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Uber Business Proposal - Alice Zagrean

Uber is currently unprofitable from its core ride-hailing service due to not charging service fees in some cases where the total fare is less than the driver's earnings. To address this, the proposal suggests implementing a minimum service fee charged on all rides to ensure Uber covers costs and earns a small profit regardless of fare calculations. This could help Uber transition to consistent profitability from rides. However, it may reduce the number of drivers or riders, so the proposal also discusses becoming more transparent with customers and potentially hiring drivers as employees rather than contractors.

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224 views7 pages

Uber Business Proposal - Alice Zagrean

Uber is currently unprofitable from its core ride-hailing service due to not charging service fees in some cases where the total fare is less than the driver's earnings. To address this, the proposal suggests implementing a minimum service fee charged on all rides to ensure Uber covers costs and earns a small profit regardless of fare calculations. This could help Uber transition to consistent profitability from rides. However, it may reduce the number of drivers or riders, so the proposal also discusses becoming more transparent with customers and potentially hiring drivers as employees rather than contractors.

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© © All Rights Reserved
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Alice Zagrean

Business Proposal
The Problem
• Uber has several services, but they’re not
making the profit they should be through
their rideshare service.
• The company itself does not receive a profit
through the drivers.
• In some cases, they do not charge a service
fee.
• Uber is still a successful company through
other features such as UberEats, but if they
are to hope for profit through their ride-
hailing service, the business plan must
change.
Evidence:
“The company remains consistently unprofitable,
hemorrhaging $625M in Q3’20.” (CBINSIGHTS)

“In the case that the total fare is equal to or less than
driver earnings, Uber doesn’t deduct a service fee.”
(CBINSIGHTS)
The Solution
• Uber does not charge a service fee if the total
fare is less than or equal to the profits that the
driver is making on that fare.
• On this basis, Uber is not making a profit on
many of their rides
• To combat this, I propose that a minimum
service fee be charged to all rides.
• By doing so, Uber will still be making enough
to cover various “regulatory and operational
costs” (CBINSIGHTS) and also bring in a light
profit regardless of what is caluculated by
their formula.
• The Uber Fare Calculation Formula is
currently:
“(base fare + time rate + distance rate) *
surge multiplier) + tolls and other fees,”
(Ridester)
Limitations & Solutions
• The solution of adding a minimum service fee to
each ride does pose several risks
• Uber hires drivers as independent contractors
rather than employees. If the addition of a
service fee causes a reduction in drivers, Uber
can switch over to hiring people as employees.
• By paying people a base salary for the miles/time
spent driving, and allowing them to keep their
tips, Uber would be creating an even more
consistent place for people to make money (if
the business plan must be changed this way)
• The risk of loosing riders due to the slight
increase in price can also be avoided
• Through being transparent with customers and
explaining the introduction of the fee, you
develop a trust with your customers and they will
be less likely to drop Uber.
Conclusion
• Changing the fare calculation formula to
include this minimum service fee is what
would be required of Uber’s analysts
• Testing the new formula and observing
profits alongside the average rides per
driver is critical to observing if this proposed
solution is working
• Encouraging drivers and riders that the Uber
platform is the most convenient way to
hitch a ride through an efficient marketing
plan must continue
• Being open with drivers and riders about
this minimum fee being added will make the
company look better and it will develop
trust with the customers
• Soon, Uber will be bringing in a steady form
of profit and breaking through the era of
unprofitability with their rideshare platform.
Business Proposal End
Thank you for your time!
References

“How Uber Makes — and Loses — Money - CB Insights Research.” CB Insights Research, 2018,

www.cbinsights.com/research/report/how-uber-makes-money/.

iqbal. “Uber Revenue and Usage Statistics (2019).” Business of Apps, 10 May 2019,

www.businessofapps.com/data/uber-statistics/.

“Ridester.com | Information about Delivery and Rideshare Services.” Www.ridester.com, 15 Apr.

2019, www.ridester.com/
Uber Marketplace Service Fee | Uber

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