How to start a taxi and private hire firm
Get your start-up moving with our guide on how to start a taxi business
Starting your own taxi business is a world away from what it would have been just a decade ago.
Even the humble hackney carriage – any automobile for hire licensed to pick people up from the street – has not been able to resist being swept up in the digital revolution. Mind you, it’s not the first iteration. First passed by Parliament in 1654, an ‘Ordinance for the Regulation of Hackney-Coachmen in London and the places adjacent' was created to bring some order and regulation to the chaotic horse-drawn coaches of London.
But while the UK taxi industry has undergone seismic shifts in recent years, especially in metropolitan areas, where ride hailing and on demand taxi apps are taking an increasingly large share of the market, starting a taxi business – be that a hackney taxi or a private hire vehicle – still offers a viable business opportunity.
Difference between taxis and private hire vehicles
First things first, what is the difference between black cabs and private hire vehicles?
Hackney carriage (taxis, black cabs) are able to pick up people off the street without a prior booking. Mostly found in urban areas, black cabs are highly regulated, with fares controlled by local councils and numbers restricted by many local authorities.
Drivers of black cabs are essentially self-employed and have to go through rigorous checks and tests before they are awarded their license. Although some Hackney Carriage drivers form co-operatives and switch their cars to saloons and other models, the majority of these taxi drivers can be found in their black cabs trawling the streets for customers with their orange light on.
Private hire vehicles (PHVs), or minicabs, have to have a prior booking when picking up passengers. Usually linked by a radio circuit and operating out of similar, branded vehicles, minicab owners face stiff penalties if found touting their business to random people on the street.
It is possible to mix fleets, with Hackney Carriages undertaking private hire tasks alongside standard minicabs. However, remember while it is possible for black cabs to be used for private hire use, doing the same thing in reverse is against the law.
Why should you become a self-employed taxi driver?
Whichever mode of taxi driving you choose, being a taxi or PHV driver gives you flexibility. You can often choose when, where and how often you work. Paul Poulten, a self-employed black taxi driver, says: “Being a self-employed taxi driver has many benefits. You have the flexibility of when you want to work and can mange your own wages and shifts. As it isn’t target driven, it’s usually lower stress than other jobs.”
Bear in mind, if you want to be getting the most lucrative fares you’ll be working nights and evenings. You’ll also spend all your time in a car on the road, often in heavy traffic. It helps if you’re comfortable chatting to people as you’ll be constantly interacting with members of the public.
Whilst small talk can be awkward, it’s better than sitting in silence for hours and hours every day. You might even have a fascinating passenger.
The government’s National Career Service estimates a taxi or PHV driver’s annual salary to start from around £14,000 for a starter and up to £30,000 for a highly experienced driver.
According to Poulten, these are the key traits of a good taxi driver:
- A good sense of humour
- A good listener
- Good communication skills
- Good memory
The UK taxi industry
As mentioned before, the UK taxi industry has changed significantly.
According to a UK market research report of the taxi operation industry by IBISWorld, the UK industry is forecast to grow at a compound annual rate of 2.1% over the five years through 2018-19 to reach £9.7bn.
Whilst it has faced challenges from the likes of Uber, the report points out that the introduction of contactless payments in taxis could challenge some of ride-hailing platforms' competitive advantage, whilst the possibility of Uber losing its licence to operate in London could boost demand for traditional taxis.
Poulten claims ride hailing apps have “really affected our trade”. He says: “There are so many Uber drivers on the road, they’re taking over and driving down standards as they are not regulated properly. They are not DBS checked whereas we are; their cabs are not maintained as well as black cab drivers; they don’t cater for people with physical disabilities; and they are not as insured as we are.”
It would seem ride hailing apps are taking over as there has been a 120% increase in licensed PHVs in London alone since 2005, and a 55% increase outside the capital.
The National Highways and Transport Public Satisfaction Survey collects information on public opinions of taxis as private hire vehicles. The latest (2017) data shows that overall public satisfaction with taxis and PHVs remained relatively stable on 2016 at 67%.
- However rural areas, were on average 7% lower for satisfaction than urban areas
- London saw overall satisfaction rise from 67% to 70% between 2011 and 2017.
- Reliability satisfaction (71%) and availability satisfaction (73%) remained at similar levels in 2017 and much higher than the England average for satisfaction with cost (53%)
Taxis remain a male-dominated profession with 96% male in 2017/18 and 4% female.
So, what does this all mean for prospective business owners? Well, the market is a competitive one – and finding some kind of niche will be important in standing out.
As the research shows, the number of taxis has continued to decline in London, whilst the underwhelming level of satisfaction in rural areas could make the case for improving the taxi offering with a hyper-local taxi service in a rural area.
In the end, it could just come down to whatever’s convenient for you as a driver. Obviously moving location may not be feasible but think about the different options below to see what might make the most sense.
The city centre gives you the benefit of having a wealth of potential fares, a diverse range of prospective passengers, and an interesting driving environment. However, that interesting driving environment can also be hectic, frustrating, hostile and costlier. If driving a taxi in London, you’ll also need to pass the Knowledge.
TfL can either grant a licence for the whole of the Greater London area or for one or more of nine different suburban sectors in London.
A local taxi service
Driving in the suburbs can be more a relaxing experience than driving in the city centre, with less traffic and fewer pedestrians. However, this could also mean fewer fares and less lucrative fares.
Airport cab company (Read more in our guide to How to start an airport shuttle service)
You could anchor yourself to solely serving an airport or a key transport route from a city centre to another location. This would require you to have a PHV licence. There are likely to be many other firms competing for airport territory as it’s a constant supply of passengers.
Likewise, staking out a spot from a train station is a guaranteed source of regular passengers.
Local working parents or those who don’t have access to a car could be a good market to target with a school taxi business. To do this you’ll need an enhanced DBS check to assess whether you are suitable to transport children.
The club run
Drunken revellers are always in need of a taxi service. You could form a relationship with a club or bar to ferry punters to and from the venue and perhaps even pick up commission from your efforts.
Becoming a female taxi driver
Although the vast majority of taxi drivers are male, another potential niche is a female only taxi company. This could attract female passengers who could feel more comfortable and safe with a female taxi driver and parents who would be more trusting of a female driver transporting their children.
Taxi business for sale
Another option if you’re interested in potentially running a fleet is to consider looking for an existing minicab office for sale, and essentially buying a ready-made business.
You’ll want to look at the business’ turnover and the reason why it is being sold as well as working out if you have the sufficient capital to buy it.
Most importantly, conducting extensive competitor research in your area will enable you to figure out where there’s a gap in the market for a new taxi service. This could be an underserved area of town or a niche that has yet to be exploited by other taxi companies.
The internet has also given moaners a huge platform to air their grievances about however they think they’ve been wronged by a business or organisation; use this to your advantage. Look online at reviews of taxi businesses in your local area to see what complaints customers have and how you could improve upon their service.
Naming and branding for your taxi business
Whilst most self-employed drivers won’t need to be concerned with taxi business names, a private hire firm with multiple vehicles would certainly benefit from creating a strong name and brand.
If you’re in a small local area, this could be as simple as naming your taxi business after that location which will also help it to be visible in online searches. Building a strong reputation as a reliable service will rely on consistent and obvious branding across your vehicles and a minicab website so punters can discover you online.
If you’re unsure of what to do for taxi website design, there are plenty of web hosting services that can help you get started, or you could pay a website designer to do the work for you.
A taxi business plan
If you’re planning to operate as a self-employed taxi driver, compiling a business plan might not be top of your priorities.
However, it’s crucial to think about to ensure that starting a taxi business will actually be a viable – and profitable – option for you.
Make sure to draw up a thorough business plan detailing the market you’re entering, expected start-up and ongoing costs (for instance buying a cab, GPS software, radio equipment and petrol – you may want to consider find out more about fuel cards) and your potential earnings (how much will you charge for fares to ensure profitability etc.).
You can download a free business plan template here.
Starting a taxi company takes money, time and effort, and it's vital to ensure that you balance all three. Fortunately, there are software and tools available to help simplify the various processes.
Take a look at the options below to find the best project management tool for you.
Buying a taxi
Buying a black cab
The black cab is probably one of the most recognisable taxis in the world. As a taxi driver, you can only drive an approved black taxi, made by the London Electric Vehicle company (LEVC) – formerly the London Taxi Company – in Coventry.
2017 saw the introduction of the new electric black cab, the TX, which is capable of driving purely on electric power. As of January 2018, all black cabs have to be either electric or capable of running with zero emissions. Your taxi must also now be less than 15 years old under the latest TfL legislation, in an attempt to run diesel models off of London’s road by 2025.
You can view a full breakdown of costs on the LEVC’s taxi cost calculator page.
LEVC even offers a page of driving tips for the TX to help you ensure you getting the most from the car.
You can also buy or rent a range of approved second hand black cabs through the website. Cars are available from around £120 per week. Although you can buy a black cab from elsewhere, buying from LEVC will give you confidence that the used black cab has gone through stringent checks and has all the requisite features.
Poulten says that when looking for a black cab to buy you should bear the following considerations in mind:
- Comfort – you’re going to be spending many hours of the day sitting in that driver’s seat so make sure it’s a place you like sitting
- Hybrid engine – 2017 saw the introduction of the new electric black cab
- Build quality – give any vehicle a thorough inspection before buying. Check it’s passed its MOT and enquire about any previous issues or repairs it may have had
- Accessibility for all – every licensed London taxi should be wheelchair accessible and include:
- A ramp
- A swivel seat
- An intermediate step
- Grab handles
- Floor lighting
- A hearing aid induction loop
- Space for assistance dogs (at no extra charge)
Cars for PHVs
What makes a car suitable for a PHV? Unlike a black cab, you could technically use any car, but there are still a number of considerations you should bear in mind to make sure you’ve got the right vehicle for the job.
Some boroughs and local councils require taxis and PHVs to have a certain seat width or engine size.
The car will also obviously have to be deemed safe. You can read the vehicle requirements for a taxi below.
Here’s what you should consider before choosing which car to use for your PHV:
- Reliability – choose a car that’s known to run smoothly with little maintenance and slim chance of a breakdown
- Safety – the sheer amount of time you spend in a car increases your chances of being involved in an accident. Choose a car that’s been rigorously safety tested
- Cost – this depends on how much you have to spend, but it’s probably sensible to start with a pretty affordable car
- Number of seats – do you want to be able to transport eight people or just three?
- Luggage space – if you’re likely to be picking up passengers with lots of luggage (such as from the airport) then boot space is a consideration. You don’t want to miss out on a fare because you don’t have enough
- Manual or automatic – whilst manuals tend to be more efficient, if you’re going to be stopping and starting in traffic all day, an automatic will guarantee an easier and smoother experience
- Features – as a PHV driver, you are not required to do the Knowledge, meaning a sat-nav could be a good idea to ensure you get from A to B in the quickest time possible
- Engine – your main considerations will be CO2 emissions (the lower the less VED tax you’ll pay) and fuel economy
Taking payment in taxis
The modern taxi driver can’t just rely on taking cash payments from passengers; and as cash continues to lose ground to card payments as the favoured method of consumers, you risk losing out on fares if you don’t take card.
In fact, from October 2016, it has been a requirement for London taxis to accept card payments and provide printed receipts. So, if you’re planning on operating in the capital, you must install a TfL-approved card payment device in the passenger compartment.
Card readers for taxis
A number of card payment providers have TfL-approved systems you can install in your taxi.
|iZettleSystem: Miura M010
Swedish company iZettle offers a black cab bundle for £259 which includes:
The company has negotiated an installation deal with MAM Auto Electricians for its customers at £70 + VAT.
|PayPalSystem: Miura M010
The PayPal here complete cab bundle costs £264.99 excluding VAT and comes with:
Installation costs £70 and takes around 45 minutes.
The price of the PayPal Here Card reader alone is £45 excluding VAT.
|IngenicoSystem: Ingenico ICT220, Ingenico ICT350
Ingenico doesn’t have an actual focused taxi package but the Ingenico ICT220 and ICT350 are both approved by TfL to be mounted in a taxi cab.
Contact Ingenico for prices.
|Taxiworld LtdSystem: Taxiworld, FREEdom, Solution
Taxiworld’s payment package includes:
Taxiworld doesn’t charge for installation and charges a transaction fee of 3.75% + 20p. Call for details about pricing.
You can read more and do a comparison in our guide to your card machine options. If you want to compare quotes straight away, simply complete our quick and easy comparison form.
Taxi fares in London
Below is a rough guide to taxi fares in the Greater London Area. There is a minimum fare of £2.60 at all times.At the end of the trip, your passenger must pay the full fare displayed on the meter. As a taxi driver, you are obliged to accept any fare up to 12 miles or an hour in duration, provided the end destination is in Greater London. The exception to this is if the passenger is picked up from Heathrow Airport, in which case you must accept a distance of 20 miles.
Journeys that start from Heathrow also incur an additional £2.80 charge.If a passenger ‘soils’ your taxi to the extent that you have to take it out of service for cleaning, you may charge the passenger a £40 penalty.
|Distance travelled||Journey time||Monday to Friday 05:00 – 20:00 (Tariff 1)||Monday to Friday 20:00 – 22:00 Saturday to Sunday 05:00 – 22:00 (Tariff 2)||Every night 22:00 – 05:00 Public holidays (Tariff 3)|
|1 mile||6 – 13 mins||£6 – £9.40||£6 – £9.40||£7 – £9.20|
|2 miles||10 – 20 mins||£9 – £14.60||£9.60 – £14.80||£10.60 – £15|
|4 miles||16 – 30 mins||£16 – £23||£17 – £23||£18 – £28|
|6 miles||28 – 40 mins||£24 – £31||£30 – £33||£29 – £34|
|Between Heathrow and Central London||30 – 60 mins||£48 – £90||£48 – £90||£48 – £90|
For PHVs, fares are usually agreed on before the journey. PHVs are not subject to the same regulation as taxis and do not have to have a fare meter or conform to fare tariffs set by the council. As a PHV driver, you are required to give an accurate fare estimate before the start of any journey with a passenger or agree on a fixed fare. Fares are typically based on distance travelled.
Other taxi equipment
A taximeter is crucial piece of kit. Mounted in the drivers cab but visible to the passenger, it calculates and displays the fare as it increases over distance travelled.The TfL has some specifications for taximeters in London taxis, notably that it must:
- Display the units of fare in pounds sterling (£) and pence (p)
- Have display, markings and instructions in English
- Be in a sealed, tamper-proof device
Taxi vehicle tracking solutions
GPS is an essential part of effective taxi fleet management. A vehicle tracking solution brings a host of benefits for taxi fleets. It enables drivers to log jobs and receive directions and fleet managers to manage vehicles and track driver behaviour including accelerating, braking and engine use. This allows you to:
- Improve response times to customers
- Reduce fuel costs
- Reduce accidents
- Get accurate data
- Avoid congestion charges
Basic models include route planning and speed camera alerts, whilst pricier models can provide very accurate traffic information, intelligent route planning and compatibility with Siri.
Autocab Taxi tracking
Autocab has more than 25 years of fleet management experience. Its Ghost Cloud booking and dispatch software allows you to:
- Receive and dispatch multiple jobs
- Increase booking capacity
- Increase productivity and efficiency
- Access your system from any device at any time
Prices are available from the sales team upon request.
Digtital Dispatch provides dispatch, booking and fleet management software, as well as payments solutions for small to very large fleets. Its TaxiBook offering is a bundled subscription service for fleets of 30+ vehicles and includes a driver’s app, credit card payment, computerised call taking, and reporting. Pathfinder is designed for fleets of up to several thousand. It is an end-to-end solution helping everyone from call-takers to the drivers with an in-vehicle data terminal, management and reporting.
MTData Taxi tracking Software
MTData provides GPS telematics and fleet management solutions for taxi and private hire firms.Its dispatch solution is available self-hosted or cloud-based and features configurable algorithms for different times of the week so you can optimise your business during busy periods and profile customers.
Envoy Taxi Booking Dispatch & Management Systems
Envoy prides itself on being one of the most affordable solutions on the market. It is a web-based system that doesn’t require any special hardware or software and can be set up within 30 minutes.The booking and dispatch software features:
- Booking from job history
- Return and repeat bookings
- An address database
- An integrated fare calculator
- Caller ID
- SMS confirmation of booking and taxi arrival
If you want to be easily identified as a taxi you’ll need to make it obvious with a roof sign or bright eye-catching lettering (or both).These roof-mounted units can now be used as digital advertising displays, helping the driver additional revenue and attract more attention. Verifone’s TfL-approved DigitalTops have built in solar panels to supplement your taxi’s battery power and changes its ads using 3G wireless technology.
Depending on the set up of your taxi business, communication between your cars and the base is essential so you can rendezvous about who’s attending to what fare at what time. If your fleet is using a radio system you’ll need to get a licence from Ofcom. The Ofcom licensing centre issues operators with licenses to be able to own and use radio equipment. You can either apply directly to Ofcom or leave it to your supplier to sort out. Applications usually take around two weeks to be processed.
If you want to find the perfect tracking solution for your business, simply complete our quick and easy quote comparison form.
Finding taxi office premises
Most entrepreneurs setting up their own private hire firm tend to operate out of their homes to begin with. Nationally accepted regulations state you must identify an ‘operating centre’, this can be any building you like as long as it conforms to health and safety rules and has all the appropriate licenses for equipment. Some authorities send inspectors to the property as a part of rubber-stamping your application.
If you are able to afford premises for your taxi operating centre, make sure it is close to where your main customer base resides as your operating centre should be easily accessible to customers who wish to walk in and make bookings, rather than call. As trade is brisk on Friday and Saturday nights, a private hire office in a town centre, close to pubs and nightclubs, will offer a prime location to attract late night revellers, as well as passing customers during the day. Of course, town centre property can be expensive, so have a close look for something that matches your budget, is in a good location and can serve your business’ needs.
To be eligible for a taxi licence in the UK you must:
In order to be eligible to drive a taxi or private hire vehicle in London you must:
- Be aged 18 or over (though you cannot be licensed until you are 21)
- Hold a full DVLA, Northern Ireland or driving licence for a state in the European Economic Area
- Have the right to live and work in the UK
- Undertake and enhanced DBS check (details below)
- Undergo a medical examination to meet the DVLA Group 2 medical standards
If you’re going to be operating a fleet, you’ll need to spend time hiring the right people to work in your vehicles. When hiring you need to make sure your drivers have the relevant licences, are permitted to work in the UK and don’t have a criminal record.The same checklist above applies to any driver you hire, including their legal right to live and work in the UK and the relevant medical and DBS checks. Failure to comply could land you or your employees in legal trouble.As with hiring any employee, a thorough background check of their employment history will flag up any potential future problems.
Other than the test to get a taxi driver licence, there is no mandatory training course for taxi drivers. Nevertheless, there are training providers you could use for your drivers to ensure they drive to a high standard and with best practice.
Dealing with the competition
With several taxi firms jostling for supremacy in any one area, competition is inevitably high in the industry. New operators will often find themselves subjected to aggressive tactics by other firms, such as price undercutting. With Hackney Carriage price rates set by the council, private hire firms can operate a cheaper service, sometimes leading to a “them and us” animosity between the two sectors.Having a good online presence will help local customers find your taxi website as well as making yourself active on local social media pages. Investing in search engine optimisation (SEO) from the start to ensure you rank highly for taxi searches in your local area will give you a boost. If you don’t know the first thing about SEO, you could hire someone to optimise your website for a small sum.
You can find out everything you need to know about website design here.
That said, it could still be worth forming relationships with local businesses such as restaurants or bars that are likely to have a steady supply of inebriated diners needing a lift home. Leave your details with front of house staff and let them know that you or your drivers are available. If the restaurant or bar is agreeable, you could leave a business card or leaflet on their noticeboard or front desk.
Only black cabs are able to carry advertising and sponsorship on their cars and modern taxis provide a wealth of opportunities for making money through advertising. You can wrap your taxi to such an extent that the whole chassis acts as a mobile advert.As mentioned before, digital taxi top advertising signs can display different adverts on their screens through 3G, whilst in taxi advertising digital display screens are becoming a common sight.There are many providers in the capital offering advertising services to some of the biggest brands in the world who will only be too happy to buy up advertising space in your taxi.
Selling your taxi business
If you decide to change your lifestyle or retire and exit the taxi game, selling a black cab is not difficult provided you’ve kept it in good nick. The LEVC offers a safe and regulated portal for selling your old vehicle. It will be put through a stringent 100-point check and assessed by factory-trained technicians.
Find out about how to sell a business here.
There are even online platforms for selling whole PHV operations. You’ll have to provide a number of details for prospective buyers so they can assess whether it’s a good business opportunity including:
- Asking price
- Net profit
- Number of vehicles
- Reasons for selling
- Years in operation
- Lease terms and rent (if you have property)
Franchising your taxi business
If you’ve built up a considerable reputation as a taxi or private hire service in your local area, with a strong brand name and image, you could spread your business by franchising.You allow an interested party to pay for the privilege of using your brand name and image on their fleet, in exchange for your training and support. This way you can expand into other locations without significant upheaval on your behalf and minimal costs.