How a botched car hire deal birthed a thriving business for mitumba trader

When Simon Kibe (pictured) went out to hire a car to run some errands in Thika town, he did not know he was courting a big business opportunity. As a first-time car hire client, he expected a smooth transparent transaction. As such, he planned his day accordingly.

Things turned out disappointing. "I had ordered a Toyota Axio model, but after waiting for over four hours, they delivered a Toyota Probox," he explains.

Disappointed, he accepted the Probox as he didn't have many options anyway.

It was during this moment that the then Mitumba seller started interrogating car rental services as a business, following the many gaps and potential opportunities he saw from his rental car supplier.

With no car and no means to get one, he engaged his friend at Gikomba, who had a car. He asked if he could find clients to hire it. "My first client was my neighbour, I made Sh1,000 as profit," he explained in an interview at his office.

With this, and given what he made from his mitumba business, Simon put in more effort to get more clients through word of mouth.

"It took some time, but my next client wanted a car for a full month. I made a Sh40,000 profit as the owner asked for Sh35,000 while I rented it at 75,000."

This single venture saw him ditch the mitumba business. He registered Kizusi Smartex Ltd, focusing on the car rental services business.

"I started with zero capital as the business was registered in an office that housed a cybercafe, and I did not have my own cars. My mitumba customers became my rental car clients," he explains.

Today, the 35-year-old Simon has a fleet of over 150 cars to support his service business. He however owns only two cars with the rest linked to his network. In his words, "car rental business has lifted him financially and socially".

Car hire business metrix

Being a car rental business owner, you are always looking for new ways to improve your business. One way to do this is by understanding the key metrics of your industry, which will help you make data-driven decisions.

According to Simon, his cars rent out at between Sh3,000-Sh150,000 per day. "It's not all about revenue; you also need to keep an eye on expenses. Your cost per car rental helps you do just that by measuring how much it costs you to rent out each vehicle on average. This figure includes both direct costs (like fuel and maintenance) and indirect costs (like insurance and depreciation)," Simon expounded.

"Keeping tabs on your cost per rental will ensure that your business is profitable and help you find ways to cut costs where possible."

He says high fuel prices remain a challenge that has seen the occupancy rate of his fleet go down.

"This metric measures how many cars in your fleet are being rented out at any given time. A high occupancy rate means that your business is running smoothly and meeting customer demand. But now, we have seen people who used to hire a car individually crowdfund and only take a single car," he posed.

Nonetheless, he says his net promoter score (done by asking customers to rate your company from 0 to 10 relative to how likely it is that they will recommend it to a friend or family member) has been rising, and his business is mostly dependent on referrals and corporate clients.

Since he does not own most of the cars that bring him income, Simon advises keeping a balance between the percentage of partner car rental agencies. "The number of partnerships your rental business has can significantly impact your growth. Keeping track of this will help you set targets for new partnerships and measure the effectiveness of existing ones," he notes.

"Understanding the average rental period for your cars is crucial in managing your fleet. Shorter durations can mean more opportunity for new customers and allow you to rotate cars, whereas longer durations may mean higher revenue but could lead to less business in the long run."

Car rental industry

Data from Euromonitor, a London-based research firm shows that Kenya's car hire market is growing at a rate of eight per cent per annum except during the Covid-19 prevalent years when travel restrictions forced the industry to its knees.

According to available data, Kenya has an estimated 30 cars per 1,000 people compared to South Africa's 165 cars per 1,000 people and 700 in the US.

However, despite the low number of vehicles per person, these vehicles spend 90 per cent of their lifetime in parking bays after the morning and evening commutes. The average car is unused 92 per cent of the time, according to McKinsey, the management consultancy.

This window when the cars are not in use makes good income for owners who have harnessed car rental business, according to Simon who quoted this as part of his source of fleet.

The industry has also been held back by the lack of an affordable insurance product that would cater to pay-per-use clients. Kenya's car insurance only caters for comprehensive, PSV and third party, a key challenge that Simon says the industry "Must Overcome".

Nevertheless, the car hire market is worth an estimated Sh5 billion in Kenya.

The sector is however expected to expand due to technology disruptions helping car owners to rent their cars without having to open an office or lend it to car hire firms, a trend that is currently catching up as the technology avails.

Car rental trends

The impact of technological advancements has revolutionised the industry in the recent past.

According to Simon, improved customer and corporate information management and hassle-free Internet booking applications are the two prominent ways of assisting car rental service operators to offer enhanced services to their customers.

He says the increasing reliance of users on smartphones for carrying out various tasks traditionally done by computers has transformed the car rental experience for customers.

Moreover, an emerging trend in the travel and tourism industry is the evolution of 'bleisure'.

This relatively new term describes a combination of leisure travel with a business trip and is gaining popularity across the globe.

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