How can local taxi services overcome pitfalls?

During a recent panel discussion hosted by Onde, industry experts with up to 14 years of experience shared valuable insights on common challenges taxi or ride-hailing businesses have faced in their practice.

In this article, we give a summary of the key pitfalls taxi and ride-hailing business founders make and strategies to overcome them.

Mistake 1: Launching with many drivers without building a customer base

A common misconception among ride-hailing founders is that launching with a large fleet — 10,000 or even 100,000 drivers — guarantees success. However, without sufficient demand from customers, these drivers will struggle to find work.

Drivers join platforms to earn money, and if you fail to provide them with opportunities to generate income, they will quickly switch to other services. Drivers often decide within the first three days of work whether to stay on the platform. You rarely get a second chance to win them back.

The question of customer/driver balance is the most critical in the ride-hailing business. It’s critical to balance supply and demand from the start, constantly adjusting to keep the numbers even. 

Mistake 2: Assuming a good product will sell itself

Some founders mistakenly believe that their service’s quality and competitive pricing will automatically attract users. Unfortunately, even the best products require active promotion.

Effective marketing and customer outreach are essential. You need to target your audience, attract users, recruit and train drivers, and invest in market analysis and promotion. A good product is only part of the equation; visibility and engagement are just as important.

Mistake 3: Advertising to everyone without defining a niche

While it may seem logical to market taxi services to everyone, as everyone can take a ride at some point, this approach often dilutes the message. To stand out, businesses must identify a niche and clearly communicate their unique value proposition.

Conduct a thorough market analysis to differentiate your service from competitors. Determine what makes your offering unique and tailor your marketing efforts to reach the right audience.

Mistake 4: Overpreparing for every possible scenario

Some businesses fall into the trap of overpreparing, attempting to anticipate and solve every potential issue before launching. However, the reality is that you cannot prepare for everything.

Unpredictable challenges will arise, and adaptability is key. Instead of aiming for perfection, focus on starting strong and learning from real-world feedback. Adjust your strategy as needed.

“No one can ever be prepared for everything you just have to be prepared.” Natalia Pirtskhalashvili, Director and Business Development and Growth at Onde

Mistake 5: Ignoring local legislation

In the early days of ride-hailing, there were often no regulations governing the industry. Even just 5-7 years ago, in regions such as Africa, Latin America, and parts of Asia, the ride-hailing industry operated in an environment with little to no legislation or regulatory frameworks. Businesses were required to adhere to no specific rules regarding privacy, terms, or conditions. For instance, companies could directly message a database of 50,000 riders with promotions like, "Hey, we have discounts! Check out our app!" without facing compliance hurdles.

Today, compliance with local laws, including privacy policies, licensing, and terms of service, is non-negotiable.

Failure to comply with regulations can lead to fines, shutdowns, or reputational damage.

Invest time in understanding the legal requirements of your target market or hire experts to handle compliance for you.

Mistake 6: Taking all driver suggestions at face value

While it’s important to value driver feedback, not all suggestions are equally beneficial. Focusing excessively on making drivers happy can lead to inefficiencies or implementing features that do not benefit the majority.

For example, while drivers may request tipping features from a company, tipping often contributes less than 1% to their earnings outside certain regions, such as the U.S.

Filter and prioritize feedback to implement truly impactful changes for drivers and riders.

Mistake 7: Failing to embrace digital transformation

In today’s digital-first world, traditional taxi operations that rely on methods like SMS or WhatsApp are quickly becoming obsolete. Modern customers expect seamless, app-based services that are convenient and engaging. A whole generation of users can’t imagine their lives without a smartphone and doing multiple things from one place. They don’t want to lose any minutes.

To remain competitive, invest in a sophisticated, automated system and a set of apps that are a joy to use. Whether you develop custom apps or use a white-label solution, digital tools offer efficiency, scalability, and the ability to provide a superior customer experience that your transportation business - any transportation business - just can’t survive without.

“A good ride-hailing service provider is more than just a tool—it’s an entire ecosystem and a guiding mindset. By adopting this perspective, businesses can gain valuable insights into what areas they should focus on, particularly during the critical early stages of their operations.”

Natalia Pirtskhalashvili Director and Business Development and Growth at Onde

Mistake 8: Choosing technology based on the wrong criteria

When selecting software, founders often prioritize having features similar to competitors like Uber, Bolt, and Grab. However, the stability of your apps and the system is far more critical than any unique and original features you can think of.

Smooth, uninterrupted functionality builds trust and loyalty among both customers and drivers. A reliable system ensures that customers can place orders and drivers can complete them without glitches, directly impacting revenue and customer retention.

Businesses often fail to realize that their revenue is directly tied to the stability of their systems. Since revenue is generated through commissions from drivers, ensuring that orders are processed, completed, and paid seamlessly—without any glitches—is crucial for maximizing earnings.

When choosing ride-hailing or taxi software, prioritize uptime and check which processes the provider has in place to deal with any technical issues.

Mistake 9: Fearing strong competition

Competing with industry giants like Uber can seem daunting, but it also presents opportunities. Giants often lack local market knowledge and agility, giving smaller companies an edge.

Avoid mimicking their strategies - local businesses rarely can match the marketing budgets of ride-hailing giants. Instead, focus on your unique strengths.

Leverage your understanding of local culture and build strong connections with drivers and customers. Build a relationship rooted in trust and mutual support: when drivers feel that they are valued, they are more likely to stay with the local company.

Use your knowledge and flexibility to test ideas, adapt quickly, and learn from your experiences. 

—

In conclusion, the Onde team advises the following:

“Don’t be afraid to fail, just fail smart.”