Any time you use a popular rideshare app, you probably think that you could start a similar company of your own. After all, all you need are some drivers and an app to connect them with people needing a ride. How hard can it really be?
The fact is, it’s a little more involved than simply launching an app and recruiting drivers with reliable vehicles. That’s not to say that it cannot be done, but before you start down the road toward becoming a ridesharing mogul, there are a few things that you need to know.
1.You Need a Niche
As a startup, it’s going to be hard to compete with large, household name companies like Uber or Lyft. If you are going to be successful in this industry, you need to find a way to differentiate yourself from the established companies, and that means finding an unmet need to fill or a specific niche. For example, in some markets, entrepreneurs have capitalized on Uber’s policy of not giving rides to unaccompanied minors by creating ride services specifically designed for children to bring them to school or activities. These ride services offer additional security and protection for children via background checks, dash cams and more, while meeting a demand in their communities. As you develop your business plan, try to determine how you can differentiate your company from others, perhaps by serving a specific demographic, destination or service type.
2. You Need Cash
Starting a rideshare company is not an inexpensive proposition. You need to have access to funding if you are going to be successful, as every aspect of launching your company costs money. On average, a rideshare company earns about 25 percent of each ride. Consider the costs of app development, driver recruitment, marketing, licensing and insurance and other overhead costs; they add up quickly. Don’t forget that you need to pay your drivers, so you’ll only be taking a percentage of each ride. You need a solid strategy from the start to get the company off the ground. Some companies, including Uber, have started adding fees on to every ride to help cover the cost of insurance, but you need to factor in all of those costs as you launch your business.
3. Creating an App is the Easy Part
The foundation of any ridesharing company is its app. It needs to be simple to use, and easily connect people needing rides with drivers, accept payments, and include features like GPS monitoring and a rating system. Before you begin developing your app, you should know that you do not have to reinvent the wheel. Options like the Ridecell platform make it easy to set up a functioning ridesharing app without a costly and time-consuming development process. Instead of investing in a proprietary app that has the similar features to existing apps, use one of these platforms to save time and money.
4. You Need to Follow the Law
As with any business, there are strict legal requirements governing the operation of ride sharing companies. State laws vary, but most require new companies to register as a transportation company, often with the Public Utilities Commission. In California, for example, ridesharing companies must pay a $1,000 fee for an operating license, pay a quarterly fee based on revenues, and meet strict requirements for driver training and background checks. Keep in mind as well that not all cities or states allow ridesharing, and you may be restricted from offering certain types of rides (i.e., you may not be able to pick up passengers at the airport.)
5. You Need to Explore Your Insurance Options
Insurance is one of the biggest expenses for any ridesharing company; one company reported spending 25 percent of its revenue on commercial insurance coverage for death, personal injury and property damage. Even though rideshare drivers have their own personal insurance coverage, when they are transporting customers, they are covered by the company insurance. Again, every state has its own requirements, but meeting the state minimum coverage amounts is typically very expensive and a business cost you must be prepared to manage.
Starting a rideshare company can be a lucrative business option, but only if you know exactly what you’re getting into before you launch the app and are prepared to handle all aspects of the business. When you do, you’ll have a better strategy and be better positioned to become a leader in your market.
