company, insurance is essential. Taxi drivers pay premiums between £1,300 to £1,800 a year, according to Marc Loud from Park Insurance. Of course, your location, vehicle, and any previous claims or penalty points will affect this cost.

Keep in mind that cheap taxi insurance can cost you more in the long run. Before you take out any insurance policy, you should check for policy exclusions that mean you’re not covered under certain circumstances.

You also need to make sure you have public liability insurance to cover you against claims made against your business by members of the public. You could also look at breakdown cover to guard against spending days off the road unable to work because of an unexpected breakdown.

Additionally, if you have dependents who rely on you to bring in cash every month, loss of earnings cover and personal accident cover would alleviate the financial strain in the event you’re unable to work due to unforeseen circumstances.


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How to get the best price on your taxi insurance

You should always take the necessary steps to get a good deal on your insurance. There are several ways to do this:

  1. Never accept the first quote you’re offered. It pays to contact as many different insurance companies as you can, as each company will calculate your risk profile differently, so you will be offered a different price by each firm. If you would rather work than spend your day calling up insurance companies, use an independent broker like Park Insurance to do this leg work for you.
  2. Consider increasing your excess cost to bring down your monthly premiums.
  3. Pay your insurance annually, as monthly payments drive up the cost.
  4. Try to package your insurance policies together, which will save you time and money.


Our five top tips to put you firmly in the driving seat when you start a taxi business

#1 – Research the market

Market research is vital during the early stages of starting your taxi business. Are you going to be the only taxi in town, or will you be fighting for business in an oversaturated market? Bigger taxi firms in cities price their service aggressively to win business from new and independent firms, so if several firms are already competing in your area, you might need to look further afield to survive and hopefully thrive.

You’ll also need to research the type of customer you want to target. Are you looking to do airport runs or group trips to the seaside? Whatever you choose, you need to be sure there’s enough demand to give you enough business. If one niche is crowded, look for another: school runs and patient services for local hospitals are often underserved areas.


#2 – Get licensed

No matter what your plans, you will need to ensure that you get an operator’s licence from your local licensing committee. The local council issues these, and there may be specific criteria to fulfil before you can obtain a licence (criminal record checks, for instance).

The licensing process for Hackney Carriage licence is slightly different, however, as these taxis can pick people up from the roadside and from taxi ranks, which private hire cars cannot. Ensure you know in advance which type of taxi business you want to operate: private hire or Hackney Cab.


#3 – Get the right taxi insurance

Taxi insurance is different from normal car insurance as it covers you for commercial use of your vehicle. A good broker can arrange complete packages of taxi insurance for you, which includes public liability cover, interruption of earnings cover and employer’s liability cover (which you’ll need if you employ any drivers, even if they are self-employed or subcontracted).


#4 – Prepare to work hard

Running a taxi business is definitely not a 9-5 job. You’ll need to prepare for long hours, including evenings, weekends and Bank Holidays, as this is when you can maximise your earnings. Make sure that your family knows and accepts that you’ll be out at all hours of the day.


#5 – Look for car lease deals

Whether you’re planning to run a fleet of taxis or just one cab for yourself, you can spread your costs by leasing one or several cars rather than buying them in cash. Leasing deals often include servicing, warranties, and replacement vehicles in the event of a breakdown, all of which can be very useful for a taxi business.


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Let Park Insurance help your new taxi business to succeed

Thanks for reading our guide on how to start a taxi business in the UK. We have over 30 years of expertise in helping taxi drivers to secure the best value insurance. Our understanding of your business and our close relationships with some of the UK’s biggest insurance companies helps us to negotiate great prices on your behalf.

We’ll source robust insurance that won’t leave you with any surprises if you do need to make a claim. We’re independent, so you can count on us to select the best value deals from a wide panel of specialist insurers. That means you can be confident we’re finding you the best price we can.