I remember the old days where we used to hail a taxi by finding them on the roadside. Today we book a taxi through our smartphone using an app. Like booking, the taxi business model and revenue model have evolved.

In this blog, you find complete information on the business and revenue model of taxi business and how to design one.

So, let’s begin.

Present Taxi business model

After the advent of Uber, the taxi business model has completely changed and follows suit of Uber.

The taxi business has a website or a mobile app for customers to book on-demand or schedule a ride. The customer enters the pick-up and destination on the app/website and books a ride. The app assigns a driver for the trip who are present near the customer’s location.

Types of users in the taxi business

As the taxi business model is a two-sided market, the website connects the customers and taxi drivers.

Business owner

The business owner oversees and manages the interactions that happen between these two groups.

Customers

They sign up on the app or website using the phone number and email address. Customers can hire a taxi anytime and anywhere.

Taxi drivers

They are independent drivers who partner with the taxi company. Drivers earn their income from each ride.

How does the taxi business work?

Here is how the customer’s use the app

1. To book a ride, the customer enters the pick-up and drop location.
2. The app/website displays various vehicle categories.
3. The customer chooses a vehicle category depending upon the number of people traveling, their convenience, and books a ride.
4. The app assigns a driver for the trip.
5. Customer gets the driver’s information like their name, phone number, and the review rate.
6. The customer can call the driver to specify the direction to their pick-up location.
7. Driver picks up the customer and drops them at their destination.

The customer rates the ride experience.

Here is how the driver use the app

1. The driver has their own app, and they receive the ride request through it.
2. When the driver receives the ride request, they can either accept or reject it within a particular time. Else, the ride request gets reassigned to other drivers.
3. When the driver accepts the ride request, they receive the pick-up location of the customer, their ratings, and their phone number.
4. The driver picks the customer and drops them at their destination.
5. They rate the ride experience with the customer.

Here is how the owner manages the taxi business

The business owner manages their whole business through a simplified dashboard.

They log into the dashboard using an email address and password. Through the dashboard, they can manage vehicles, riders, drivers, bookings, and homepage settings like the banner, etc, on the platform as well.

Revenue Model of the taxi business

The revenue model is how the business is structured to make money. The revenue model of taxi business is very simple.

When the customer reaches the destination, they pay for the ride by cash, wallet, or through credit/debit card to the business owner.

The business owner deduces the service fee and transfers the remaining amount to the driver. The service fee charged is either a fixed amount or a percentage.

How to design the taxi business model?

To design the taxi business model, you can use the Business Model Canvas template that was initially proposed by Alexander Osterwalder.

Here is the sample image of the template.

Business model canvas

Source – Wikipedia

Let’s describe each block in detail:

Key partners

In the key partner’s section, you add the partners and alliances you make to run the business successfully. Here you include the nature of the association and the name of the person or organization.

Key Resources

In key resources, you fill the details of the essential assets a company needs to start and run the business. It can be physical, intellectual, or human resources. For instance, to run an IT company, a company needs a physical, intellectual, and human resource.

Likewise, to build a taxi app for your business, you need

Human resource: Developers and designers to work on your idea. Marketing and sales team to get the customers on-board.

Financial resource: Money to pay for the development process, like getting the servers. Also, paying the developers, designers, sales, and marketing team.

Key Activities

Key activities cover the activities and tasks that a company must undertake in running a business.

In a taxi business, the owner has the responsibility to build supply and demand, market their business to potential customers, and manage the legal matters as well.

Value propositions

This section asks to describe the advantages your business offers to the customers. You can describe the competitive advantage you offer, how the quality of the product/service helps customers, and the price you offer.

Customer Relationships

Here you specify the relationship nature with the customer in the business. The various types of customer relationships are self-service, personal assistance, automated service, etc.

In the taxi business, the bookings are done automatically. The owner just oversees all the process and interferes if there is an issue to be resolved.

Channels

This section lists out the channels you utilize in getting the customers and reaching your brand. It is your online channels like social media, email, or your official website.

Customer Segments

Here you give a detailed analysis of the target audience. As the taxi business is a multi-side platform – customers and drivers. The customers use the website to book a ride and drivers sign-up to earn an income from each ride.

Cost Structure

The cost structure is the overall cost you encounter in setting up the business. To set a taxi business, you take care of the:

Organizational costs – Cost that occurs in making your business legal and accounting service.

Office, necessary equipment – It is the physical location you set like an office, the equipment you need.

Development costs – The cost of developing your app and the maintenance cost like servers

Human resources – Employee salaries.

Marketing & advertising – The amount you spend on marketing and advertising your business.

Revenue Streams

Here you include the strategies you use in getting revenue out of your business. The revenue streams of a taxi business are the service fee in using the platform.

Wrapping up

The taxi business is evolving with time. With the advent of new technologies, it’s bound to change the existing business and revenue models of taxi business.

I hope this blog is informative. For more information about setting up a taxi business, you can send a message to support@radicalstart.com.

 

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