A car rental business is a very lucrative and profitable business that has seen a high percentage of year-on-year growth in the last 5 years. This is a guide on how to start a car rental business in South Africa.
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Overview
The car rental industry took a big hit in 2020 but it is getting back on its feet again in 2021 and is expected to recover in 2022 and beyond. This is an industry with a high barrier to entry, this means that you will have less competition and can be able to make some money if you have a good pricing strategy.
The industry relies heavily on the airline industry, it’s mostly people who fly from one city to another that use the services of a car rental business. Common customers include business travellers and leisure travellers.
Choose the right location
This is not a business that you can run from your house, you need a commercial location that will store your fleet of cars. It’s very important to make sure that the location is closer to where most of your clients will come from.
It’s often best to choose a location that is not far from the airport. Most of your clients are likely to be business or leisure travellers who are coming from another province or city. They usually request need a car to move them around while in a certain city.
Costs of starting a car rental business
Purchasing or leasing the fleet of cars will be your biggest cost, this cost will also manifest itself as an ongoing expense. Cars need to be repaired and maintained, other costs include getting insurance and tracking.
You need to have an office as stated above, printers to print out all the short-term contracts and high-speed internet. Office utilities and computers should be part of your equipment list. Another huge cost will come in employee wages and salaries.
However, it’s very possible to start off this business with as few people as possible. A team of three people should be able to handle all the early operations of this business. The office needs to be equipped with some security features like CCTVs and burglar bars.
Raising capital
This is a very expensive business to start, most people wouldn’t be able to sustain it even if they quit their jobs and used the money as capital. It’s only logical that the majority of people entering this business will need financing.
The best places to get financing from this type of business is from Angel investors, venture capitalists, financial institutions and specific investors. It’s important to note that financing with financial institutions will likely be a loan and not equity based. Angel investors and venture capitalists will seek equity in return for funding.
This needs you to do a thorough market research, you should be able to convince investors that you have a viable business. You will need to point out something that the competition is missing and how you will carve out your place in the market.
Have a marketing plan
Most businesses struggle with marketing, it’s usually the bridge between success and failure. You have to make sure that you invest a lot of resources into marketing your business. This can be a tricky business to market.
You won’t exactly run Facebook ads, people rent cars when they need them, you have to make sure that you are always there when you are needed. This needs you to make deals with other players in the travel sector. Bigger companies make deals with airlines, most people who are traveling by air will need a car when they get to wherever they’re going.
It might be hard for you to strike deals with an airline when you are just starting out, it’s best to work with travel agents. Travel agents might be your biggest source of clients when you are just starting out. Experienced travellers won’t need the help of a travel agent, you can target them by displaying digital ads on travel websites.
Google AdWords can also be really powerful in this case, bid for the words that you know most travellers type when making a search on Google. Try to rank for searches like “flights to Durban”, they might see your ad and remember that they need to rent a car when they get to Durban.
Creating a website for your business will also come in very handy, it will give you some credibility and give helpful information about your business to the visitors.
Register your business
Registering a car rental business only costs R125 in South Africa, when registering it as a private company. You might also need special permits and licenses that are needed for transporting and selling vehicles.
Conclusion
This was a guide on how to start a car rental business in South Africa. Do you have any thoughts or questions? Comment below.
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RentALLScript
19 May 2021Renting a car for an official or personal is most common in many metro cities around the world, In the past few years, it has a unexpectable growth because of the introduction of mobile apps to rent or schedule a car quickly within a few taps on the mobile phones. The online car rental system disrupts the conventional way of renting a car.
If anyone planning to launch a car rental software for your startup or transform your business online, it would be the right time for the launch. Many readymade solution providers like RentALL Cars available out, You can reach them and purchase the solution and add or remove the features as you want.
Indira Appalnaidu
5 Mar 2022What type of insurance would be taken for this type of business?