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Cost Management for Taxi Businesses: How to Reduce Operating Costs

Personnel costs (36.5% of revenue) and fuel prices are the largest cost items for a taxi business. With the right strategy, you can manage these costs and improve your profit margin.

The Biggest Cost Items in the Taxi Industry

Two cost categories stand out above the rest:

• Personnel costs: On average 36.5% of revenue — a significant share under pressure from CLA wage increases
• Fuel costs: Fluctuating but one of the largest variable cost items

Managing Personnel Costs

1. Smart Scheduling

By optimising your roster with data on peak and off-peak hours, you avoid unnecessary staff deployment during quiet periods. Use fleet management software that analyses trip patterns.

2. Mixed Self-Employed and Employed Drivers

A healthy mix of employed drivers and self-employed contractors provides flexibility during busy periods or sick leave without always bearing the full payroll costs. Be mindful of the rules on bogus self-employment (the DBA Act).

3. Low Sickness Absence

Absenteeism is a hidden cost driver. Invest in a healthy working environment, ergonomic vehicle interiors and wellbeing policies. Every day less sickness absence directly saves on payroll and replacement costs.

Reducing Fuel Costs

1. Switch to Electric Vehicles

An electric taxi costs approximately four to five times less per kilometre in energy when charged at home compared to a diesel vehicle. The higher purchase price is recouped through lower operating costs.

2. Eco-Driving Training

An economical driving course can reduce fuel consumption by 5–15%. Many insurers and leasing companies offer discounts for drivers who participate in eco-driving programmes.

3. Tyre Pressure and Maintenance

Correct tyre pressure reduces rolling resistance and fuel consumption. Regular maintenance prevents costly breakdowns and improves fuel efficiency.

Other Cost Savings

• Insurance: Compare business insurance annually; with multiple vehicles you can negotiate sharp fleet deals
• Financing: Reconsider lease or financing arrangements and renegotiate when contracts expire
• Digitalisation: Digital trip registration and invoicing save administration time and costs
• Tax benefits: Use MIA/Vamil, KIA and other investment allowances

More Information

For tailored business advice in the taxi industry, contact KNV or a specialist taxi industry accountant.