In this taxi/cab service sample business plan - written in Q&A style - we are going
to explore how taxis play a major role in aiding intra-city transport services
and offer investors a steady flow of income when run optimally. Proven business
models such as cab hailing service like Uber and Bolt prove that intra-city cab
services can be lucrative for all parties (drivers, cab hailing company and
investors).
What is a
Taxi Service in Nigeria?
A taxi service provides convenient passenger and mobility
services for people who don’t own a private car or may own one but are unable
to use it for their transportation needs (car broke down, wife is using the car
etc) within a city or geographic region of a state. The service usually
attracts a fee which may or may not be fixed and depends heavily on distance
covered, condition of roads or weather or level of road traffic. Actually with
the innovations such as taxi meters and Apps which provide detailed charges for
taxi use the informal and estimated system of charging passengers fees which is
even still practiced in many Nigerian cities will gradually phase out and thus
making the service more efficient and pocket friendly.
What is the
Opportunity for Taxi Service in Nigeria?
Taxi services are in high demand in Nigeria because a lot of
cities are populated by people who need to commute for business and
non-business reasons. People need to use taxis on their way to the airport, to
social attend events (weddings, parties, anniversaries, seminars, concerts) to
honour business meetings (job interviews, association meetings, sales
presentations etc), on their way to work or back from work, on dates, to pay
visits to family or friends and many more reasons. The point is a large number
of middle class people prefer cabs/taxis to mass transit buses because of the
convenient and customized service this business can offer on the go.
You can place a call from your home and a taxi or cab will
show up at your door step to take you to your desired destination plus you can
still use a cab if the weather is bad (like heavy rainfall) and you are in an
isolated area, this is unlike commercial buses that may not be available at
such times or at your very convenience. If you live in an estate and want to
move to the airport at an odd hour, a taxi service can come to the rescue.
A lot of people trust and prefer to use registered cab
services because of the dreaded “one chance” commuter armed robbery incidents
in which mostly unregistered taxis are used by criminals to rob unsuspecting
commuters who are unfortunate to trust and use their taxis. One chance is not
limited to taxis, people have been robbed in commercial buses in the past as
well. All these encourage patronage of registered taxi services.
What is the
Market Size for Cab Service in Nigeria?
Since the middle class make up the lion share of cab/taxi
service users in Nigeria and they occasionally use this service (at least twice a week) we could postulate that the market size can be calculated based number
of rides per annum and average fee per ride. Of course this amount is a guess but I will
try and make it conservative. I will limit the market size computation to Lagos
and Abuja being the two largest markets in Nigeria.
For the Abuja market, with a middle class population of at
least 700,000 of which 120,000 commute to work 5 times a week or move about on
other days for non-business purposes with taxis, we are talking potentially of talking
of between 540,000 and 600,000 rides per week at an assumed average of 700
naira per ride we are talking about 43 billion naira per annum from taxi
services in Abuja alone. The Lagos market is much larger with a middle class
population of over 3,600,000 million of which 1.6 million rides per week and
900 naira per ride brings yearly market size to over 83 billion naira per in
sales. The average daily returns for taxi drivers excluding running costs (fueling
and miscellaneous) is roughly 7,000 naira on weekdays and as much as 25,000
naira on Saturdays. Both markets combined can pull over 123 billion naira
yearly in gross revenue.
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What is the
Future of Cab Service in Nigeria?
Giving the increased acceptance of cab hailing service in
Nigeria and growing entry of more companies into this business, the stiff
competition and efficient use of metering system by mobile Apps, the pricing of
taxi services would drop to favour end users which will also increase demand
for the service. That implies year on year growth in the business revenues for operators
although operating margins and commissions may not necessarily follow the same trajectory.
How does a
Cab Service work?
There are 4 business models for taxi services in Nigeria.
- The traditional model which has been in use since 1970s would involve self-employed drivers owning their own taxis and riding it without making returns to anyone.
- The hire purchase model in which an investor purchases a taxi for a driver and charges between 60% and 100% interest on the vehicle with the driver repaying the loan weekly until the stipulated amount is completed repaid.
- The corporate cab services which introduced metering for users still operate in Abuja wherein a cab company purchases a fleet of vehicles and employs drivers to ride them. Passengers are charged by readings on the meter at fixed rates per kilometer or per second depending on how the metering system is programmed.
- The cab hailing service which is the most recent and popular option involves private car owners signing up with a SaaS company such as Uber or Bolt. The cab hailing service is a partnership arrangement in which the SaaS Company provides the App and markets the service while the car owners provide the actual service to end users.
What are
the Challenges of Cab Service in Nigeria?
There are many challenges such as; security issues like drivers
being robbed at gun point, kidnapped or even assaulted by people with
questionable characters. Add the nasty attitudes of passengers, dishonest
drivers who use crooked means to shortchange the taxi owners or issues from
transport service agencies like VIO, FRSC, NURTW, association of car hire
operators especially those on airport shuttle service that are opposed to cab
hailing doing airport shuttle service and even the police who may occasionally
frustrate drivers, state of bad roads which contributes to maintenance cost, decreasing
commissions, high fuel costs, the business clearly has its fair share of troubles
in as much as it offers good income to investors and drivers alike.
How
Profitable is a Cab/Taxi Service in Nigeria?
The average return (profit) for many taxi drivers per
kilometer covered is 28 naira multiplied by total number of kilometers covered
that approximately amounts to 14,000 naira if a total of 500km is covered
daily. Some hard working drivers may cover up to 800 kilometers per day working
from sun up till sun down. This is of course mostly during weekends and depends
on population of commuters, rush hour period on weekdays (7am till 9am or 5pm
till 8pm), the city (Lagos is busier than Abuja), the amount of vehicular
traffic on the road and if there are fewer taxis on the road among other
factors.
What do you
need to setup a Cab Service in Nigeria?
Besides the cost of the vehicle (2 million naira) of which 2005
Toyota Corolla is the preferred choice by most operators, it would depend on
which of the business models you wish to operate for your business. If you are
opting for the cab hailing model, you would need at least 13 million naira
investment, for a cab service company operating a fleet of at least 5 cars, we
should be looking at 18 million.
Opportunities
for Taxi and Cab Services in Nigeria
- A lot of movements at night (night vigil, airport
shuttle, night club goers etc)
- High number of social and business events especially
in Lagos, Abuja and Port Harcourt
- One chance commuter robberies has attracted many middle class to using registered
- taxi services
- The cab service is very convenient and pocket friendly
for most end users
- High population of middle class folks who desire this
service at least 4 times a week
- Among other opportunities (only available on request
by email).
Paul Onwueme
is a professional Business Plan writer since February 2014, has achieved
respectable results with his business plan writing service with several of his
clients securing funding and leaving positive feedback about his writing
service. You can connect with him via phone: 0803 206 4106 or email: paulonwueme@gmail.com
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