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How to Start a Scooter Rental Business

How to Start a Scooter Rental Business

Scooters have become a popular way to travel short distances.   They are fun, easy to ride, and convenient.  If you’re in an area where scooters are used for transportation or recreation, a scooter rental business may be a great way for you to make money, have fun, and be your own boss.

Business Overview

A scooter rental business offers electric scooters for rent to customers by the hour, half-day, or full-day.  Local customers may rent them for a quick way to get around, and tourists may rent them to explore the area or just for fun.  Some scooter rental businesses also offer scooter tours of an area to see places of interest or landmarks.

Industry Summary

According to Markets and Markets, the global bike and scooter rental market is projected to grow from $2.5 billion in 2019 to $10.1 billion by 2027.  According to IBIS World, the demand has grown rapidly in metropolitan areas and on college campuses.  There has been some concern about the industry due to the lack of knowledge of the rules about scooter use on public roads, leading to regulation of the scooter rental industry.

Industry Trends

Dockless e-scooter rental is expected to see the largest growth within the industry.  Dockless means that scooters can be located and unlocked using a smartphone app.  This allows users to find the nearest scooter without having to go to a central location.  Scooter rental customers like the convenience, the avoidance of traffic congestion, and the eco-friendliness of emission-free transportation.

Target Market

Your target will be tourists, people who work or live in metropolitan locations, and potentially college students if you choose to locate near a campus.

Skills, Experience, and Education Useful in Running a Scooter Rental Business

There are several specific skills and education that you will need to open a scooter company.

  • Experience.  Some knowledge of how electric scooters work will be helpful, and knowledge of scooter rules and regulations is essential. You also need to know your market and where people want to use scooters, and where they will want to visit.
  • Mechanical knowledge. If you know how to maintain and repair scooters yourself, you will save a lot of money.
  • Business knowledge and experience.  You will need to have some basic knowledge of marketing, finance/accounting, and human resources.
  • Customer service. You’ll need to build rapport with your customers so that you retain them as customers and gain repeat business and referrals.

Checklist for Starting a Scooter Rental Business

If you’re thinking about starting your own scooter rental business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.

Step 1: Write a Business Plan

After coming up with the idea, the next step in starting your scooter rental company should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you think through all the aspects of the business and then serves as a guide as you begin.

Related: How to write a business plan

Step 3: Choose a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a scooter rental business, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 3: Name the Business

Finding the perfect scooter rental business name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 4: Select your Location

A good location for a scooter rental business is critical.  You need to be in an area with tourists, a metropolitan location, or near a college campus.  You must be somewhere with a large pool of potential customers and little competition from large competitors.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Some cities have specific licensing for ridesharing businesses which may include scooter rentals.  Not following the local regulations properly can result in significant penalties or even restrictions in operating. Additionally, check with your state for specific license requirements for your scooter rental business, and contact your department of motor vehicles for scooter license and registration information.

In addition to scooter-specific requirements, there are also general business registrations to research. A few to consider include a business license, sales tax permit, and an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a scooter rental business is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.  Some entrepreneurs will tap into their own funds, a home equity loan, or credit cards, however, funding from the bank or investor may be necessary due to the high costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

A scooter rental business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a scooter rental business include social media marketing and online advertising, as well as flyers.  Developing a website can be a significant expense, but it can also give your scooter rental business greater visibility online. Your location visibility and signage will also be a critical part of your marketing.

If you are fortunate enough to find a market without competitors or scooter startups like Lime or Bird or even ridesharing companies like Lyft, Uber, Skip, Spin, or Lime Scooters. Consider how you would market against them if they operated in your community.

Ongoing marketing will also be necessary to grow your customer base.  You need to have enough demand in your area for scooters to be successful, so if you live in a city where scooters have not gained popularity, you will have a rough time.
Another challenge is that a scooter rental business will be seasonal to a certain extent, so you will need to plan for your downtime.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.

Step 9: Get Business Insurance

Finally, there is some danger involved in scooter riding, so you need to be aware of liability and safety precautions, and regulations.  Make sure that you have proper insurance coverage to protect you in case of injuries.

There are several types of insurance to consider when starting a scooter rental business. A few of these include:
– General liability insurance can help protect you from third-party claims of bodily injury and property damage. Considering this type of business is renting to riders with little experience driving a scooter, liability insurance is critical to protecting your investment.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working. This is critical in a Scooter Rental business in case one of your employees is injured.
– Property and casualty insurance protects you if your equipment is damaged.

The cost to start a scooter rental business will vary depending on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hire Employees

You may need employees to help you run your scooter rental business, particularly to collect and redistribute scooters if you have a dockless rental business.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your scooter rental business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a scooter rental business?

Here are some of the typical costs you will face when you open a scooter rental business.
– Setting up a business name and corporation costs approximately $200.
– Business cards, brochures, postcards for marketing $200 – $300
– Website setup $100 –$200 for a basic, do it yourself website, $1,000 – $2,000 for a professional site
– Electric scooter fleet with 10 scooters to start – $6,000 +
– Vehicle to transport scooters for repairs, maintenance, or battery charging $10,000 +
– Scooter app development $5,000 +
– Location rental $1,500 – $3,000 + per month
– Liability insurance, worker’s comp, property-casualty insurance, scooter insurance $1,000 – $3,000
– Initial marketing such as Facebook ads or search engine optimization for your website, flyers, and postcards, $500 -$1,000

How much can a scooter rental business owner make?

Prices for electric scooter rental are about $1 and 15 cents per minute.  If you have a consistent customer volume, you could make $50,000 – $100,000 per year in revenue before expenses.

The costs to run a scooter rental business are high and include ongoing insurance, maintenance, licensing, and more.  Also, scooters that are ridden often will need to be replaced fairly regularly.  Being ridden by multiple people creates a lot of wear and tear, so the average life span of a scooter is only 3 months. Don’t only look at the purchase price of the scooter. Consider the manufacturer’s quality and durability in the pricing calculation.

Another cost to be aware of is the cost of vandalism and theft, as these are major problems in the industry. Do you have a plan to reduce these costs, such as implementing GPS tracking to automatically set off an alarm or smart lock technology, or are you charging enough to replace your scooters?

Are there grants to start a scooter rental business?

It’s extremely rare to find a grant to start a scooter rental business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a scooter rental business?

The NAICS code for a scooter rental business is 532284, which is categorized under Recreational Goods Rental.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?