Where It Began

Not many people know it but when I first entered the private hire industry it wasn’t meant to be permanent. I was actually working as a self-employed Draughtsman creating engineering drawings on a computer aided design system. To be honest, it didn't go well. The work was patchy and on reflection maybe I should have waited until I was older?

With intermittent work and late payments, I needed money. An advert in the local paper read ‘drivers wanted, cash paid’. I called and reached a local taxi firm. The owner invited me in for a chat and before long I completed an application for a private hire licence. The cost was just £39 with very little to prevent you getting it – today you need a medical, an enhanced police check and references.

I soon became no stranger to a twelve-hour shift on a Friday and Saturday night. It was character building to say the least - working for a taxi firm next to a nightclub! Unfortunately, about a year later, I experienced a violent incident. At the time it was scary but in hindsight, it was probably the wake-up call I needed.

Unwittingly I had transitioned from a time-served, precision engineer with a string of professional qualifications to a full-time taxi driver. Two years previous I was working for a multinational company with an attractive package and a comfortable office. The days of Monday to Friday were over and gone. It was time to take stock and ask myself where I was really headed in life.

I loved being self-employed but the chances of building a business as an engineer were fading. Considering a long-term career as a taxi driver depressed me (despite the fun times) and a change of career seemed unlikely. I started to recognise however that because I trained as an engineer it didn’t mean I had to remain an engineer. I could use what I had learned though.

As a Draughtsman it is vital you understand document control. Furthermore as an apprentice I had studied BS5750 as a quality system to gain ‘Technician Guides’. This highlighted the importance of an audit trail and ‘root analysis’. Reviewing how a taxi office managed data and processed information was just shocking and it explained the complaints!

Everything was paper-based! When staff changed shifts, information was lost or thrown in the bin and when bookings were made, the details were sketchy. The basics were non-existent and contract customers suffered as a consequence. Considering all this, I realised there was a lot of room for improvement and I knew the Internet was about to be a revolution.

If ever there was an opportunity in front of me, I suppose this was it.

A Better Model. A Better Service.

My last few blogs have discussed how the private hire industry works and how the drivers within it are engaged. DrivenByQ has a mix of employees who drive company owned vehicles and self-employed sub-contractors who have their own vehicles. The full-timers are mostly exclusive to DrivenByQ. The part-time drivers however might sub-contract to multiple companies and will also have some of their own clients who use their service.

At every stage of growth, DrivenByQ has depended on sub-contractors to help at times of peak demand. At the executive level however there is only a small pool of sub-contractors in our local area. Very few people can offer the same level of quality as ourselves. Rivals will even resort to using a taxi company when they are busy. This drastically reduces the quality of the vehicle used and means no plate exemption too.

At DrivenByQ, we believe that if a customer expects an executive car service, they should receive an executive car service. To ensure this happens, we use our sub-contractor network from across the region and upgrade the service from executive to VIP if needed. This often costs DrivenByQ more than we charge to a customer. On the flip side, it not only ensures quality is maintained but it gives passengers a pleasant surprise.

Some of the VIP vehicles will be the latest (long-wheelbase) Mercedes S Class. These cost over £70,000 when new and represent the pinnacle of a large, luxury car equipped to the highest standards. Features of these cars include double glazed windows, electric sun blinds, massaging seats, adaptive lumbar support, digital TV and ambient lighting. The L version (for long) even adds an extra six inches over the standard car. This gives generous legroom and the rear seats have an additional electric recline function.

It may seem overkill to send such high-end vehicles for DrivenByQ customers but it ensures the ongoing relationship with corporate customers is maintained. It also builds the relationships required for us to transition from our local market to a regional one. With over one-hundred airport transfers a week to and from Manchester International Airport, it seems only natural to make Manchester Airport the next focus.

A Different Model. A Different Company.

My last Chauffeur Blog set out the difference between an executive car company and a minicab office and the way drivers work for them. An executive company largely accepts bookings in advance where passengers have planned ahead. A minicab office mostly accepts spontaneous bookings. There has been a massive upheaval in both of these markets in recent years by new ‘tech’ companies. Uber, Lyft and Ola are typical of disruptors using mobile phone technology to book and organize journeys.

The way new ‘tech’ companies offer cars at short notice is just the same as traditionally cab companies have done for years. They ask a self-employed driver to pay them a fee in return for work. The driver will then work a shift and be available on-demand. For a busy driver it can be lucrative, for a quiet driver it can be dire. Some drivers work sixty hours a week with many hours spent sitting around waiting for a job. The hope is that over a week, the busy times cancel out the quiet times and the average is sufficient to make a wage.

Last week, one of the UK’s biggest private hire companies ‘Addison Lee’ made the media after three of their drivers took them to court. The ruling said the drivers should not have been self-employed. The impact could be immense and I wonder whether many operators will survive as the knock-on effect is huge. Just to highlight a simple fact: historically what a driver earned from fares was their income, now it would be considered the companies. This in turn leads to all sort of complications when managing money!

Firstly, the operator (or company) would no longer receive a fee from individual drivers as their income. Instead they would have to collect the all fares which would be considered collectively for multiple drivers. Ultimately this requires VAT to be charged at an extra 20%. For business customers like we have at DrivenByQ this is not an issue but for the general public this could be catastrophic. The money would need managing and a payroll established. Add administration costs to the equation and there would no doubt be cash-flow issues.

Since becoming a Limited Company in 2007, DrivenByQ registered for VAT and at all times informed drivers in advance of what their bookings would be. Between jobs, drivers go home or have downtime. This means their hourly rate is favourable because there is no requirement to sit around for hours on end and wait for a journey. We never charged a weekly fee either. Instead we earned a commission from each driver’s journeys. The commission increases with their turnover so it is favourable to increase their overall earnings.

I wonder where the industry will now start heading. With the Taylor Review having an effect, court cases coming to a head and new technologies emerging, I am sure there will be lots more change to come. Just consider electric vehicles, driverless cars, workers rights, drones and the possibility of car ownership becoming a thing of the past and you could quite easily be excused for feeling gloomy. On the other hand, this change we are seeing could lead to a very exciting time where there are lots of opportunities on the horizon. Maybe, you just need a different vision to see it?

A New Model. A New Chauffeur.

In the last year, DrivenByQ has been through some fairly big technical changes which have mostly occurred in the background. If you were to go back and read through my Chauffeur Blog you would see that acquiring a new account customer lead to a domino-effect. Simply increasing the turnover past a certain point meant changing our VAT arrangement. This lead to the purchase of new company owned Mercedes vehicles and that in turn lead to the hiring of our first ‘employed’ driver.

Not many people know it but the private hire industry works quite differently to most business models. The majority of the time, the cars and drivers are not owned or employed by the company. Instead, they work on a self-employed, sub-contract basis. Historically, DrivenByQ has been the same. Using self-employed drivers who own their own vehicles. The advantage of this is that it keeps costs fixed and it provides a flexible workforce. Additionally (and it may be brutal but) anyone underperforming is quickly replaced.

Minicab offices use the same model and always have done with drivers paying a rental fee (or settle) for their radio equipment. At DrivenByQ we use a commission rate which is proportional to what a driver earns. The difference however between a minicab (or taxi) office and the executive work which DrivenByQ carries out is that a minicab driver will work a shift pattern of up to twelve hours and wait to see what they earn - which is sometimes very little. An executive driver will know in advance what they are working and will only work when required.

The real separation between the two models is that a minicab (taxi) office will have drivers ready to go ‘on demand’ whereas the executive company will struggle to cover jobs at short notice. This was the industry standard until a few years ago when digital disruptors (like Uber and Deliveroo) arrived in the market. They attracted a new kind of person to the industry who demanded conditions more akin to a traditional type job. Comparing earnings to hourly rates of pay resulted in legal claims being made and over time, the government’s response was to publish the Taylor Review.

The outcome of this report was to recommend more people be employed on an hourly rate where they could also receive worker’s rights. I am proud of the fact that DrivenByQ has always paid some of the best rates to self-employed drivers and they have in turn been able to invest in nice vehicles. This summer however, with the purchase of company owned vehicles and a change in the way we reclaim VAT, we spent time constructing a bespoke ‘contract of employment’. We then took on our first ‘employed’ driver who has sick pay, a set hourly rate and a holiday entitlement.

Out With the Old, In With the New

This week we said goodbye to our oldest car. Namely the 2009 Mercedes E Class which proved to be a very reliable motor with some 291,000 miles on the clock when sold. As we said goodbye to this car, it was also an opportunity to say goodbye to Euro4 (European Emission Standards).

In 2017 we said goodbye to the last of the Euro3 vehicles being employed. This signalled our commitment to improving our green credentials and considering our clients’ CSR policies. Looking at specifications shows how engines have changed in the last few years.

Comparing our old 2009 E Class with the brand new 2018 E Class (purchased September) reveals the improvements: Power and performance has increased, efficiency has been enhanced (greatly) and most importantly emissions have reduced.

Mercedes E220	2009 CDI	2018 SE
BHP	170	194
0 – 60 mph	8.6	7.3
MPG	42	65
Gearbox	5 speed	9 speed
Co2 (g/km)	177	122
Engine size (cc)	2145	1950

This change is aided by modern materials and energy saving features like LED lights and new post combustion technology (which reduces harmful nitrogen oxide gases). There are more developments too including voice control, a 12” widescreen display, auto-braking and a five star Euro NCAP safety rating.

Two Out of Three Ain’t Bad

My last few blogs have been about purchasing brand new Mercedes vehicles. In reality however, DrivenByQ never bought brand new cars in the past for its executive fleet. This did not prevent the company growing though. So why change?

From the all the books I’ve read in the last few years, one in particular stands out. That book is ‘The Discipline of Market Leaders’ by Treacy & Wiersema. It argues there are three (market leading) strategies available to stand out from your competitors.

One strategy is to offer the best service. DrivenByQ has done this since day one and it is why we have grown. It's what the company is renowned for too: Outstanding Customer Service. The other two options relate to the product and price.

By building a modern fleet of Mercedes Benz, DrivenByQ now offer the best products to compliment the best service and enhance the customer experience even further. Therefore the only thing a customer can say is average about DrivenByQ, is the price!

The Mercedes E Class

After receiving fantastic feedback from the passengers travelling in our 2018 Mercedes V Class, it seemed only natural to go back to the dealership and buy another Mercedes. This time we opted for a vehicle which could carry out the majority of our work - an executive saloon car for up to three passengers, offering comfort and style.

The choice boiled down to the Mercedes C Class, E Class or S Class. The C Class was too small to be classed as an executive vehicle and the S Class had a list price of over £70,000. While DrivenByQ does occasionally have work for such a vehicle, the majority of our bookings are for executive travel so it is more cost-effective to sub-contract the VIP trips.

The remaining choice of the Mercedes E Class was split between the SE or AMG model (with extra styling and bigger wheels). For the chauffeur driven experience, an SE offers a comfortable and relaxed environment and presents the more sensible choice. The E220d engine with a two litre displacement mated to a silky smooth (nine speed) automatic gearbox only enhances the luxury.

It is no slouch and is capable of regularly returning over 60mpg which is 50% more efficient than the vehicle it replaces. Rather than specifying a basic model, we requested the SE Premium with a three-year unlimited mileage warranty. The projected overall figures were surprisingly only £1,000 more than buying a three-year old car and working it for three years (including the repair bills).

I suppose some people might go with the three-year old option as it is a lower financial risk and not such a commitment. We saw this as a marketing opportunity though. After all, why would a passenger want to travel in a second-hand, three-year old vehicle when they could ride in a brand new Mercedes E Class? Not to mention all the latest features it offers and choice of sixty-four ambient lighting colours.

The Mercedes V Class

So, we made a decision to purchase a brand new chauffeur vehicle. Simple right? Well, not quite because there are options to consider. Who would have thought it could be so complicated? As someone who has never had the luxury of selecting vehicle options before, it soon became apparent that choosing quite a few can lead to a significant cost!

Then there is the length. Normal, Long or Extra Long? Then there is the style. Sport or AMG? And do you really want the bigger AMG wheels with low profile tyres which can make the ride harsh? Then there is the colour and the option of metallic paint. The list goes on and that is before you even think about the interior which offers the choice of five, six or seven passenger seats.

There is an option to have a centre console between the front seats with a refrigerator. How about an electric sunroof? Well, at some point I guess you have to be practical and think about what gives the most value to the passenger and the driver? A quick bit of research on the Internet reveals second-hand prices are robust but nearly every V Class has a black interior with carbon fibre trim effect.

So what do we do? We decide to be different and go for a wow factor. We specify a silk beige leather interior complimented by a walnut wood trim. We be pragmatic and choose an Extra Long body style in metallic silver with seven passenger seats and we add a few sensible options such as electric memory seats, a parcel shelf, a 360 degree parking camera and the uprated 250d engine.

To save a little we opted for the Sport instead of the AMG but still kept the electric sliding doors, electric tailgate and ambient lighting to impress passengers. After weeks of deliberation it seemed we finally had the right specification - except for that one last little thing. The icing on the cake for yours truly: A fifteen speaker Burmester theatre system with exceptional sound quality.

A New Mercedes Benz

Last year when it became apparent our VAT scheme would need to change, it was also evident the existing VAT scheme would generate a surplus revenue in a relatively short space of time. Coupled with this were two ageing vehicles on our company fleet which would need changing. With this in mind it seemed like a good time to take up the offer of an extended test drive.

Not too far from where I live there is a Mercedes Benz showroom for commercial vehicles. One weekend I popped in to have a look and was offered the loan of a ‘Vito’ people carrier for almost a week. It seemed rude not to accept. If I am honest, it was also good fun to drive something a little larger than I would normally.

So what did I think? Well, it was extremely practical. It wasn’t too unwieldy and a vehicle that size has the potential to generate extra revenue. On the flip side, the test vehicle was somewhat basic with its plastic bumpers and steel wheels. It was some way off an executive standard too (even if my wife did spontaneously purchase a washing machine which we took home with us).

After a few days of driving the vehicle in different environments and seeing how it measured up as a people mover, it made sense to have something this size. It also made sense to have something with such reasonable running costs. So what did I say to the salesman when I took it back? “I like it and it makes sense so I have placed an order for a Mercedes V Class” which is something you can only buy at the car dealership.

The VAT Advantage

My last blog spoke about VAT changes. In relation, its biggest affect is on a vehicle purchase. Historically I bought vehicles about three years old and they were preferably ex-company cars which had been on lease. The reasons? They were well maintained, had been under warranty and had done most of the depreciating in the price department.

In the last few years, I have realised two drivers sharing one car generates more profit. The consequence is the car wears faster. That wear can be expensive too, especially if you clock more than 60,000 miles a year. For example a clutch could cost £1,500 to fix and another £2,000 in lost revenue while off the road. Buying a second-hand car also means the inability to specify certain features or colours.

In contrast, Mercedes Benz offer a three-year, unlimited mileage warranty on a brand new vehicle. Add the advantage of reclaiming VAT on the running costs and purchase price and it makes a new vehicle much more appealing. With the volume of our work building and already supporting ten full-time drivers, projecting figures over three years gives some interesting calculations.

If you consider our pricing structure adds 50% when carrying more than four passengers, the extra revenue would help contribute toward a vehicle. Additionally, Mercedes people carriers offer a potential 28,000 miles between service intervals and they have solid residuals. With this in mind, a new vehicle doesn’t look so expensive after all when calculated over three years.

The Flat Rate Conundrum

When DrivenByQ Ltd incorporated (in 2007), it seemed a good idea to register for VAT (Value Added Tax). Although our turnover did not exceed the registration threshold at the time (of £86k per annum), we registered anyway and used the simplified VAT system known as the Flat Rate Scheme. We charged VAT to account customers but could not reclaim VAT on purchases.

The upshot of not reclaiming VAT was retaining a good portion of the VAT collected on the invoices. Over time it was quite a nice revenue which the business would not otherwise have accessed. It generated around 8.5% extra revenue on the turnover. The scheme worked great until April 2017 when the rules were updated.

The UK Government made a change to tackle ‘aggressive abuse’ known as the limited cost trader scheme. This required a business to spend more than 2% of its turnover on goods to qualify for the same rate of VAT retention. For DrivenByQ the only way this was possible was to move our vehicles inside the business and claim the fuel as goods (something only a private hire company can do).

The issue here was that the vehicles were previously owned by ourselves as sub-contractors. Therefore moving the vehicles in to the business would also require us to be employees. After some detraction, we finally decided to move the cars and ourselves as owners inside the business. This required a payroll and a pension scheme to be setup along with salaries.

Just as it began to work smoothly, a competitor went in to liquidation and we acquired a new customer spending over £50k on account. This pushed the turnover above the flat rate threshold (£193k) and meant the scheme could no longer be utilised. On one hand it was frustrating but on the other, it generated enough revenue to place a deposit on a brand new Mercedes. We managed to claim the VAT back too.

Four Years Later and I’m Back!

After four years away, I am back at the keyboard returning to blogging. What happened? Well, truth be told, becoming a Dad was a tad more demanding than I thought it would be. Eighteen months of sleepless nights; the obligatory babysitting duties and various illnesses my little boy brought home from nursery all had an effect.

There were numerous colds, coughs and sneezes he passed on, then the viral infections and finally the gift of Chicken Pox (which I never had when younger). This resulted in a trip to A & E in the back of an ambulance when it travelled to my lungs and developed as Chicken Pox Pneumonia. For the uninitiated, this can have a somewhat slightly adverse effect on your breathing!

With my son now in school, I am blogging again with a renewed enthusiasm. So what has changed in the last four years? Personally, as well as becoming a Dad, I tackled a Master’s Degree in Business Administration (otherwise known as an MBA), I had spinal surgery for two herniated discs and business wise, DrivenByQ almost doubled in size.

In the private hire industry, the growth of Uber spawned new case law relating to the gig economy. From this came the Taylor report (with more rules around workers rights). Separately, the National Living Wage and pensions were introduced and new VAT rules appeared. These then triggered a sequence of events which eventually lead to our first ever (brand new) vehicle being purchased.

While it has been hectic, I suppose it has generated lots of blogging material to crack on with. So, watch this space. There is plenty more to come.

A Private Hire Vehicle

In my last blog (a little while ago) I wrote about a taxi or Hackney Carriage which could be hailed in the street and hired on a meter. The alternative is a private hire vehicle which cannot be hailed. This service is booked in advance through a licensed operator who keeps a list of all journeys (known as a run sheet). They have set prices or quote using their own system and they charge for dead mileage.

The vehicle is licenced under its local council. It is identified in line with council conditions too, which could be a plate to the front and rear (with windows stickers to the sides) or the operators name plastered all over the vehicle. In contrast, some councils stipulate a small plate on just the rear of the vehicle or even a single and discreet disk, mounted in the front screen.

The diversity comes from the way the law was formed and introduced. Known as the Local Government (Miscellaneous Provisions) Act 1976, every council across the UK has its own interpretation of the conditions which govern the industry (depending on their location and environment). These conditions can vary from city to city and between rural locations too.

Crucially, the law was not carefully constructed by central government over a period of time. Instead it was lifted (in a rush) directly from the Plymouth City Council Act 1975 which was specific to a borough of England - and not necessarily the best fit for everywhere else. Over time, with advances in communication technology and the evolution of the Internet the law has become outdated.

To add to the diversity and confusion, a private hire vehicle can have up to eight passenger seats and it can often be any make and model the driver or operator prefers (subject to some licencing conditions of course). This means some vehicles are bought for their rock bottom prices and some, are bought for their level of quality and ability to perform.