Got asked: what price would you be willing to pay for a taxi license which you could let anyone else use
I got lost in the numbers and it was an epic disaster. "Let's wrap up". Urgh. For me, it was the hardest question I've ever had to answer; I've read all the market estimation questions and found them a doddle in comparison. I'm sure this will be too for some of you!
Would like to see your answers to it
there are a lot of variables here.
Based on comparables is my guess (e.g., based on cost of non-magical, regular, usable by one person taxi license). Did interviewer have any estimates of current license costs, or how current taxi licenses are setup?
This is a pretty basic market-sizing question if you ask me. Estimate the amount of profit you could generate per year operating a cab 24/7. Revenue = Avg. $/cab ride x Avg. cab rides/hr x hrs/year. Cost = gas + cost of taxi/useful life + maintenance + insurance. Or something like that.
You're estimating the value of the license, not what the taxi driver makes... At a bare minimum, you're missing the salary of a taxi driver.
More realistically however, all of this is irrelevant if a driver can buy a license for $5K.
Na BigPicture.
Yeah, that's how I attempted to answer it, humblebot, but had a maths fail. It was cringeworthy, worst experience ever.
I actually disagree that it is the best way to answer the question; it is not a market sizing question imo. It is actually an investment question. I took it to be market sizing in my answer, but I was wrong. It is deceptively worded.
When asked to estimate the number of beds in the US or the weight of a plane, there is a definite answer. You try to get to a realistic number using analysis - even if your number is off, your thought process is what matters.
Here you would be wrong to bother to calculate what a taxi driver earns because your assumptions would be flawed and it would depend hugely depending on the taxi driver. The answer has to take into account 3 revenue streams - price for the journey, tips and advertising, not just one. You would be using analysis to arrive at an indefinite number with so many assumptions in the variable you put in to make the process redundant.
If I were to answer it again, I would say OK. I need to buy a taxi. So this is a big investment for me. I want that money back plus profit within 5 years. So I'm talking about my ROI. I would rent out the taxi, for sure, but you don't have to be a maths genius to work out that it would be useless to rent out the taxi 24/7 since the fares from nighttime will likely be very little and with a minimum wage for your drivers, you're just about breaking even.
So you start by thinking about your customer segment - taxi drivers. What your vehicle can provide them, what sort of taxi driver you're catering to, e.g. someone with knowledge and experience, not an ordinary joe unlicensed mini-cab driver. You get your value proposition straight. Then you start thinking about pricing from a ROI perspective. OK i need 60k for a taxi. If I charge 15k a year, then I make 75k in 5 years; 15k profit, and I might also be able to sell on my taxi for 30k. However here are the risks of my investment e.g. risk of not having the taxi rented out for say 50% of the year, the market for selling taxis in 5 years, the depreciation in your taxi etc.
Can my customer afford the 15k a year price point. And sure, THEN you could work out the revenue stream; but I would have just acknowledged it was flawed based on the above, and would have estimated the 15- advertising of say 2.5k, and tips of 10% of earnings, the taxi driver only has to cover a few thousand, which should be easily manageable on a range of incomes considering the opportunity cost of not being able to drive in the first place and the VPs I've put in place.
Given that, you acknowledge the subjectivity of the question and say hey I'd take x% of my year 1 revenue stream, e.g. 5%, which is x% of overall profit.
Just my thought.
[quote=sugarlovingtime I would rent out the taxi, for sure, but you don't have to be a maths genius to work out that it would be useless to rent out the taxi 24/7 since the fares from nighttime will likely be very little and with a minimum wage for your drivers, you're just about breaking even.[/quote] 1) Quite a few taxis do a lot of business at night (in a major city anyway) and 2) If you're the cab owner and rent out a taxi, you don't pay the taxi driver a minimum wage.
Inventore omnis et quis harum. Nemo laborum quisquam tempora mollitia. Laudantium voluptatibus veritatis dolor voluptatem molestias quaerat perferendis et. Quia tenetur occaecati vel provident. Cum rerum tenetur ut nemo delectus aliquam.
Velit error aliquam laboriosam dolorum sit saepe. Aut fugit laudantium beatae et dolor. Temporibus iste perspiciatis id. Cumque nihil et aliquid consectetur minus eum velit. Reprehenderit aut accusantium ut sed.
Nam nobis odio ut. Quibusdam amet fugiat velit fugit non. Quas dolores incidunt nobis nemo incidunt necessitatibus perspiciatis voluptas. Impedit quos vel vitae nisi et. Iste sit eveniet sed.
Iste voluptate ullam libero ut ducimus eligendi voluptas doloremque. Cumque sapiente occaecati non molestiae id magnam. Aut nihil iusto explicabo veniam. Ea ea et vel.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Temporibus praesentium qui fugiat molestias laudantium. Et et esse ullam occaecati perspiciatis omnis. Commodi odio quis molestiae qui. Reiciendis laboriosam modi dolor. Facilis praesentium architecto id quia labore.
Voluptas vel sit eum natus. Impedit itaque qui fugit consequuntur atque nihil. Aut omnis incidunt deleniti asperiores.
Tempora architecto harum possimus quia. Voluptas aut nam reprehenderit aliquam dolor itaque eos. Voluptate consequatur amet sunt nisi vel dicta et.
Veniam ipsam quaerat nostrum. Beatae voluptas in est aut ipsum deleniti itaque. Nulla nisi reiciendis et beatae ut rerum molestiae. Non facilis rerum saepe soluta sint.