Lessons for your business from the “Yellow Cab” bankruptcy


In the last few months several Yellow Cab Company affiliates have filed for bankruptcy in different U.S. cities (San Francisco, Reno, Chicago, NY) because of competition from rideshare service companies (such as UBER and Lyft) as well as lawsuits. Probably, these Yellow Cab affiliates are just the first ones to file bankruptcy and more may follow. The Taxi industry is facing the most important battle of its history: a battle for its survival. If the industry is successful, it will come out of the ashes; if it’s not, the taxi industry may become as extinct as the Gigantopithecus. What is wrong with the Taxi Industry?

First, it seems the taxi industry has not changed its business model since the Hansom cab was around! (They still split the fare or lease the cab). The taxi industry has not cope well with the new, so far, innovative rideshare services. The traditional model still there and their lack of innovation and shortsightedness has been its demise. As Queens Supreme Court Justice Allan Weiss said, “In this day and age, even with public utilities, investors must always be wary of new forms of competition arising from technological developments.” Is your business ready to compete and innovate?

Second, the taxi industry does not have a talent acquisition and retention strategy. There is no incentive to stay; cabbies have no perks and they have very long hours. If you can make the same amount of money by driving on your own terms with a rideshare service company, what company would you choose? Also, the cost of entry for a rideshare services is cheaper, less rigorous and bureaucratic, than in the taxi industry. For example, to become a taxi driver you may have to take from a 6 hour defensive driving course in NY to a Taxi Training Certificate in SF. Does your company has a talent acquisition and retention strategy?

Third, the taxi industry does not seem to have an adequate risk management strategy. In the cases of SF, Reno and Chicago part of the decision for filing for bankruptcy was lawsuits from traffic collisions. This means they did not have enough insurance to cover the risk and not enough money to accept and budget it. Does your company has a risk management strategy? Do you have the proper insurance?

The taxi industry is having a very hard time and does not seem likely it will survive for much longer unless they are able to innovate, diversify services and find a good niche (i.e. special transportation for disabled people). This is a good learning opportunity for business owners, like you, who want their company to thrive, grow and become a long lasting brand. Learn from other businesses mistakes, stay on top of technology trends, innovate, create new products; hire the best talent and keep it; have a good risk management strategy and review it and modify as needed. Don’t let your business be the next Gigantopithecus and fade as many other brands.




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