In Start Your Own Transportation Service, the Staff of Entrepreneur Media explains how you can launch a profitable transportation service, whether you want to start a long-haul operation or an in-town service. In this edited excerpt, the authors provide a closer look at an existing taxi service so you can learn for yourself what it’s like to run a transportation business.
If you're thinking about starting a transportation business, learning how existing transportation service entrepreneurs got started and are running their businesses can help you figure out if this industry is a good fit for you. To get started, here’s the story of Orcas Island Taxi, which Charles “Eric” Whitehead started after a construction job dried up.
Orcas Island, a 57-square-mile horseshoe-shaped island in the San Juan Islands off the coast of Washington state, is a tourist’s paradise in the summertime. Kayaking, whale watching, and hiking, biking, or horseback riding through Moran State Park are just a few of the things that attract visitors to the island. The island has both an airport and a ferry terminal and can also be reached by floatplane and via small marinas. But once you land, you need to get to where you’re staying. And that’s where Orcas Island Taxi comes in.
Owner Charles “Eric” Whitehead’s grandparents owned cabins on the island many years ago, which have long since been sold. But Eric had fond memories of visiting Orcas Island, so when he was living in Delaware and got a call from a relative to come out for a construction job, he was enticed to go back.
Unfortunately, by the time he got there, there was no construction job. He did land a different job, though, that kept him on the island, and while he was doing that, he found out that the man who owned the phone number 376-TAXI was looking to sell the number. Eric had run a cab service before in Delaware, and he felt the island needed a reliable taxi service. So Eric bought the number for $2,000 and then bought a vehicle.
The most challenging part about cab service, Eric says, is the insurance. “Right now, insurance on one cab runs $30,000,” he says, a figure that has doubled in the six years since he started Orcas Island Taxi. The other difficult part about cab service in a place like Orcas Island is the winters. Even though Orcas is the biggest of the San Juan Islands, it’s very seasonal.
“In my first winter,” Eric says, “I would go three or four days without a fare.” You need to get creative about a business like this, and Eric did. He has since contracted with a local private school to transport students from home to school in the morning and back in the afternoon.
The summers, on the other hand, are crazy busy. Eric runs three cabs nonstop in the summer. “I basically have three months to make my money.” In the winter, one of those cabs is permanently garaged, and the other is used just for pre-paid reservations. Although his business is located centrally on the island, which helps a lot with having less time on the road with no fare, the cell service on the island is spotty, making it difficult for him to get in touch with drivers while they are on the road.
And he has diversified that summer income in a couple ways. “I rent scooters to people.” On this hilly island, scooters are desirable. He figures he gets a 98 percent return on his investment.
The other revenue-generator is advertising. Businesses advertise on his cabs; not only does he get ad revenue, but his contract with the advertiser requires that they call him first for cab service for their customers.
One drawback about the island is that it’s hilly, and although there’s little snow, all his cabs need to be four-wheel drive to be able to maneuver the gravel roads, steep driveways and houses located on cliffs.
Orcas Island Taxi service is also subject to all of the regulations of a passenger transport service, and Eric recommends anyone thinking of starting a taxi service check very carefully into the local, state, and federal regulations. One plus: His out-of-the-way location means there are no territorial concerns like there would be in a big city like Chicago or Boston.
And, like all successful small-business owners, Eric concurs with the importance of planning, especially for a startup period where you’re not going to make much income and what you do make is likely to be put right back into the business.
“It took me three months to make any money,” he says. Other advice Eric offers is to do lots of research, find reliable workers, and, for a taxi service, use GPS so you aren’t wasting time and money (gasoline being the second-highest cost of taxi businesses next to insurance) trying to find places.