How to Start a Rideshare Company

Since Uber’s beginnings in 2009 in San Franciso, ridesharing apps have gained ground and are now regularly used by many people. Whether to attend an event and avoid the hassles of parking, or to get home safely after a night on the town, ridesharing is the go-to choice, making it a $15 billion industry in the U.S.

While it may seem daunting to start a rideshare company of your own and compete with the likes of Uber and Lyft, if you’re innovative, it can become a reality. 

But first, you need to understand the business. Fortunately, this step-by-step guide details all the information you need to launch the next big rideshare company.

Step 1: Decide if the Business Is Right for You

Pros and cons

Rideshare industry trends

Industry size and growth

• Industry size and past growth – The U.S. ridesharing services market is worth $15.2 billion in 2023 after growing 11.1% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/ride-sharing-services-industry/))
• Growth forecast – The U.S. ridesharing services market is projected to grow 11.3% in 2023.
• Number of businesses – In 2023, nine ridesharing services companies are operating in the U.S. 
• Number of people employed –  In 2023, the U.S. ridesharing services industry employs 6,449 people.

Trends and challenges

Trends

• More customers are looking for rideshare drivers who have an electric or hybrid vehicle, creating an opportunity for an entrepreneur to start an eco-friendly rideshare service.
• AI is being used to predict customer behavior, allowing rideshare companies to target specific areas to grow their business.

Challenges

• Driver attraction is challenging currently due to high fuel prices.
• Uber and Lyft have both been under pressure from drivers and lawmakers to treat drivers as employees rather than independent contractors. 

How much does it cost to start a ridesharing business?

Startup costs for a rideshare company range from $450,000 to $650,000. Costs include the app development, and budgets for driver attraction, operating, and marketing. 

How much can you earn from a rideshare business?

Your average Uber trip charge will likely be around $20. After paying drivers and all expenses, your profit margin should be about 20%. 

In your first year or two, you might have a total of 1000 trips per week, bringing in $1,040,000 in revenue. This would mean $208,000 in profit, assuming that 20% margin. 

As you gain traction, sales could climb to 3000 trips per week. With annual revenue of $3,120,000, you’d make a tidy profit of $624,000.

What barriers to entry are there?

There are a few barriers to entry for a rideshare company. Your biggest challenges will be:

• Funding the startup costs
• Competing with Uber and Lyft

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a rideshare company, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research rideshare companies in your area to examine their services, price points, and customer reviews.

• Make a list of ridesharing companies that offer similar services. 
• Review your competitors’ services – their features, pricing, and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a ride share app company that only hires drivers with electric vehicles or a ride hailing app company that will make multiple pickups.

You might consider targeting a niche, such as launching only in your own city.

In addition to rideshares, you could offer food or other product delivery. 

Build a rideshare app

Building an app is a pivotal step in starting a rideshare company. This digital platform serves as the primary interface between drivers and riders, facilitating ride bookings, payments, and communication.

A user-friendly design, robust security features, and real-time GPS tracking are essential components.

Moreover, the app should seamlessly integrate payment gateways and provide an intuitive feedback system.

How much should you charge for rideshares?

Your prices should be competitive with the prices of the major players in the industry, but they should also be based on your costs. 

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

You’ll have two target markets – drivers and riders. Both tend to be a younger demographic, so you should market on TikTok and Instragram.

Where? Choose your business premises

While a rideshare company operates predominantly online, there are still some physical premises requirements for smooth operation:

• Office Space: A central location for administration, operations, customer support, and to conduct interviews or trainings for drivers.
• Parking Area: Depending on the business model, you might require parking areas for company-owned vehicles.
• Maintenance and Service Area: If you’re maintaining a fleet of vehicles, you’ll need a service area for vehicle maintenance and repair.
• Storage: For marketing materials, equipment, spare parts for vehicles, etc.

Step 3: Brainstorm a Rideshare Company Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “rideshare” or “ride hailing”, boosts SEO
• Name should allow for expansion, for ex: “NexaMobility” or “OmniTransit” over “EcoRide” or “MedMove”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Rideshare Company Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Summarize the core concept of your rideshare company, including its unique selling points and market opportunity.
• Business Overview: Provide an overview of your rideshare business, explaining the type of rides offered (e.g., standard, premium, shared), coverage area, and any specialized services.
• Product and Services: Detail the range of services your rideshare company offers, such as ride-hailing, delivery, or carpooling, and any additional features like in-app payment or driver ratings.
• Market Analysis: Analyze the local transportation market, including demand for rideshare services, demographics of potential customers, and regulatory considerations.
• Competitive Analysis: Identify existing rideshare competitors in your area, their market share, pricing models, and customer feedback, and explain how your business will differentiate itself.
• Sales and Marketing: Outline your marketing strategies for acquiring riders and drivers, including digital advertising, partnerships with local businesses, and referral programs.
• Management Team: Introduce key members of your rideshare business, emphasizing their experience in the transportation or technology sectors and their roles in managing the company.
• Operations Plan: Describe the day-to-day operations of your rideshare service, covering driver recruitment, passenger safety measures, vehicle maintenance, and customer support.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts based on projected rides and pricing, expenses for marketing and driver incentives, and your path to profitability.
• Appendix: Include supporting documents, such as driver agreements, regulatory compliance information, insurance policies, and marketing materials.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to rideshare companies. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your rideshare company will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a rideshare business. You might also try crowdfunding if you have an innovative concept. When you get to a certain point, you may be able to attract angel investors or venture capital.

Step 8: Apply for Licenses/Permits

Starting a rideshare business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your rideshare business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book Now” or “Apply now”. This can sharply increase rides and driver applications.

Marketing

Here are some powerful marketing strategies for your future business:

1. Localized Partnerships: Forge partnerships with local businesses, such as restaurants, clubs, and event venues, to offer exclusive discounts or promotions to their patrons, creating a symbiotic relationship that enhances your brand visibility.
2. Geo-Targeted Social Media Campaigns: Utilize social media advertising platforms to run geo-targeted campaigns in areas with high ride demand, focusing on promotions, referral bonuses, and engaging content to attract and retain users.
3. Influencer Collaborations: Partner with local influencers or bloggers to promote your rideshare service through authentic reviews and firsthand experiences, leveraging their audience trust to drive new user sign-ups.
4. Community Engagement Events: Host or sponsor local events, community gatherings, or festivals to increase your brand presence, and provide on-site promotions or exclusive ride discounts for attendees.
5. User Referral Programs: Implement a robust referral program, incentivizing current users to refer friends with discounts or ride credits, fostering a word-of-mouth network effect that expands your user base.
6. Time-Limited Promotions: Create a sense of urgency by running time-limited promotions during peak hours, weekends, or holidays, encouraging users to take advantage of special discounts or bonus features during specific time frames.
7. Driver Incentive Programs: Implement programs that reward drivers for high customer ratings, completing a certain number of rides, or consistently operating during peak hours to ensure a motivated and satisfied driver fleet.
8. Strategic Vehicle Branding: Consider branding your rideshare vehicles with eye-catching and memorable visuals, turning each ride into a mobile advertisement that raises awareness and curiosity about your service.
9. Customer Loyalty Programs: Introduce loyalty programs that reward frequent users with exclusive perks, discounts, or priority service, fostering a sense of loyalty and encouraging repeat business.
10. Data-Driven Marketing: Leverage user data to personalize marketing efforts, sending targeted promotions and notifications based on user preferences, location history, and behavior to enhance user engagement and satisfaction.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your rideshare company meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your rideshare business could be: 

• Arrive in style, on time, with our reliable rideshare service
• Ride with confidence, knowing safety is our top priority
• Your convenient and affordable rideshare solution for every occasion

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a rideshare business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in rideshare companies for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in rideshare companies. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

You need workers in addition to drivers to fill various roles. Potential positions for a rideshare business include:

• Developers – develop and maintain ride share app
• Customer Service Reps – handle customer calls, resolve issues
• Marketing Lead – create and implement marketing strategies

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Rideshare Company – Start Making Money!

Starting a rideshare company takes an investment, but there’s no limit to how large it can grow. You’ll also be providing a valuable service in the cities where you launch. The ridesharing industry is growing rapidly, so it’s a great opportunity to get in on the action.

You understand the business now, so you’re ready to develop your app and launch your successful rideshare company!