Business Overview

Water taxis offer a unique way for tourists to sightsee and/or commuters to catch a ride to their intended destination. Transportation is on a public or private basis, with services including urban waterfront transportation and coastal excursions.

Who is this business right for?

If you love being on the water, and enjoy both boats and people, opening a water taxi service might be the perfect fit. This facet of the transportation industry is engaging and fun, allowing entrepreneurs to utilize their boating skills in a unique and profitable way.

What happens during a typical day at a water taxi service?

The specifics of your day-to-day activities will vary, depending upon the services your organization offers and the needs of your customers.

A typical day will look something like this:

  • Before your first group of passengers arrives, start to the boat up and perform a routine check of all fluids, including fuel.
  • Travel to your first pick-up location.
  • Greet passengers, assist them in stowing away any gear they may be traveling with.
  • If your services include sightseeing, you will need to both plan and deliver information to customers along the route.
  • Navigate waterways, dropping passengers off at predetermined locations.

Administrative duties include:

  • Planning and executing new routes
  • Marketing and networking
  • Answer emails and phone calls regarding private charters/parties (if you choose to offer this service)
  • Oversee workforce
  • Plan and enforce budget and pay bills

What is the target market?

Historically, tourists have comprised approximately 85% of a water taxi’s demographic. Consumers are now realizing the benefits of utilizing these services and are turning to them as an economical commuting option. Since each city’s waterways are distinct, owners are urged to research what the area is lacking and devise a business plan that specifically targets those needs.

How does a water taxi service make money?

A water taxi business’ primary source of income is derived from each passenger they transport.

What is the growth potential for a water taxi service?

With the rise of fuel costs and increasing environmental awareness, consumers are seeking out alternative transportation options. Many are turning to public transportation and carpooling as an economical way to reduce their carbon footprint. The water taxi industry offers a solution to these needs. Entrepreneurs have experienced significant growth over the last few years, with plans to expand their operations over the next decade.

Getting Started

What are some skills and experiences that will help you build a successful water taxi service?

As with any venture, strong business acumen would prove beneficial. If you lack the experience and knowledge necessary to run a business, consider pursuing classes online or at your local community college.

The administrative tasks only represent one aspect of your business, however. Your water taxi company will require you to be independent, logistical, and possess strong organizational skills. Since your purpose is to transport passengers, strong interpersonal skills will also prove critical to the organization’s success.

Additionally, most states will require you to have a significant amount of boating experience in order to obtain the necessary licenses. This includes navigating waterways under various weather conditions, traffic patterns, and changing tides. Check with your local Coast Guard to determine how many sea service hours you are required to log and fill out the necessary paperwork accordingly. You may be required to complete a physical, which includes a vision exam and drug test. Colorblindness is typically a disqualifying factor.

What are the costs involved in opening a water taxi service?

The primary items required to start up a water taxi business are:

  • Passenger boat - You will need at least one boat to get started. Minimum size you’ll want to invest in is 28 feet. Many suggest a vessel 32-38 ft long. Used vessels can cost as low as $15,000-$45,000, while new, larger ones could set you back as much as $250,000.
  • Fuel
  • Insurance
  • Signage for your vessel
  • Business cards and marketing materials

It is suggested to set a budget of at least $35,000 to get your business started.

What are the steps to start a water taxi service?

Once you're ready to start your water taxi service, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:

STEP 1: Plan your Business

A clear plan is essential for success as an entrepreneur. A few important topics to consider are:

  • What are the initial costs?
  • Who is your target market?
  • How long it will take you to break even?
  • 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.

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STEP 2. Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your security guard company is sued. Consider using a registered agent service to help protect your privacy and stay compliant.

STEP 3. Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

STEP 4. Open a business bank account

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 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.

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.

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.

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Select your state below for an in-depth guide on completing each of these steps in your home state.

Where can I find a business mentor?

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 water taxi service?

Successful water taxi business owners offer the following advice:

  • When shopping for your first boat, look for the following: 1) flexibility 2) enough seating to be able to offer affordable passenger rates without cutting into your profits 3) sound construction that is commercial and marine grade 4) make sure it meets all coastal regulations specific to your area.
  • Keep your vessels clean and offer a safe ride at an affordable rate. Your profits will reflect the service you offer.

Growing Your Business

How to promote & market a water taxi service

Many successful water taxi business owners indicate they do not spend a penny on advertising, relying solely on word-of-mouth. However, if your target demographic is tourists, consider partnering with hotels, airports, tourist attractions, and travel agents in your area. By offering packages and/or discounts, both benefits stand to gain valuable business. Your local Tourism and Recreation Department could also serve as a great resource.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

How to keep customers coming back

It is critical that you provide a first-rate experience every time. Your boat should be clean and safe. Maintenance must be performed regularly to avoid unexpected breakdown. Prices should be fair and congruent with industry standards. For routes that drop commuters off at different stops along the waterway, it is suggested that you offer 7-day and 31-day passes with unlimited rides.

How and when to build a team

If you plan to start with just one vessel, you should be able to run your water taxi business yourself. As you begin to learn what is needed in your sector, new routes should be added and business hours may expand. To avoid burnout, you will need to start building a trusted team of taxi drivers.

Each employee must possess knowledge of local waterways and have boating experience. To carry more than seven passengers, they must also be at least eighteen years of age and be able to pass the requirements for obtaining necessary licenses.

Legal Considerations

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a water taxi business. 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 information about local licenses and permits:

Maintain Personal Asset Protection

Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.

Two of the simplest steps that will protect your business, and yourself, are to:

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.
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To learn more about maintaining your LLC's corporate veil, read our guide and protect your personal assets.

Earning Potential

How much can you charge customers?

Fares vary, depending upon location and specific services offered. The national average fare is $2-$5, with weekly and monthly passes offered at a discounted rate for regular customers.

What are the ongoing expenses for a water taxi service?

There are a number of ongoing expenses one should budget for in this industry:

  • Vessel maintenance - Average annual maintenance for a 49-passenger boat is reported at $10,000.
  • Hull and outfit maintenance - A 49-passenger vessel operating 3,000 hours annually requires approximately $3,100 for hull and outfit maintenance.
  • Moorage fees - $2,400 per boat annually
  • Insurance - Rates vary depending upon operating hours, size of vessel, location, and type of coverage required.
  • Fuel - Successful business owners report burning more than 3,500 gallons of fuel each month.
  • Labor - Operators earn between $20-$22/hour, depending upon the size of the vessel and their experience level.

How much profit can a water taxi service make?

Assuming your service runs 3,000 hours per year and your 39-passenger vessel is full during those hours, a fee of $4 per person would generate revenue of $468,000 (pre-expenses). Several business owners have reported a modest profit going into their second year.

How can you make your business more profitable?

Consider implementing these strategies to increase your organizations’s profitability:

  • While the initial cost is greater, many are now turning to hybrid-electric powered boats to reduce ongoing expenses.
  • Offer special event transportation and group transportation.
  • Host dinner or sunset cruises.
  • There is a lack of resources for individuals living in a marina. Consider offering transporting services for those in need.
  • Offer coastal excursions such as scenic tours and whale or dolphin watching.
  • Offer advertising slots on your boats.
  • Sell beer and wine to your customers.
  • Charters are a very lucrative option for many water taxi owners.
  • Approach your City Counsel about partnering to offer your services as an extension of the Public Transit system. Some owners have been successful at obtaining federal grants to invest in this partnership.
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