What is it?
Getting from A to B in parts of Britain is becoming increasingly difficult – just look at the ailing rail network, the overcrowded tube and the clogged-up bus lanes. Fortunately, there is one sector that can benefit from all this frustration with public transport: the taxi and private hire industry.
No longer confined to helping elderly ladies with their weekend shopping, taxis and private hire vehicles now offer an invaluable service to people who need to get to work on time or simply want to get home at 2 in the morning after a night on the tiles. Setting up and running your own taxi firm isn’t a science, but it's by no means simple. However, successful companies in this sector can steer their way to a very tidy profit.
It is certainly a growing market: statistics from the Department for Transport show that the number of taxis and private hire vehicles in England stood at 67,032 in 2007, an increase of 5% since the previous survey. According to the same report, there are over 30,000 taxies which are purpose in the whole of the UK, with nearly 9,000 taxis and 12,000 PHVs in the Sout East region alone. And there are now at least 24,593 licensed taxi drivers in the London region. Taxi use has steadily increased over the last 20 years too, with around a third of the public using a taxi at least once a month, compared to just 16 per cent in the mid-1980s.
What’s the difference between taxis and private hire vehicles?
Although both serve the same purpose (to transport paying customers to their destination, help with their luggage etc.), taxis and private hire vehicles have significant differences.
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, 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.
Although many private hire drivers are self-employed, the majority of small firms in the entire taxi and minicab market are found in this sector.
However, if you want to be self-employed and make profit on your own, become a licensed black cab driver and go it alone. There is always the chance of setting up your own firm down the line, once you have the advantage of a driver’s badge and knowledge of a local area. Many black cab owners form co-operatives where they team up with other drivers to increase profits and run operations much like a small business.
Indeed, one of the most successful taxi companies in the UK, Computer Cabs in London, was built around a small fleet of black cabs wanting to offer customers a better deal. The firm now has a fleet of at least 3,700 taxis, taking over 13,000 bookings a day.
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.
Rules and regulations
Trying to identify uniform rules for all taxi startups in the UK is impossible, as there are hundreds of council licensing authorities in the UK, each with varying regulations. However, there are some basic points you must adhere to before you can hang your traffic light air freshener onto the rear view mirror and start talking to passengers about last night’s game and the weather.
Private hire car regulations
Previous to 1998, every local authority in the UK regulated the private hire trade except London. This was rectified by the Private Hire Vehicles (London) Act, which handed responsibility of regulation to the Public Carriage Office, which until then only looked after black cab licensing.
Minicabs have suffered a bad reputation in the past due to the previously unregulated nature of their work. Rogue drivers would pick up stray passengers and charge them extortionate prices or worse. It’s still estimated that at least one woman a week is raped in illegal minicabs in London alone, a shocking statistic which blights the good name of the industry.
Minicab firms must now hold a private hire operator license before they can accept bookings – your company will not be able to trade without one. In order to get a license, you will have to prove that you are ‘a fit and proper person’. Any criminal convictions, bankruptcy or breach of health and safety rules will count against you.
You should also prove you hold any relevant radio licensing or insurance documents – any illegal equipment or uninsured drivers are frowned on by the authorities, to say the least.
The regulations don’t require you have an office as such, although you do need at least one “operating centre.” This must be the premises where you take your bookings. Happily, your home address can be your operating centre, although a licensing officer is often sent to inspect the premises.
An application fee is payable to your local authority, which runs for five years. Fees vary according to the local authority, but as an incentive to startup minicab firms, there is often a reduction in the cost for small operators, who are defined as having just one or two cars in their fleet.
Private hire cars are not required to have meters, and there are no price limits in place across the country. However, the vehicles are meant to have an MOT three times a year, and if you are planning on using your 1985 Ford Escort to pick up customers, forget it – it’s almost impossible to get insurance for cars over ten years old.
As for drivers, it is best to employ those over the age of 25, as it may be difficult and expensive to insure younger workers. Your drivers must have held a full EU driving license for 12 months, pass a medical and make a declaration in relation to any criminal convictions. In some areas, drivers have to pass a ‘knowledge’ test, similar to black cab licensees, in order to operate.
Contact your local council to find out about any variations in the operating rules that apply to your area.
Hackney carriage (black cab) regulations
If you are planning to go it alone in a black cab, you need to meet certain requirements. To get your license, you need to be 21 or over, have a full EU driving license for at least 12 months and be able to drive a taxi competently.
Again, you need to prove that you are a ‘fit and proper person’, so prepare for a full check on your criminal and medical past, with any aberrations being held against you (although any minor crimes will not be terminal for your application.) A ‘knowledge’ test must also be passed.
London’s black cab laws are slightly more complex. You first have decide whether you want to apply for a ‘green badge’ (which allows you to operate in central London) or a ‘yellow badge’ (which allows you to ply your trade in the suburbs.)
The Public Carriage Office allows two years for applicants to pass their central London knowledge test, and six months to pass the suburbs knowledge test.
There is currently no compulsory training programme, although in 2000 the Intermediate Certificate in License Education for Taxi and Private Hire was introduced to provide a nationally recognised qualification for drivers.
Although you can drive a taxi without one, many firms are taking up training to improve the skills of drivers and to win company contracts as well as public confidence.
For further information, contact the Private Hire, Hackney Carriage and Chauffeur Training Organisation on 0191 296 0814.
The National Private Hire Association represent over 400 private hire firms. To find out what they can do for you, call them on 0161 280 2800 or click on www.privatehiretaximonthly.com/npha.html
If you are thinking of becoming a taxi driver, you should firstly contact your local council to find out their particular fees. The Licensed Taxi Drivers Association will also be able to help you out – you can contact them by calling 0207 286 1046.
As with much to do with the taxi industry, where you live and what sector you are working in (black cab or private hire) greatly affects the costs involved in setting up your own firm. You should contact your council to get exact figures, although there are some solid estimates that you can work from.
Hackney Carriage costs
The Disability Discrimination Act requires black cabs have to include wheelchair access and induction loops for the hard of hearing, and it could cost you several thousand pounds to modify second hand black cabs to keep up with newer rules. Brand new cabs cost dearly, and you can expect to pay a little bit more for an automatic.
Taximeters are obligatory for Hackney Carriages and cost a few hundred pounds, although it is possible to rent them out on a monthly or yearly basis.
As well as the cost of a license, drivers also have to pay for an additional driving test and area knowledge test – again, these costs vary according to the licensing body. The outlay doesn’t stop there – a medical examination will need to be factored in as well.
Private hire costs
As with Hackney Carriages, the costs of getting your private hire fleet on the road will vary depending on which licensing authority you are dealing with. Bear in mind, however, if you plan to sit at the controls of a reasonably-sized fleet of cars, you will need to pay for operator, driver and vehicle licenses before you can get your Certificate of Compliance from the council, which allows you to start taking bookings.
A private hire operator’s license costs a few hundred pounds, while a license for your vehicle will can be a couple of hundred. A license for your drivers will need to be paid for too.
Meters are not compulsory for private hire cars, but if you choose to use one, they must be checked and sealed by your local council.
Although it should be fairly uncomplicated to get a driver and operator license, great care should be taken over selecting the correct vehicle when applying for the vehicle license.
Customers will expect your cars to be clean, tidy and fairly spacious, so plastering your minicab firm’s telephone number on the side of a rusting Metro is not advisable. Take the age of the car into consideration too – not only is it difficult to get vehicles over ten years old insured, many licensing authorities are also setting age limits on private hire fleets.
Cheap, reliable, fairly new, second hand saloons are the therefore best bet when you are starting out, although tracking down such cars can be tricky. Visit car dealers in your area for an idea of the type of car is best for you and how much it will cost you, before you lodge your application with the council.
As mentioned earlier, insurance is an essential part in becoming an accepted and reputable private hire business. Cars, drivers and third parties (i.e. passengers) must be insured, with special private hire insurance available to minicab firms. It is also worth getting your operating centre (if it is not your house) and any equipment (radios, GPS systems etc.) insured too.
Cover usually extends to anything up to £5 million of damage, although policy prices, like any type of insurance, vary according to the provider.
There are several specialist taxi and private hire insurers, such as Taxielite - www.taxielite.co.uk/londontaxi.htm and Insurance Line – www.insurance-line.co.uk.
Most of the major insurance providers cover private hire cars, as well as the people that drive them, so shop around to get the best deal for your business.
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 to become your operating centre, make sure it is close to where your main customer base resides.
There are two reasons for this – if your cabs are operating in the countryside, the chances are that they will be using VHF frequency for their radios, which is fine over long, straight lines, but isn’t so good when bouncing off buildings and going round corners. Therefore, barking instructions to minicabs that mainly operate in the Welsh valleys from an office in central Cardiff won’t help clear communication, to say the least.
Secondly, 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 have 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.
What equipment is needed?
The expense for your fledgling taxi firm will not end with buying a few cars and hiring a couple of drivers. Modern cab companies have state-of-the-art radio equipment, with many splashing out on new technology such as Global Positioning Systems (GPS). If you are starting your private hire firm on little more than a shoe string, your options are narrowed, but you still must invest in radio equipment, and get it properly licensed too.
Almost all private hire firms have some sort of radio communication, ranging from simple hand held mobile devises to complex computerised systems that are able to track and interact with drivers. Before you consider your options, however, you must get a proper license.
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.
“The cost depends very much on the number of cars in your fleet and the frequency you transmit on,” says a spokeswoman. “For example, if you were starting out and had one to eleven cars, the costs would be lower. If you are using a high density band needed in a congested area, such as a town centre, this is more expensive than if you were using a low density frequency in rural areas.
“So, the cost of the license can vary, depending on your circumstances,” she says.
You can contact Ofcom by calling 020 7981 3040 or by clicking on www.ofcom.org.uk
Small operators starting out go for the standard radio equipment – as long as you are able to communicate effectively with your fleet, there’s little need to pay over the odds for flashy devises.
Paul Farmer of a leading radio equipment suppliers says: “The most basic equipment you can get is just a fixed mobile appliance, which you can get with VHF (Very High Frequency).
“Back at the control centre, you can then have a desktop microphone to save you using your hands for the radio all the time. You need a power supply unit for that, and you also need an external antenna on your base.
“Bear in mind that you need planning permission to put this on a building and if you are just operating out of a residential house, you’ll have to put it at the gable end of the property, and not on the front of the house,” he says.
Make sure you get the right equipment for the area you cover. VHF is good for long range communication and is best over long straight lines, so if your private hire firm is in a small town or village, that would be best. Ultra High Frequency (UHF) is a shorter wavelength and it bounces well off buildings, so if you were operating in a busy, built up area, that would be the one for you. It’s important to get that right, especially as equipment doesn’t cost more or less according to the frequency.
“You can also use the Dolphin System, which uses a collection of mobile phone-like devices to link taxi cabs together by using group calls,” explains Paul.
“Saying that, the group call feature is very difficult to set up and although you can use the devises as mobile phones, they are very expensive,” he says.
Equipment costs can vary greatly according to your supplier, so shop around for the beat deal from a reputable radio communications firm.
To take the next step up to cover a wider area, you would need to lease a line on one of your area’s telephone masts. Space on these transmitters is owned by companies such as NTL and Crown Castle, who then lease out space to local operators.
However, although this option allows your firm to cover a larger area, it can be expensive for companies just starting out. Just setting up a lease on a mast can cost many hundreds of pounds, while you may have to pay tens of thousands a year rental on the airspace. Although these costs can be covered by increased custom due to a wider consumer base, it is usually only medium to larger-sized private hire firms that go down this route.
Once upon a time, the only way to keep in touch with your fleet would be to bark instructions down a microphone and hope your cars are roughly where they should be.
Luckily, with new technology you can track your cars as they roam around town using GPS, and keep in touch with them by simple text message.
Previously, GPS systems have been out of the price range for most start-up minicab firms, but luckily there is a new range of affordable options, with the Navman systems leading the way.
The best option for small firms is the web based system, which is accessible using just specialised software and the internet. Such applications allow you to log onto a restricted access website, and to track and communicate with your drivers, who have simple sister devises in their cars.
Once your fleet it wired up, you can talk to them as normal, but you can also send them text messages inquiring about pick ups and so on. The drivers have five or six standard responses that they can send back to you, ranging from ‘Picked up and on our way’ to ‘Help! I’m being attacked!’
Such services are charged on a monthly rate per car operating, although strict contracts mean that you are often tied into the service for up to five years.
Making a profit
Getting the right equipment and licenses doesn’t provide a guarantee that your private hire firm will be successful – your whole enterprise can survive or fail due to public perception, so it’s essential that you get this right.
Taxi firms rarely get involved with advertising campaigns that stretch beyond a curt mention in the Yellow Pages, so it is important that ‘word of mouth’ is on your side. Research shows that most customers make their judgement on a minicab firm after just one journey, so it’s vital that you make this experience an efficient, comfortable and wallet-friendly one.
Even if you are operating just two cars from out of a cramped spare bedroom in your house, if your drivers make a good impression, you could see a loyal customer base build up, thus boosting your profits and leading to an expansion of the business.
Try to ensure that your cars are clean and tidy – a valet service is often worth the expense. Smoking policies vary across minicab firms, but your first thought should be to make the customer feel comfortable and relaxed – so don’t hinder yourself by turning away valuable custom, even if they prefer to smoke.
Factors such as turning up promptly, treating the customer with courtesy and having a competitive pricing policy is vital in building up repeat customers.
Margins can be tight, with seemingly endless overheads such as petrol and insurance and license renewal, but with a growing market, putting in the effort for even the smallest detail of customer care is worth it to help you get decent returns for your investment.
Customers can be both corporate or private, with taxi firms now catering for both needs to cover a broad a range of the market as possible.
Many private hire companies have agreements with medium to large businesses who want to provide a transport service for their staff. This can provide your firm with regular and secure work, with contracts often being in place for a number of years.
However, the decision to get involved with ferrying a company’s workers around shouldn’t be taken lightly. If payment to your firm is monthly, or even longer, this could provide you with some serious cash flow problems if you do not supplement your contracted work with enough regular bookings.
Therefore, if your business is in it’s infancy, it is best to wait until it is large enough until you take on corporate contacts as well as regular customers. Many cab companies get the best of both worlds, leading to significant profits.
Make sure you work out a strategy before you take on your taxi firm. Try and look for gaps in the market – for example, if you live near an airport, are there enough cabs offering transportation for the passengers? Other potentially lucrative avenues can be school runs, wedding hire and transport to pubs and clubs. Do proper market research into what’s needed and your battle to make your business a success will be much easier.
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.
Advertising is usually best focused on your local area and the Yellow Pages, with larger, eye-catching adverts worth the expense for a newcomer to the market. However, although you can advertise yourself wherever you like, it’s worth remembering that only black cabs are allowed to carry advertising and sponsorship on the sides of their cars.
Generally, if you operate your firm in an efficient, fair manner, you should see the results in terms of customer numbers, without having to resort to underhand tactics.