The Indian taxi market is very profitable and attractive. You need not even hold a valid license to start a taxi business in India. It is all about how to place your resource and how you get the best out of it. It is a fast emerging mature market in India.
Market in detail
Since the price of the fuel is rising and the need of transportation is not satisfied with the public transportation, you can consider this market as an open and ever-growing one. It is a vendor driven market with moderate barriers of entry into the market.
Scope of the market
The market looks very crowded in a large picture. However the market is flexible to new comers. Since the market is almost mature, it is important to have a niche before you start the business. You should be able to provide a strong value proposition to your business. There has been a 25% increase in the taxi fare in India. The scope of such business in urban areas is very much profitable than semi-urban or rural areas.
This is one of the most flexible businesses. You can either hire or lease a lot of taxis and hire good human resource or work on a percentage basis with the drivers who already own taxis. The office space that you would require is very limited. However, you would be requiring a large open space to accommodate taxis. You would need a software package to manage bookings and other operations and a receptionist to manage the basic administration.
Return on investment
Say, you have opted for the freelancing option. You would have to spend a major amount on spacing. It would come around one lakh per month if you want to accommodate a lot of taxis in your premises. For other expenses and assets, you would require almost 5-6 lakhs during start up and not more than one lakh working capital per month. If you are planning to provide monthly income to the drivers, you can break even within a year. If you are planning to provide percentage based compensation to the drivers, it might take a little longer to break even, but it would help to increase the profitability of the business on a long term basis.
Growth in the market
If you are able to provide an excellent service, you can increase your market share by 40% within the first three years. There are a lot of competitors who have poured more than 600 crores into the business. Thus, you need to make sure that you are exposed to the customers to gain a better market share.
Retaining the customers is the main element of profit in this business. If you are able to sustain the customers, you can grow 70% within the first three years.
The growth in this industry totally depends upon your human resource. How your drivers drive and behave would determine the brand value of your company. Even one misfortune can put your business out of the market in no time. With a 25% increase in the taxi rates, it is better to use freelancing method than to lease out cars and hire drivers. Apart from these, there are a lot of other factors that would determine your growth starting from the location, niche, number of cars, your business model and so on.
Any person who wants to travel to another destination would be your client base. But, you would need a little more than individual clients to generate more profit. Get affiliated with any company to get more customers and also try to provide value added services like lady drivers to attract more customers.
- Do not get into a price war. It would not be profitable and it would take a lot of time to break even.
- Do not expect very high revenue within the first year. If you are able to break even within the first year, it means you are on a fast growing track.
- If you are able to get fifty loyal customers by the end of the first year, you are doing well in terms of customer base.
- If you are able to concentrate on tier I and tier II areas, you would be able to see a three digit growth rate.
- Your growth is highly connected to the way you advertise your business.
- Online booking services and mobile apps would increase the flexibility of the business and attracts more customers.
As stated before, this is a mature industry. But, there are a few unexplored territories in this market. It is important to sort out those areas and create a business model that would suit that niche. If you are planning to start the business and then find a niche, there would be a considerable delay in the speed of breakeven and also reduction in the revenue generated.