Ridesharing companies like Uber and Lyft have been all the rage recently. They had fought (and are still fighting in some countries) with taxi companies over their right to transport passengers in urban areas. In most cases, they managed to win these fights, thanks to an important caveat of their business. They are supposed to be a carpool service, not a taxi one. You might think that the difference is negligible, but it isn’t necessarily true.
To fully understand the difference, think of ridesharing as if your friend is picking you up on their way to work. If they do this every day, it is only fair that you participate in fuel costs. Now, instead of a friend, imagine a complete stranger doing it and you can use an app, like the one Ridecell makes, to summon them.
Of course, there is a lot of grey area around the concept. Most states have very strict regulations that say what is and what isn’t rideshare. For instance, in California, to be able to function as a ridesharing business, your drivers can’t accept street hails. They can only transport people to pre-arranged destinations. Regulations are pretty clear, but enforcing them is another matter. That is why there are constant clashes between ridesharing and taxi companies.
Starting a Ridesharing Business
Starting a ridesharing business involves several steps. Perhaps the most important one is defining your niche. It won’t do you nay good to start another Uber since you can’t really compete with them. What you can do is exploit their weaknesses, and there are many. For instance, one of the latest trends in big urban areas is kid rides. Uber has been very lax with their background checks, leading to several cases that featured on national media prominently. It is also prohibited for minors to ride in Uber unaccompanied, according to the company’s Terms of Service. It happens all the time, though, but lately, parents have been reluctant to send their kids alone in an Uber ride. Some entrepreneurs saw this as an opening and started ridesharing services for kids.
You can send your kids to school with them or have them pick them up after practice. The market for this niche is huge. Big cities are filled with parents that simply don’t have enough time to drive their kids around. Many parents complain that being a driver for kids is a full-time occupation. With Uber seemingly uninterested in this market, smaller companies are picking up the slack. One of them is Hop Skip Drive.
One of their main concerns is thorough background checks of all the people that drive for them. Each driver will have a personal interview and a fingerprint background check before being allowed to drive. All their vehicles are equipped with dashcams, covering every inch of the car.
Zum is another startup with a similar purpose. They work with schools and currently have contracts with over 4,000 educational institutions in the Bay area.
Uber is all about passengers. This marketing strategy has worked well for them, as they are worth almost $50 billion and are a clear industry leader. However, that approach also has a few problems, possibly even critical ones.
By focusing on passengers, Uber has thoroughly neglected drivers. And drivers are an essential part of the whole operation. If you have disgruntled drivers, they can easily switch companies as soon as a better offer appears, and there are already a few of those on the market. One of them was Juno. They offered many benefits to their drivers, including company shares, and had a strategy in place to deal with the wide implementation of autonomous cars. Unfortunately, they were bought by Gett and later sold to Lyft, so the whole concept never got off the ground. That doesn’t mean that there isn’t a place for a ridesharing business that treats its drivers well on the market.
Whatever your marketing strategy is, you need to make sure that it is well-researched and based on real facts, not wishful thinking. Know your market and your demographics, which leads us to the next step.
Create a Sound Business Plan
A solid business plan is an essential part of creating any new company. Think of it as a road map to where you want your company to be in the future. Before even starting, put everything on paper, from the name of your company to the sources of finance. This will help you get a clear overview of your assets and weaknesses and will tell you where you need to focus your time and energy the most. Keep your goals simple and achievable. A good way to do that is to break them into several smaller chunks. Not only will this allow you to achieve them easier, but it will also provide a source of motivation as you chalk them as finished. You can keep track of your progress more easily that way. Keep your target demographics on the mind at all times. Try to anticipate their needs and offer solutions.
A good business plan will have a high dose of flexibility built-in. That means contingencies and a lot of them. Think hard on them, as this will help you down the road when you face an obstacle you didn’t predict, and you will face them. Flexibility will let you modify your plan as circumstances change, so you won’t be caught flatfooted.
The first thins your investors will ask is your business plan. They will not necessarily be experts in the transportation field, so you may need to explain things in a way that everyone understands. One other thing they will look at carefully is the financial plan. Things like a sales forecast, income statement, cash flow predictions, and balance sheet have to be on point and you must be able to explain them. Even if you are financing your ridesharing business yourself, make sure that the financial plan is correct.