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 do you know what do you need to do to get started? And are you aware of the hidden costs? Our simple ‘how to’ guide outlines what you need to know to get started running your own taxi business. Read on to discover the essentials, from average earnings to how to get the best price on your taxi insurance.
Firstly, how much does it cost to start a taxi business?
When you start 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, the cost you’ll need to spend can vary depending on the age, make and model you choose.
Buying a new taxi outright isn’t the only option. If you don’t have enough cash to buy, there are options for leasing or hire purchase. You might also be able to find a great deal on a second hand cab – just watch for high mileages. A hybrid or fully electric vehicle is essential if you want to work in London. The initial outlay may be higher than a diesel or petrol vehicle, but you should see savings on the cost of fuel consumption. And think about the sort of car you’ll need for your driving jobs. For example, if you’re planning on running a route that involves a large number of airport drop-offs you’ll need a car with a good boot storage capacity.
Getting a suitable car not the only cost you’ll need to budget for when you start a taxi business. Don’t forget the costs of fuel and on-going maintenance for your vehicle as well as other essential costs like insurance. You’ll need specialist communications equipment, like a radio, to keep in touch about fares. And you’ll need to invest in a payment facility so your customers can use their credit card to pay you.
Costs to get your taxi licence
You’ll also need to pay for your taxi licence (costs vary depending on your location). And if you need to take any tests these can add up too. Tests you might need to pay for include:
- Medical tests. To prove you are fit and healthy to drive. Costs can vary.
- Language tests. You’ll need to be able to prove that you can communicate in English to a minimum level. If you have an NVQ/ GCSE/O level in any subject, that’s enough. If you don’t, you may need to take an Interim English Language Test (IELTS). Costs for this can vary.
- The Knowledge test. If you’re planning to become a cabbie in London, you’ll need to take the famous Knowledge test. Other parts of the UK may also expect you to take a test showing that you know the area well. This may be included in your application fee or it may be charged extra. If you fail the first time, you may also have to pay an additional amount to take it again.
- The Disclosure and Barring Service (DBS) is a must when you apply for your taxi licence. It identifies if you have any convictions or cautions that would prevent you from working with the public. You can’t apply for this yourself, but you can request a basic disclosure for a fee.
Additional costs to consider
There are other considerations that you’ll need to bear in mind when you start-up. For example, how are you going to let people know about your taxi business? Budget an amount for advertising in local directories and printing fliers to leave at key locations. And make the most of modern technology by signing up to apps like MyTaxi or Gett for a small fee.
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 up to £30k. 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 reducing your outgoings, like essential taxi insurance, too.
How much does taxi insurance cost?
Taxi drivers should expect to be paying out an average premium of £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.
Turning a profit
Cheap taxi insurance can cost you more in the long run. Beware if it seems too good to be true, as it probably is. You should double check for policy exclusions that could leave you out of pocket if you do make a claim. Make sure you do have extras like public liability insurance and breakdown cover that can really protect your business from unexpected events. And, if you have dependents who rely on you to bring in a wage, consider protecting your income. Loss of earning cover and personal accident cover can both help cover the financial strain if something happens. So if you can’t work for a period of time, you can still pay the household bills.
How to get the best price on your taxi insurance
Whilst you shouldn’t scrimp on taxi insurance, it doesn’t mean you shouldn’t try to get the best value deal that you can. That means taking steps to get insurance cover that you can count on at a good price. There are several ways to do this.
- Never just accept the first quote you get or your renewal quote. It pays to contact as many different insurance companies as you can. That’s because insurance companies calculate your premium based on different risk factor. Depending on what formula each company uses, you could find two very different prices for very similar cover. If you would rather be out on the road earning cash than calling up insurance companies, use an independent insurance broker like Park Insurance to do this leg-work for you. The team at Park understand the specialist needs of taxi drivers. And they are experienced at negotiating the best price deals on your behalf. So they can save you time and money as well.
- Consider increasing your excesses to bring down your premium cost. Beware of setting excesses too high though.
- Pay annually if you can, as monthly payments incur extra costs that can push up the amount you’ll need to spend.
- Buy a package deal of insurance to save money. For example, buying breakdown cover at the same time can save you ££s.
More ways to save
- Be a good driver. The biggest factor is pushing up insurance costs is if you’ve made any previous claims. A good no-claims record can save you up to 75% on your premium.
- Stick to road laws. Any penalty points on your licence are likely to increase your premiums. So make sure you know the speed limit and you stick to it. And invest in hands-free kit for your phone so you can stay in touch without breaking the law.
- Be as accurate as you can when estimating your mileage. Insurance companies calculate premiums based on risk. The more miles you drive, the more likely you are to have an accident. Try to estimate your average annual mileage as accurately as possible to pay the best price. Just be careful not to under-estimate as this could void your cover.
- Choose your vehicle carefully if you want to get the best price on your taxi insurance. Look for cars in a lower insurance group to secure lower prices.
Can I operate a taxi firm from home?
Part of the appeal of starting a taxi business is that it’s something you could potentially do from home. But it’s not always straightforward. You may need planning permission to run a business from your home, so contact your local planning office for advice.
If you own your home with a mortgage, you may need to check with your mortgage provider that they are happy for you to run a business from the property. And if you rent your home, you will need to check with your landlord.
And don’t forget, if you are running your taxi business from home, you’ll need to let your home insurance provider know as they may require you to take out a commercial insurance policy to cover it.
Our five top tips to put you firmly in the driving seat when you start a taxi business
#1 – Check your market
Are you going to be the only taxi business in town? Or is there already an established company operating in your area? Taxi firms defend their ‘territories’ fiercely, so make sure you’re not stepping on someone’s toes or moving in on an already overcrowded area. By the same token you’ll also need to do a bit of market research to find out what kind of custom you’re likely to expect – are you looking at lots of airport work, or is it more likely to be short hops (less than two miles) at closing time on a Friday night? If things are looking crowded you might want to think about specialising, such as school runs for kids, or patient services for local hospitals.
#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. Licences are issued by the local council (unless you’re going for a Hackney licence) and there may be specific criteria that you will need to fulfil before they’ll grant you a licence (such as criminal record checks if you’re doing school runs, or getting a particular type of taxi insurance). Hackney licences are completely different from private hire licences, so ensure you’re getting the right type of licence for your business.
#3 – Get the right taxi insurance
Don’t skimp on insurance. Taxi insurance is different from normal car insurance in that it covers you for commercial use of your vehicle. A good broker can also arrange complete packages of taxi insurance for you, such as 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 sub-contracted).
#4 – Be prepared to work hard!
Running a taxi business is definitely not a 9-5 job! You’ll need to be prepared to do long hours – very, VERY long hours! Evenings, weekends, Bank Holidays – these will be your busiest times so expect it to impact on your life in a big way. Make sure that your family know what to expect too, and that you may be in and out at odd hours!
#5 – Look for fleet car lease deals
If you’re planning to run a fleet of taxis then you can either get your sub-contracted drivers to supply their own vehicles (which can push your taxi company insurance up and is no guarantee of quality), or you can hire a fleet of vehicles on a lease agreement. This can often be a better alternative as you have the reassurance of full servicing, warranties and replacement vehicles if any of yours are damaged. You may also be able to get a good deal on a fleet, as well as trim the cost of your taxi insurance too.
Let Park Insurance help your new taxi business to succeed
We have over 30 years of expertise helping taxi drivers to secure the best value insurance. Our understanding of your business and close links to some of the UK’s biggest insurance companies helps us to negotiate great prices. And 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 will 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.
For a free quote for taxi insurance call our helpful and knowledgeable team now on 0117 955 6835 or get a quote.