How To Start a Matatu Business In Kenya

Often associated with unruliness and chaos, the matatu business in Kenya has attracted extreme assessments. Some say it’s a lucrative venture, while others label it as a risky investment. 

Starting a matatu business is capital-intensive, with an initial Kshs 675,000 and above. This will earn you a revenue of about Kshs 20,000 daily.

The increased population of Kenya has increased the demand for public transport as not everyone can afford a personal car. Investing in this industry can be a great strategy to accomplish your financial goals.

However, you must understand all the requirements and assess whether you can afford them. In this guide, I will cover the following:

• The fundamentals of Matatu business
• How to penetrate the Matatu business in Kenya
• Commonly asked questions

Let’s take an inside look.

The ABCs of Matatu Business In Kenya

Learning the basics of the matatu business helps you meet the requirements and establish a solid foundation for your venture, setting you up for long-term success. Below are some of the key elements you should acquaint yourself with before investing your hard-earned money in the public transport industry

Matatu Classes

Each matatu class has distinct legal and logistic demands. The amount of money you will use to fix or service a minibus is not equal to that of a bus. 

Matatus are classified into six categories, including

1. Class I, which is a 14-seater
2. Class II is a minibus with a capacity of 15 to 25 passengers
3. Class III is a minibus with a capacity of 25 to 40 passengers
4. Class IV is a bus with a capacity of 40 passengers
5. Class V is an urban with a 40-passenger capacity
6. Class VI is a double-decker bus with a capacity of more than 40 passengers

The more you advance in the vehicle class, the higher the price tag. Nevertheless, the price varies depending on whether you purchase a new or second-hand body.

NTSA Compliance

The National Transport and Safety Authority, popularly known as NTSA, demands you to meet specific requirements before your matatu can hit the road. Here is a list of the principal regulations

• A valid inspection certificate
• Road service license
• Valid insurance cover
• Modifications include a speed governor, safety belts, and seat features.
• A permit from the county government for area-specific routes
• A permit from the MCSK if you have a music system

Consult NTSA officials for more information on any additional requirements.

SACCO Registration

Joining a Sacco is mandatory for every matatu operator. Typically, a Sacco protects you as a matatu owner and resembles a lobby where your car can operate. So, once you complete the NTSA compliance process, you need to identify the route you’ll operate in and register in a relevant Sacco.

Remember to check the terms and conditions of the Sacco before joining to avoid hefty charges that will lead to losses. Also, ensure that the Sacco provides maximum protection to its members to prevent constant disruptions from officers.

Operational Costs

Operational costs are recurrent and can reduce your revenue. An estimated figure for your matatu can help you plan for a smooth business journey. Some of the main costs you should consider before investing in this business include:

1. Servicing and Repairing Costs: You need to take your Matatu for servicing and repairing minor issues such as lights, broken windows, and worn-out tires.
2. SACCO Fees: The Sacco will charge you fees, shares, and operational costs to allow you to use their stage.
3. Insurance: Your insurance coverage has monthly premium rates you must settle to operate as a public transport provider. Typically, there are two types: comprehensive and third-party coverage.
4. Bylaws: Bylaws charges are fees you pay to operate on specific routes, for instance, the Thika and Nairobi routes. These charges vary depending on the region, with places like Nairobi featuring high fees. 
5. Miscellaneous: Miscellaneous costs in the matatu business include inspection stickers, speed governor updates, and inspection processes.

Challenges of Matatu Business In Kenya

Here are some of the challenges matatu business owners in Kenya face

• Harassment From Police Officers
• Dishonest staff steal from you
• Fluctuating fuel prices
• High initial capital makes it difficult to penetrate the industry
• Traffic jams
• Wear and tear increases repair services

Advantages of Matatu Business In Kenya

• High demand for public transport services
• You can access new or second-hand matatus
• It’s profitable for long-distance matatus

How To Start a Matatu Business In Kenya

As a first-time matatu business entrepreneur, you’re probably in a dilemma about where to start. This guide provides a step-by-step process to set up your matatu business for success.

Let’s dive deeper.

Step 1. Conduct Market Research

Getting into a business environment without comprehending how it works can easily lead to low returns and losses. That’s why it’s essential for every entrepreneur planning to open a business to research the business environment.

Some of the critical factors you should examine during your study include:

• Short and long-distance routes
• The demand for public transport services in different routes
• The cost of new and second-hand matatus
• The cost of fuel
• The most suitable Saccos for different routes
• Your target market 
• The transport service pricing strategy
• The government regulations
• The competition

Once you obtain this information, you can prepare a business plan to give your venture a clear direction. 

Step 2. Purchase a Matatu

Now that you’ve identified the different sources for new and second-hand matatus, visit them to analyze their quality. It’s highly advisable that you purchase a new one if you have enough capital.

However, if you’re working on a tight budget, find a durable second-hand option that will not make you visit the mechanic regularly. The most essential factors to consider during this step are the durability of the matatu, the capacity, and your budget. 

Step 3. Determine The Route and Pricing

The route you choose will determine the amount of money you make. For instance, the same distance in Nairobi will fetch you more money than in other smaller cities. Hence, you should consider operating in places that bring you more returns with low expenditures.

If you decide to operate in long-distance Saccos, find one with high demand to maximize your revenue. In addition, learn the pricing of your preferred route to ensure you calculate the returns beforehand.

Step 4. Modify the Car

Your new matatu is not ready to hit the road yet! 

You must modify it to fit the NTSA’s requirements and customers’ preferences. This will help you have a smooth business journey while attracting a massive audience to fetch maximum profits. 

Some of the key areas you should focus on include:

• Labeling: Since you belong to a specific Sacco, you must label your matatu with the matching name and routes. 
• Music System Installation: Adding a music system to your matatu gives your clients a good customer experience. However, don’t invest much money into this, neglecting the essentials.
• Branding: You must brand your car depending on your route and Sacco. Some Saccos allow graphics that appeal to the youth if your target market focuses on the 18 to 35 age group. 

The main NTSA modifications you should adhere to include safety belts, fire extinguishers, speed governors, and spacing between seats.

Step 5. Secure License and Insurance

For a smooth business journey, you need to acquire an insurance cover. The most suitable option is comprehensive car insurance as it covers you fully. Nevertheless, you must visit and study different company offers to choose the best.

In addition, you should take your matatu for inspection by the NTSA officers. They will double-check whether it meets requirements such as speed governor and roadworthiness. Failure to complete this step can lead to hefty penalties, so don’t overlook it.

Once your car is approved to operate, you should ensure your driver has a valid driver’s license, PSV license, and Good Conduct certificate. 

Step 6. Join a Matatu Sacco

Operating from a Sacco allows you to enjoy low expenditure. In addition, you gain a competitive advantage as passengers consider your car safer, as they can report mishandling or harassment if it occurs. As a result, you can easily succeed in the matatu business when you register with the right Sacco.

Planning to monitor and collect maximum revenue? Saccos can help you accomplish your revenue goals. Typically, a Sacco provides a limit for the tout and driver to work with, delivering a specific amount of money daily. 

Before you join a Sacco, visit the different offices within your region, learn their requirements and offers, and then choose the most favorable. You can accomplish this by comparing the returns with the regular charges.

Step 7. Hire a Reliable Driver and Tout

Employing reliable staff will help you achieve your financial goals faster. One way to accomplish this is by allowing your Sacco to recruit suitable candidates for your matatu. This will keep them in check depending on the daily target you set for them. 

Another approach you can apply is hiring the driver and tout from referrals. However, once you hire them, you’ll need to set the daily target they should send to you. Then, permit them to split what they earn after that. 

Step 8. Advertise Your Business

Now that you have completed all the requirements and your car is ready to hit the road, you should advertise your business to increase your reach. Some of the best ways to achieve this include social media and flyers. 

The online platforms are driving massive profits to businesses. A good example is Metro Trans, which has gained an exceptional following and client base, earning Matatus in this Sacco’s good returns.

These eight steps will help you set up your matatu business for long-term success. And don’t feel limited to operating with the initial number of cars you acquire. You can always expand your venture by acquiring new matatus from your revenue.

How To Boost Your Matatu Business 

It’s every businessperson’s goal to realize consistent growth and profitability. You can implement the following tips to maximize your Matatu’s business potential.

Tip 1. Apply Competitive Pricing 

Applying competitive pricing is the most straightforward way to increase your business profitability. When you charge your customers a friendly fee, they will seek your services as it helps them save money. 

Typically, the difference in your pricing compared to your competitors is insignificant. Some Saccos will only charge Kshs 50 less than their rivals and still attract massive prospects to their matatus. 

Tip 2. Provide Excellent Customer Service

Customers want their travel needs addressed satisfactorily. Timely departure and arrival, a clean environment, and effective communication are essential in gaining repeat clients. Hiring a driver and conductor with ethics can help you achieve this quickly. 

Whenever a customer raises a relevant issue, your Sacco should address it to ensure their safety and comfort. Prioritizing your clients’ needs will always fetch you more prospective customers.

Tip 3. Implement Book Keeping Best Practices

Business thrives with proper bookkeeping. You must have a record of your revenue, expenditure, and profits. You should also budget for your returns on expanding or improving your business profitability.

Not having a record of your money will mean working with inaccurate numbers, leading to unmonitored spending and losses in the long term. 

Tip 4. Develop a Growth Strategy

Developing a growth plan helps you take action toward expanding your business. You can find professional help in building a customized and effective strategy. Or you may learn from successful matatu owners whether they save up to acquire more matatus or have table banks to help in the same.

Also Read:

• 11 Lucrative and Unique Businesses In Kenya

Frequently Asked Questions

1. Which Vehicle Is The Best for Matatu Business In Kenya?

Nissan NV350 and Toyota Hiace are the most common matatus in Kenya. Reason? The two models are highly durable, allowing you to earn through them for a long time. They’re also energy efficient compared to other models.

The availability of spare parts makes these two models a favorite for the matatu business.

2. What Are The Problems Facing The Matatu Industry in Kenya?

The problems facing matatu businesses in Kenya include

• Risk of theft from unreliable drivers and touts
• Corruption
• Fluctuating fuel prices
• Difficult clients

Ready To Start a Matatu Business In Kenya?

Starting a matatu business in Kenya requires thorough research and identifying suitable systems. You must get the best car, Sacco, and staff to succeed in this industry. 

The challenges associated with this venture can lead to hefty penalties. Fortunately, your business yields massive profits once you identify the right people and systems to drive your business success.  

Looking for more insights to help you reach your financial goals? Visit the Cent Warrior store for expert debt, budgeting, and goal-setting guides.