You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your kids taxi service. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a kids taxi service?
The costs associated with opening a kid taxi business are substantial. Business owners must have enough capital to cover:
- Building a custom website
- Creating a custom app
- Legal fees and licenses
- Insurance premiums
- Advertising expenses
- Background check costs
A custom website alone can cost between $6,000 and $15,000 (and possibly much more). According to How Much to Make an App’s calculator, it’s cost an estimated $93,900 to make an app that has logins, in-app purchases, reviews, ratings and other important features. Legal, licensing, insurance and advertising costs would add several more thousand dollars to a kid taxi business’ startup expenses.
Although a website and app cost a lot, business owners shouldn’t skimp on these two expenses. These are the face of a kids taxi business, and they must give parents confidence in the business. Anything less than stellar will likely lead to failure, as parents will be less willing to sign their children up for rides.
Instead of skimping on these expenses, business owners may be able to reduce their startup expenses by finding designers and developers who will do the technical work necessary in exchange for a share of the business. A partnership or profit-sharing agreement may be the most economical way to launch a business like this.
What are the ongoing expenses for a kids taxi service?
The ongoing expenses for kid taxi businesses include website and app maintenance fees, insurance premiums, and drivers’ payments. Drivers’ payments must be large enough to cover all costs incurred by drivers (i.e. gas, maintenance, etc.) and give them a profit.
Who is the target market?
A kids taxi business’ ideal customer is a parent who has a well-paying and demanding job. Such a parent is likely to need help transporting their children around town, and they will probably have enough discretionary income to pay for kids’ rides.
How does a kids taxi service make money?
Kids taxi businesses often have two fees. Many charge families a monthly subscription fee for participating in the program, and there is also a per-ride fee.
How much can you charge customers?
How much a kids taxi businesses charge for rides depends on the number of children being transported and how far the ride is. Kids Kruiser charges $15 for rides under 3 miles, $20 for rides between 3 and 6 miles, and $25 for rides between 6 and 8 miles. Most businesses have similar fees, and it’s common to have a minimum charge around $15.
These per-ride charges are in addition to any subscription fees (Kids Kruiser charges families $30 for membership), and other charges. Businesses may have cancellation, wait time, short notice, and other charges.
How much profit can a kids taxi service make?
Kid taxi businesses are still fairly new, and they’re growing in popularity. The upper limit of their profit potential probably hasn’t been reached by any business yet. If Uber and Lyft are an example, these kinds of ride-sharing businesses could eventually grow to have millions of dollars in revenue.
How can you make your business more profitable?
A kid taxi business can increase its profits by offering additional services. Zum, for instance, is set up to have a driver babysit kids or stay during an activity if an adult has to remain present with them.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your kids taxi service is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
You will need a legal drivers license to run a kids taxi service, as well as up-to-date automobile insurance. In addition, certain other state permits and licenses may be needed to operate a kids taxi service. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Kids taxi services should require clients to sign a services agreement. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example of one such services agreement.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a kids taxi service
Social media is an inexpensive and effective way to market a kid taxi business. Targeted campaigns can be set up to advertise to parents in the area. Parents who see ads on social media are already likely using smart devices, so they’re probably accustomed to apps.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
A kids taxi business can set itself apart from competitors in the area by specializing in transporting kids of a certain age. For example, a business might focus on transporting children under five or those in elementary school.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Kids Taxi Service In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who has personally struggled with the challenges of getting kids where they need to be on time may have the insights necessary to run a kid taxi business. Having personal experience arranging children’s transportation helps business owners anticipate the needs and concerns of parents who might use a kid taxi business.
What happens during a typical day at a kids taxi service?
Running a kids taxi business mostly involves working on a computer. Business owners might spend their time:
- Addressing technical issues
- Responding to inquiries from customers
- Ensuring their app and website are running smoothly
- Promoting their business
In most cases, the actual transporting of children is done by drivers who sign up to provide rides through the business’ app or website.
What are some skills and experiences that will help you build a successful kids taxi service?
A lot of the work involved in opening a kids taxi business can be outsourced to professionals who have specialized knowledge. For instance, a web designer can be hired to build a website, and a programmer can be commissioned to create an app. Even drivers can be hired on a contract basis to give kids rides.
Business owners, however, must be able to coordinate multiple workers. Building a kid taxi business is a complex undertaking and requires a lot of logistical work.
Business owners have to also be able to anticipate the concerns that could keep parents from using a kids taxi service. Specifically, business owners need to know how to address all safety concerns. There should be a thorough vetting system in place for drivers, parents should have live information on where their kids’ rides are, and all safety information should be clearly communicated. Kids Kruiser, Zum and HopSkipDrive all have prominent pages on their websites that cover safety concerns.
Business owners who aren’t familiar with the current safety standards regarding kids should consider taking a seminar on the subject. Several organizations, such as The Child Safety Protection Network and ChildSafe, offer training on child safety issues.
What is the growth potential for a kids taxi service?
Kids taxi businesses normally start out serving a single geographic region, which is usually a major metropolitan area. As a business grows, it may expand into additional cities. For example, Kids Kruiser serves Ann Arbor, Michigan, and Zum operates in the San Francisco Bay Area and Orange County. HopSkipDrive is in the San Francisco Bay Area, San Jose, Orange County and Los Angeles.
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a kids taxi service?
Many parents may be initially hesitant to pay for a kids taxi service. Offering free rides at first can help encourage parents to try a business’ services, and it can get them used to the convenience that a taxi service provides. Once they’ve used a taxi service, parents will have a hard time leaving it. This could turn initially hesitant parents into long-term customers.
How and when to build a team
A kid taxi business needs a sizable team of drivers as soon as it launches. Without enough drivers, the business will struggle to provide rides and possibly lose customers.
Drivers can be recruited before launching in an area. They’re usually paid on a per-ride basis as independent contractors, so businesses don’t have to worry about paying drivers’ salaries before launching.