This guide was written by Nicko Williamson, winner of the 2011 Ernst & Young Entrepreneur Of The Year awards for his work with Climatecars. Nicko founded Climatecars, an eco-friendly taxi company based in London, in 2007. The business now operates a fleet of 80 vehicles and employs 17 staff.
Starting an eco-friendly transport business requires not only the ability to survive and grow in a highly competitive industry, but to do so while maintaining a commitment to the environment.
The Eco-Friendly Part
In order to make your business eco-friendly you will need to assess all areas of the business and work out how to reduce emissions wherever possible. Areas to look at will be: vehicles, office energy use, offsetting and supply chain. To be genuinely eco-friendly you will need to use some technology that will differentiate your company versus competitors by having much lower emissions.
Before setting up any type of business good market research is essential. Researching the competitors in your market segment is the best place to start. It is key to understand the kind of companies operating in the sector, their resources, pricing, and product offerings.
Next, talk to potential clients. Conduct a customer survey of companies that may currently be purchasing car services from competitors. Part of this potential customer research will be pitching the idea of an eco-friendly car service business and gauging potential customer reactions. Questions you might ask could be:
- How important is the environment to your purchasing decisions?
- Would you consider switching to an eco-friendly car service?
- How much do you spend per month on car or taxi services?
Keep the questions short and easy to answer, preferably multiple choice and with optional comment boxes. Remember most people are short of time so make it as easy as possible for them to complete the survey, in addition you could offer an incentive or prize.
Assuming you decide there is a market for an eco-friendly car service then you need to build a credible business plan. This will involve covering all the key areas of the business and is as much for you as it is for any potential investor who might want to back the project. Some areas you should cover in the business plan are:
- Executive Summary
- Management Team
- Overview of the business so far
- Marketplace / Competitive Analysis
- Marketing/Sales Plan
- Financing Requirements
- Risk, Returns ad Exit
- Financial Summary – forecast P&L, Balance Sheet and Cash Flow
Starting an eco-friendly car service is capital intensive. You can expect losses to begin with as the business is scaled up. As a result you will generally need to raise capital. The best way to do this for a start up business is to raise equity funding from family and friends or business angel investors. The London car services sector is very competitive, with a number of players, so you will need to convince investors that your proposition is different and that you have the skills to execute the business.
Vehicles can be funded by hire purchase or contract hire, which can be done through banks or specialist asset finance houses. All of these companies can be found via simple Google searching.
Transport is all about volumes and optimisation, the key is to reduce the time that vehicles are idle and maximise the revenue from your assets
Assuming you have the funding in place launching a green car service is a challenge. You will need to:
- Arrange the vehicles to be delivered on a certain date
- Hire and train drivers
- Hire and train office staff
- Purchase the relevant operational software
- Pre-launch marketing
- Get some clients
These are just some of the things you would need to deal with before the company launches.
Once the company is launched the real test begins. Transport is all about volumes and optimisation, the key is to reduce the time that vehicles are idle and maximise the revenue from your assets (cars). As a result targeted selling helps establish an operating area to ensure that customers get quick response times when they want a car and that you are not sending cars miles to go on small jobs. It is not good for example to have clients dotted all over different areas of the city to begin with, it is about rolling out the service to new areas as you scale up.
The other key to operating is growth; transport is a scale business so you need to expand rapidly in order to get the volumes up to a level where the business starts to become viable. This means lots of selling and marketing and is real test of how determined you are.
You will need a thick skin to run a car services business as there are a lot of people involved which will inevitably result in issues with customers and staff, all of which you as the boss will need to deal with.
An eco-friendly car service is not a quick buck. It takes time to build a viable business and needs continuous investment and a lot of time. However once the business is established and profitable the results can be respectable margins and good cash flow.