An Enterprising Model

Recently I came across a very interesting business model. I am talking about the call taxi business. First let me explain the call taxi model.

There are 4 different stake holders in a call taxi model.

• 1.    The customer who wants to hire a taxi
• 2.    The Driver
• 3.    The Taxi Owner
• 4.    The Call Taxi Company: The organization that a customer calls to make a taxi booking.

The Structure:

The call taxi company itself does not own any taxis. The owner of a car gets himself registered with the call taxi company by paying Rs22,000 of which Rs 10,000 is refundable. The call taxi registers the owner and fits the tax with the Call Taxi insignia and a meter which reads out the cost of the trip. Once a car is registered, it is available in the system for the call taxi to be assigned to customers The process of registering and meter fitting takes a few hours. If the owner wants a reliable driver for his car, the call taxi company helps find a driver. Alternatively, the car owner himself may choose to become the driver of his own car (part time or full time).

The Process:

The customer calls the call taxi’s call center to make a booking mentioning where he wants to be picked up and where he wants to be dropped. There is a standard rate depending on the type of vehicle (4/6 seater or AC etc) he requires. About an hour before the time of the pickup, the operator finds out which taxis (in the neighborhood of the place where the customer requested a pick up) are free and calls one taxi driver and informs him of the time and place to pick the customer from. Since many taxis may be free at the said time, a first in first out algorithm is used. The driver assigned picks up the customer at the assigned place & time, drops the customer at the destination and then informs the call taxi company (calling the call taxi company on the 2 way radio) that he is now free. The driver now waits for the call center agent to assign him a new pickup.

Call Center (of the Call Taxi Company):

The city is divided into many regions and operators are assigned to a region. They handle calls from customers. They assign customer pickups of their region to drivers. The call center works 24/7. Each taxi attends to about 7 customers per day.

Financial Model

Let’s take a leading call taxi company as an example. They have about 2000 taxis registered with them. Around 1800 taxis may be operational on a given day. Each taxi pays a onetime amount to the call taxi company during registration as explained above. Each taxi also makes a monthly payment of Rs 4000 to the call taxi company to avail the services (of being assigned for a pickup).

Each taxi makes about Rs 2000 per day. Fuel and maintenance expenses would be about Rs 700 per day. The driver hands over the balance Rs 1300 for the day to the owner. The owner and the driver split this money (say Rs 1300) in the ratio 2:1. The driver makes about Rs 430 per day while the owner makes about Rs 870 per day. This is about Rs 13000, Rs 26,000 per month for the driver and car owner, respectively. The owner makes about Rs300,000 per year while the cost of a car is about the same (or a little more)..

The customer gets decent value for money since the call taxi is not much more expensive than an auto..

Now let’s see the financials for the call taxi company.

They get Rs 4000/taxi *2000 taxis = Rs 8,000,000 per month

They also have a one-time security deposit of Rs 10,000/taxi *2000 taxis = Rs 20,000,000. At 6% interest per annum, the monthly interest they get =(6/12)/100*20,000,000 = Rs 100,000.

Total income for call taxi company = Rs81,000,000.

Their expenses:

Total Salary: Assuming 100 employees being paid Rs 8000 per month = Rs 800,000.

All other expenses (Rent, Electricity etc): say Rs 1,700,000

Total monthly expenses = Rs 2,500,000

Net monthly income = Rs 81,000,000 - Rs2,500,000 = Rs 5,600,000 = $115,000

Yearly net is greater than $1m. Not bad, isn’t it?

There isn’t much competition in this sector, which is rather surprising.

But this isn’t the end of the story.. All this was explained to me by a person who himself is a call taxi driver.. I am awed.