What comes to your mind when you hear about the matatu business? Do you see opportunities, chaos or both? Well, irrespective of your perception of the industry, the fact of the matter is that this is not a business for the faint-hearted.
It’s a bumpy ride but if you are ready to learn the ropes; then there’s nothing that can stop you from conquering it (business-wise). In other words, you have to roll up your sleeves and get ready for a ride of a lifetime. A ride that can take you places if you play by the rules but one that can easily leave you bankrupt if you miscalculate your steps.
Here are 23 things about matatu business that nobody else will tell you.
2.The minimum amount of initial capital you can expect to inject to get your matatu on the road is Ksh500,000 (assuming you buy an old van which has been used locally for several years). But in order to operate comfortably, we would recommend Ksh1,000,000 as starting capital.
3.If you’re planning to purchase a locally used matatu (or a third-hand matatu for that matter), have a reputable mechanic accompany you for the inspection. This can save you some hundreds of thousands which could be incurred in replacing worn out parts.
4.Fuel is the number one major expense in this business. An average 3L 14 seater matatu consumes about Ksh4300 worth of fuel for every 350Kilometers covered. This figure may however vary depending on the make of your vehicle and the nature of driving.
5.The most expensive spare part is the engine, and when it gets to the end of its life, there’s nothing you can do about it. Always have some amount in your account sufficient to purchase a good ex-japan engine just in case the need arises. An average engine costs Ksh300,000 and above.
7.The route your vehicle plies may determine how much you make. Profitable routes around the city of Nairobi have been identified as: Mwiki – Town, Wangige – Town, Rongai – Town, Kikuyu – Town, Embakasi – Jogoo Road – Town and Kitengela – Town.
8.Some routes that are quite difficult to operate in mainly because of cartels include Kayole and Dandora.
9.33 seater matatus are more profitable than 14 seaters for town service business. Vice-versa is true for long distance transport business.
10.With a 14 seater van, and assuming the business is well managed, you can expect to make Ksh3,000 per day on average, this may however increase during peak seasons.
12.Be careful when having your driver double-up as the fleet manager as this might cause conflict of interest which may negatively affect your business.
13.It is ethical to pay your conductor Ksh1000/- per day and the driver Ksh1500/-. But it’s unethical and mean to pay them less than that.
14.You need to set aside at least Ksh3000 per week (or let’s say Ksh15,000 per month) to service the vehicle’s, oils, lining, brake pads, air filters and battery acid.
15.What determines whether you’re going to make profit or loss is how the fleet is managed. It is best if you manage the business yourself rather than leave it on someone else’s hands.
16.Although quite unfortunate to mention, traffic policemen are at the heart of this business and once in a while you’ll be forced to let them “eat”…this is quite an unfortunate trend and we hope the Anti-Corruption Authorities will be able to contain the situation soon.
17.Fines imposed on traffic offenses are quite expensive…you are better off complying with all rules and regulations else you’ll end up winding up your business in less than 6 months.
18.Always keep some money aside for emergencies…the matatu business is not the type to operate on a shoestring budget.
19.Unscrupulous mechanics and garage attendants can easily ground your business if not properly supervised. Make a point of visiting a few garages to compare the quotes. Also, build a good relationship with a few trustworthy mechanics.
20.It’s recommended to service the vehicle after every max 6000 kilometers. This will help keep it in good shape and hence your business will not be interrupted by unwarranted visits to the garage.
21.You can easily burn your fingers in the first 6 months of the business. It’s therefore advisable to keep your other sources of income intact as the business may be unpredictable during this stage of growth…so if you’re employed don’t quit your job yet.
22.It is always advisable to have your vehicle fitted with a GPS tracker so you can monitor the number of trips it makes during the day. This is especially helpful if you spend the day attending to other needs and don’t have time to monitor how the matatu is operated. Manual worksheets may not be effective in nabbing a conniving crew.
23.In order to join some of the well established matatu saccos e.g. Mololine, 2nk, North Rift etc. one is required to pay a token fee of in the range of Ksh100,000 and Ksh300,000. This token fee is meant to buy you a position in the franchise. If the Sacco is doing quite well (business-wise) then you can expect to recover this token fee in around 3 months of doing business.
It’s a wrap…these are the 23 most important things you need to know about investing in Matatu business. You can go through them once again and weigh your options…then tell us what you think via the comment box.