How to ensure your taxi business is profitable 

In this day and age, the rules of business are changing, especially in service industries. Now, the customer has become much more discerning and demanding in what they expect from a service. Before they part with their cash, they want to be sure that it’s of sufficient quality, worth what they are paying, and reliable.


In the taxi industry, the disruptive changes involve factors typical of many other industries, such as technological advances. Nevertheless, that isn’t to say there aren’t opportunities for the entrepreneurial spirit. So, how you can start, run and optimise your taxi business so that it will be as profitable given the effort you and your drivers put into it?


 How much does it cost to run a taxi business?


Finding out about the specifics when starting your taxi business is clearly the key to your research. Firstly, write a business plan. Even if you aren’t borrowing money to help you start up, it’s a very useful exercise to sharpen your mind and identify why you want to do it in the first place.


Do you want to be a Hackney Carriage or a Private Hire Vehicle taxi service? The first allows you to pick up fares anywhere, without prior booking. These only operate in large cities, where the passing trade makes it worth their while like London.


Private Hire Vehicles, on the other hand, cannot pick up fares wherever and whenever they like. They are only authorised to collect customers who have pre-booked their service.

 Person holding key to new car for private hire taxi service

Before you start your taxi firm, you’ll need to:


  • Carry out research - on the UK taxi industry to find out exactly what kind of market you are entering.
  • Buy a taxi or car - remember, this is the tool of your trade, so it’s probably the most important decision you’ll make regarding your business activities because your car – its style, condition, cleanliness, space – can say a lot about your service.
  • Make a projection of your fixed and variable costs - of which fuel is probably the biggest. Check the vehicle’s fuel economy figures to calculate probable costs. After your vehicle(s), your next biggest fixed cost will be taxi fleet insurance, so it’s essential to compare quotes to make sure you get the best deal.
  • Obtain your taxi licence - This means fulfilling the following requirements:
  • Demonstrating you have the right to work in the UK
  • Possessing a full UK driving licence
  • Undergoing an enhanced criminal records check (many local authorities around the UK insist on this)


Putting a figure on the cost of setting up a taxi business is, therefore, dependent on the various factors above. One online article puts the average cost at ‘more than £10,000’, giving a breakdown of the various cost sources.


Is a taxi business profitable?

In many respects, a taxi business is like any other business. It’s as profitable as you want it to be if there is a latent demand for your service. In business terms, you need to be aware of the following factors:


  • How much competition are you facing and how established are they? How good are they?
  • Are you optimising your business efficiency as much as possible? This means your control over costs, your revenue streams, your pricing, the standard of quality you provide and your repeat business.
  • Are your drivers all of a high standard? Is your company offering a uniform service in terms of reliability? Another way you can measure quality and effectiveness (other than sitting in the car and watching them at work) is whether demand for your company’s services rises or, at least, remains constant. If there is no demand your company won't be as profitable and you’ll probably find it hard to recruit drivers for your taxi fleet.


Have you got the appropriate taxi fleet insurance for your specific business model and operations? It could make the difference between success and failure for your business, given the higher-than-average degree of risk when driving so frequently, as well as relying on the safe driving of your other drivers if you have a taxi fleet. It’s a fundamental question and as it’s a significant regular cost, you need to make sure you compare quotes to get the cover that’s right for you.


Methods of keeping costs down and increasing revenue

 A hackney carriage wrapped in a Union Flag colour scheme driving through London

Can you run a taxi business from home?

It’s certainly the cheapest way of starting up on your own and getting your company up and running. Many sole traders choose this as the most economical option but take into account the effect it’s likely to have on your home life. If you have a family, they have to commit to accepting the impact of the inevitable change in lifestyle it will cause for you all. If you are using your home number as the booking line, it also means having someone on the other end to take the bookings.


You also need to think about the impact on neighbours and the surrounding community if you are operating from home, as there are certain legal requirements you need to observe. Once your business grows, using your home as your business base begins to be less practical.


Getting the price right

All licensed taxis have a fully regulated taximetre, updated and controlled by your local authority (or Transport for London). It’s easiest to take London as an example, as what you will be able to charge is determined by which part of the country you want to set up your taxi company.


In Greater London, for licensed Hackney Carriages, the minimum fare is £2.20 - from then on, the metre clicks over for the duration of the journey.


In general, taxis offer very good value for groups, as up to five passengers can travel at the cost of one – there’s no extra charge for other passengers or luggage. One of the reasons why taxis are becoming more popular is that compared with public transport (buses and trains, largely) they are cost effective for the passenger and they offer a door-to-door service.


In this article about London taxi fares, there’s a good example of the savings possible for a family of 5 travelling to Heathrow (as opposed to using the train service). Of course, in large cities, if you are competing against the likes of Uber and other well-funded companies, you are going to need to be more inventive about marketing your service, or establish a niche service (such as airport connections or special occasions).


At the end of the day, the question of how much you can charge for fares using your taxi fleet is academic. You need to be licenced as you need that credibility. There is simply too much competition around to survive as the typical ‘minicab’ company. For more in depth information on taxi fares explained, check out our blog elsewhere on our site.


Customer service techniques


Welcome your passenger(s)


You should always greet the passenger as soon as they get in the cab. A warm and friendly welcome sets a positive tone (and makes a difference if you are wanting a tip!) However, judge the mood and if your passenger isn’t particularly chatty, there’s no need to be overly friendly for the sake of it.


Be Helpful


Providing excellent customer service is more than just driving passengers from pick-up to destination;

  • Assist them with their luggage, shopping bags, and any other large items they’re carrying.
  • At the destination, check if they have left anything behind. Taxi drivers who go to the trouble of returning lost items will gain a good reputation, and this leads to repeat business.

 A taxi driver talking to a customer through the window

‘The customer is king’


You need to be attuned to your passengers’ needs and make them comfortable. It comes down to communicating in an appropriate way and keeping the conversation light if they seem chatty. Show an interest in them (without probing too far) rather than talking at them with an endless list of taxi anecdotes. If working in hot conditions, some drivers keep bottled water to offer to passengers – a small gesture but appreciated. Never mind if they refuse, it’s the thoughtfulness that counts.


Passengers with disabilities and elderly passengers


You can have training for managing passengers with physical disabilities, so make sure that you put that learning into practice. If you have, for example, a people carrier, you have space to store equipment like wheelchairs or crutches, and you will know the appropriate way to help someone into your car. You’ll find some tips for transporting disabled passengers here.


Passengers with physical limitations need to feel, above all, safe and secure in their environment. If you want to go the extra mile, you could equip your taxis with wheelchair ramps, and if you are regularly collecting elderly passengers, offer them a special discounted fare rate. After all, in a sense, they are a ‘receptive’ target customer and you know they are likely to use you repeatedly.


Your personal appearance


You spend time and money keeping your taxi spotless, inside and out, but how about your appearance? Make sure you take pride in your appearance – keep yourself well-groomed and smart while you are on duty. Some taxi fleet owners choose to use a uniform for their staff – that’s up to you. Just remember, it’s common knowledge that we form a visual impression of someone within the first ten seconds of seeing them!


Your competence as a driver


Be a good, safe driver – presumably, that’s what you think you are, as you wouldn’t have chosen to enter this profession otherwise! But bear in mind that what might constitute ‘good’ and ‘safe’ to you might not correspond to your passengers’ definitions. Observe road rules to the letter, especially where speed is concerned.




This might not be a game-changer, but when the traffic is bad, or there’s an unexpected snarl-up, passengers appreciate drivers with enough knowledge of the route to have a ‘plan B’. Timing is very important to many passengers. If you give a time for pick-up, make absolutely sure you respect it.


How do I succeed in the taxi business?

Taxi driver looking happy driving hackney carriage

We’ve covered certain success factors, but there are a few others which could give you a greater competitive edge and, thus, chances of being successful.


New technology


There are now several taxi management systems on the market – here’s an example of the kind of package these systems provide. Essentially, they are there to help you and your business save time and reduce costs. You are able to process more bookings by phone, website or apps. Many of these systems are cloud-based, so you don’t need a costly investment in hardware and servers. They are also subscription-based (monthly normally), so that is a cost you can spread throughout the year.


This company’s system, like many others available, offers the following range of functionalities:


Ghost booking and dispatch system - an automated application which means you don’t need a person to manage routine tasks which can be done by software with elements of artificial intelligence.


Passenger app - this allows your passenger to geo-locate your taxi as you are approaching the pick-up point and also estimates your journey time based on traffic conditions in real time.


For your business needs, analytics tools use data collected by the system to inform you about factors like popular routes, peak and quiet times and your team members’ driving activity - the aim is to optimise the efficient use of your resources.


These all-in-one systems may also provide:

  • Booking from previous journey history
  • a database of addresses for return business and repeat bookings
  • An integrated fare calculator
  • SMS confirmation of bookings and pick-up


Hiring the right personnel

If you become so successful you want to expand to a taxi fleet, you’ll need to recruit the right people to work in your vehicles. Make sure the applicants have the relevant licence, can work in the UK and don’t have a criminal record. Non-compliance could put you or your employees in legal jeopardy.


Use training organisations so that your drivers keep to a high standard and are conscious of best practices in the industry. Your drivers will probably thank you for this as well because investing in training is a sure-fire sign that you are committed to running a reputable and professional company.

Vehicle maintenance

When it comes to the maintenance of your taxi (or taxi fleet), there are routine tasks you can carry out:


Servicing - as you are doing a lot more mileage than average, you should have a thorough service every 6 months at a minimum.


Valeting - doing a quick vacuum of the car and running over surfaces with a cloth isn’t really sufficient when you have so many passengers passing through your cab on a daily basis. Invest a few pounds and take it to a professional valeting service every few days. It will cost you the equivalent of an average fare for a short journey.


Covering the risks


Whether you want to start as a one-man-band, or you are thinking about expanding to a taxi fleet, it’s well worth emphasising the importance of taxi insurance.


After your car(s) and your reputation, it’s the most important ‘safety net’ for your business offering the assurance that if anything goes wrong, you know you are protected. We are specialists in taxi fleet insurance, so get a quote today  from us so you can find the taxi insurance coverage that best suits your particular needs.