Expanding Taxi business through merger and acquisition
Discussion
After a little bit more advice please chaps.
Quick update on my business as some of you may well be interested:
T/O at Full capacity with our average fare value would be approximately £1m PA. There is no reason for the GP to change from 40%.
In reality, I will be extremely happy if we achieve 40% of that turnover in the next 12 months. Ie: £400k.
Now, there are a few ways that I can see to expand the business. The obvious way is to keep buying cars, and taking on self employed drivers. The other is to look at taking over our local competitors and the ones in surrounding areas.
If it was you, what angle would you take, and how would you go about it?
Quick update on my business as some of you may well be interested:
- Acquired in February 2007 with £160,000 T/O (un-documented) and 40%GP
- Realised it was actually £140,000 and 30%
- Improved standards, minimised costs and consolidated finance. GP back to 40%
- Grown customer base during a traditionally quiet period to a current annualised T/O of £252,000.
T/O at Full capacity with our average fare value would be approximately £1m PA. There is no reason for the GP to change from 40%.
In reality, I will be extremely happy if we achieve 40% of that turnover in the next 12 months. Ie: £400k.
Now, there are a few ways that I can see to expand the business. The obvious way is to keep buying cars, and taking on self employed drivers. The other is to look at taking over our local competitors and the ones in surrounding areas.
If it was you, what angle would you take, and how would you go about it?
Not sure if buying out your competitors are the best way, as they can just re-start their own businesses again. I don't see non-compete agreements as being worth too much in your sort of business.
Maybe you would do better to open offices in their areas, put out some flyers, and offer early discounts to get people to try you.
It sounds like you know how to build a business organically through good service, so once you have the customers giving you a try, just stick with that.
In my opinion, of course. I have alays preferred building a business through customer satisfaction, and stepping into new areas, rather than handing a competitor cash that they can use to compete.
Maybe you would do better to open offices in their areas, put out some flyers, and offer early discounts to get people to try you.
It sounds like you know how to build a business organically through good service, so once you have the customers giving you a try, just stick with that.
In my opinion, of course. I have alays preferred building a business through customer satisfaction, and stepping into new areas, rather than handing a competitor cash that they can use to compete.
I agree.
I always think that organic growth is the best way to develop a business.
When you acquire another business, what you are really acquiring is their customer base. You have no real power over that customer base and they can quickly desert the "new" business leaving you with a bit of a dog. I've seen it happen.
I always think that organic growth is the best way to develop a business.
When you acquire another business, what you are really acquiring is their customer base. You have no real power over that customer base and they can quickly desert the "new" business leaving you with a bit of a dog. I've seen it happen.
If I may expand, a bit, when I say grow organically, this does not mean that you should have to save up to grow. Leverage is a useful tool. If you believe it makes sense, then borowing to fund the growth can make sense. If you truly think you can take-over your rivals' business, and turn it around, then there is no harm in borrowing to be able to do it aggressively.
I wholeheatedly agree with Eric. Customers are fickle. These new contracts might decide to change overnight to another company - I've seen it happen. What you are buying is the goodwill, or put another way, their telephone number. Stick with your own set up and grow it. Sooner or later you will be the 'recognised' local taxi company and other drivers from other companies will want to work for you because you are busier. That way you will acquire the competition's business without trying.
My advice is to upgrade your fleet to newer and smarter cars - not bloody Mercs and Beemers, just newer cars (407, Mondeo, Octavia, etc). Maybe leave a couple unsignwritten, not everyone wants to turn up in a 'taxi', and since you are all Private Hire, it won't affect your business too much as it's all advanced bookings anyway. This will get you more 'quality' customers who don't want to take a woolly seat covered Nissan Bluebird but travel in something clean, comfortable and smart. You will always get the punter at 2am on a Sunday morning that wants to take home his kebab and bottle of Wife Beater but you can leave them to the 'Bluebird' crowd.
Introduce a 'uniform' nothing fancy, just polo shirts in your corporate colours with your company name on them. This makes you instantly recognisable and presents a professional image.
My advice is to upgrade your fleet to newer and smarter cars - not bloody Mercs and Beemers, just newer cars (407, Mondeo, Octavia, etc). Maybe leave a couple unsignwritten, not everyone wants to turn up in a 'taxi', and since you are all Private Hire, it won't affect your business too much as it's all advanced bookings anyway. This will get you more 'quality' customers who don't want to take a woolly seat covered Nissan Bluebird but travel in something clean, comfortable and smart. You will always get the punter at 2am on a Sunday morning that wants to take home his kebab and bottle of Wife Beater but you can leave them to the 'Bluebird' crowd.
Introduce a 'uniform' nothing fancy, just polo shirts in your corporate colours with your company name on them. This makes you instantly recognisable and presents a professional image.
NorthernBoy said:
Not sure if buying out your competitors are the best way, as they can just re-start their own businesses again. I don't see non-compete agreements as being worth too much in your sort of business.
Maybe you would do better to open offices in their areas, put out some flyers, and offer early discounts to get people to try you.
It sounds like you know how to build a business organically through good service, so once you have the customers giving you a try, just stick with that.
In my opinion, of course. I have alays preferred building a business through customer satisfaction, and stepping into new areas, rather than handing a competitor cash that they can use to compete.
Well, the largest company in the area (16 cars per shift) has offered us his business in a year or so. But he wants suspiciously little for it. We are taking more of his customers every week, and we have won the support of the local student unions (A massive market and potentially 20,000 new customers) - something previously exclusive to them. I know what it's down to - we get a car to a customer on time if we say we will. They don't seem too bothered. They also let just about anyone on their circuit, which means their cars have drivers that rip off the customers. They may be in the minority, but they have a huge effect on customer satisfaction.Maybe you would do better to open offices in their areas, put out some flyers, and offer early discounts to get people to try you.
It sounds like you know how to build a business organically through good service, so once you have the customers giving you a try, just stick with that.
In my opinion, of course. I have alays preferred building a business through customer satisfaction, and stepping into new areas, rather than handing a competitor cash that they can use to compete.
We're a lot more picky over driver recruitment. You've got to have a clean car and a great personality to get on our circuit.
I think you're right about the organic growth. It only takes a few hundred quid to set up as an operator in different districts as well. Our computer system will run fleets into the hundreds by simply adding more in-car-PDA's. Theres a lot of room for expansion.
You're right, there really is nothing to stop someone starting back up the next day as 'XYZ', when yesterday I bought there company 'ABC'. You can't stop someone from earning a living with their Taxi license... and all it takes is a few drivers and a phone to start a circuit and they're back off again!
Tyre Smoke said:
I wholeheatedly agree with Eric. Customers are fickle. These new contracts might decide to change overnight to another company - I've seen it happen. What you are buying is the goodwill, or put another way, their telephone number. Stick with your own set up and grow it. Sooner or later you will be the 'recognised' local taxi company and other drivers from other companies will want to work for you because you are busier. That way you will acquire the competition's business without trying.
My advice is to upgrade your fleet to newer and smarter cars - not bloody Mercs and Beemers, just newer cars (407, Mondeo, Octavia, etc). Maybe leave a couple unsignwritten, not everyone wants to turn up in a 'taxi', and since you are all Private Hire, it won't affect your business too much as it's all advanced bookings anyway. This will get you more 'quality' customers who don't want to take a woolly seat covered Nissan Bluebird but travel in something clean, comfortable and smart. You will always get the punter at 2am on a Sunday morning that wants to take home his kebab and bottle of Wife Beater but you can leave them to the 'Bluebird' crowd.
Introduce a 'uniform' nothing fancy, just polo shirts in your corporate colours with your company name on them. This makes you instantly recognisable and presents a professional image.
Hello Richard My advice is to upgrade your fleet to newer and smarter cars - not bloody Mercs and Beemers, just newer cars (407, Mondeo, Octavia, etc). Maybe leave a couple unsignwritten, not everyone wants to turn up in a 'taxi', and since you are all Private Hire, it won't affect your business too much as it's all advanced bookings anyway. This will get you more 'quality' customers who don't want to take a woolly seat covered Nissan Bluebird but travel in something clean, comfortable and smart. You will always get the punter at 2am on a Sunday morning that wants to take home his kebab and bottle of Wife Beater but you can leave them to the 'Bluebird' crowd.
Introduce a 'uniform' nothing fancy, just polo shirts in your corporate colours with your company name on them. This makes you instantly recognisable and presents a professional image.
I've been looking into uniforms... I wanted yellow Polo-Necks but they look bloody awful. I think we'll need a rethink on those.
Oh. And the Wife-beating Kebab munchers? We'll happily take them as well
We're the only cab company that doesn't moan about picking up from the barracks, or the pikey council estates. Because we just turn up and do our job without being arsey, we seem to have won 'respect' from a segment of the community that normally spells trouble for cab drivers. Have you ever found this? Most peculiar, but good
Good luck with the expansion!
My (zero business experience) opinion would be to grow organically rather than through acquistion for many of the reasons outlined, ie, low barriers to entry, customer base than may not follow, risk of being left with contracts/staff/outgoings you don't want.
I guess one big thing it would be nice to get hold of is their phone no but if your service is so much better than your competitors I would expect to see you grow whether you have the other companies business or not. And besides it would be so much more satisfying to beat them in a straight fight rather than buying them out!
My (zero business experience) opinion would be to grow organically rather than through acquistion for many of the reasons outlined, ie, low barriers to entry, customer base than may not follow, risk of being left with contracts/staff/outgoings you don't want.
I guess one big thing it would be nice to get hold of is their phone no but if your service is so much better than your competitors I would expect to see you grow whether you have the other companies business or not. And besides it would be so much more satisfying to beat them in a straight fight rather than buying them out!
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