What an Uber Driver Can Teach You About Your Business

It was a Saturday and I was on my way home from recording my latest course at Lynda.com. My husband planned to pick me up at the airport.

The morning of my flight, he told me he’d applied to be an Uber driver (he’s employed full-time, so this was a bit of whimsy). Maybe 45 minutes passed from application to approval and I was officially married to an Uber driver. He may or may not have been late picking me up for all of his Ubering of others… 😉

He enjoyed the first day so much that I decided I’d apply, too. By Sunday morning we were both Uber drivers.

Our careers were short-lived (we learned that our insurance didn’t cover ride share). Even in that short span, I took away some lessons that I think can apply to any business owner or freelancer.

Three Business Lessons from an Uber Driver

1. All revenue comes with costs

I had a grand total of three trips in my Uber career. Two were passengers. One was for a food delivery (my car still smells like Thai). Here were my earnings for each:

  1. Fare: $6.99 – $1.75 (Uber fee) = $5.24 (total payout)
  2. Delivery: $13.97 – $3.49 (Uber fee) = $10.48 (total payout)
  3. Fare: $34.01 – $8.50 (Uber fee) = $25.51 (total payout)

I was “online” (ready for fares) a total of 3hours, 17min and I earned a total payout of $41.23. For those of you at home with your calculators, that’s about $13.01 per hour.

Depending on your frame of reference, that’s good money. When I “retired” from Starbucks six years ago, I wasn’t making that much.

But how much did it cost me to earn that money?

For those three trips, I put 112 miles on my car. Standard IRS mileage rate is 53.5 cents per mile (covers fuel, maintenance, wear and tear on the vehicle, etc). So using the calculation of 53.5 x 112, I spent $59.92.

I also hit one toll booth so I could speed up a trip, which cost me $1.35.

That means my total expenses for those 3 hours, 17 minutes was $61.27. My total revenue was $41.23 (of which I’ll pay taxes on that income). So my true income for this experiment was -$20.04 (plus some tax).

Not only did I not make money, I lost money.

The lesson? You may have solid revenue, but that metric means nothing by itself. You have to look at revenue in the context of your costs of doing business. If you’re not controlling your costs, you’re flushing income down the toilet.

If you're not controlling your costs, you're flushing income down the toilet. Click To Tweet

2. Not every dollar costs the same to earn

If you’ve ever taken Uber or another ride-share service, you’re familiar with the concept of surge pricing. If you’re not familiar with it, it’s the economic principle of supply and demand in action. When there are more people requesting rides than there are drivers to fulfill them, the cost per ride goes up.

As an Uber driver, you benefit from surge pricing. It’s Uber’s way of enticing drivers to busy areas. If you know there’s an area with surge pricing, that’s where you go. I mean, would you rather make 1x your rate or up to 3x?

Well, as a rookie Uber driver, I didn’t know this. I started my career early on a Sunday afternoon when demand was (as Flo Rida would say) low low low low. I could’ve sat on my couch and binged on Netflix for that 3+ hours and come out with more money in my pocket.

How is that possible? Because not all income is created equal.

We’ve already established that all revenue comes with cost, so the idea here is to see how much I can increase revenue while maintaining the same (or lower) cost.

For fake math, let’s say it costs me $2 to earn $10. What if I could still spend $2 and earn $20? 2x the revenue at 1x the cost. Sign me up for surge pricing!
In Uber terms, I’d probably skip work on Sunday afternoons. I’d time my driving hours to overlap with surge pricing, or at least those times when there’s a steady flow of riders available (I had downtime between my 3 trips).

The lesson here? All income has associated costs, so look for opportunities to earn where that cost is lower.  For more on this topic, here’s an excellent article from Chris Lema: Not All Customers are Equal.

Some dollars cost more to earn than others. Click To Tweet

3. Be prepared for risk (and know your tolerance)

My third and final fare on Sunday was a trip from a hotel in downtown Fort Worth to an airport in Dallas (about 35 miles one-way).

Drivers have no clue where a fare is headed until you pick them up. Had I known this would be a 1.5-hour round-trip that I was only paid for half of (I couldn’t find a fare for the return trip), I wouldn’t have taken it.

I didn’t know this in advance (and couldn’t have known). That’s the way risk works – you can do your best to influence the outcome, but ultimately it’s unknown.

Can I tolerate that risk and, if so, how do I prepare for it?

If I continued driving for Uber knowing, I’d think through the possible outcomes of the “distance risk” (and others) and make decisions ahead of time for how to handle those scenarios.

  • Risk: Slow Sunday, over 50-miles round-trip with little possibility of return fare.
  • Decision: Cancel ride. Possibly lose some sort of Uber karma.
  • Risk: Busy Saturday night with increased chance of surge pricing, but possibility of long trip.
  • Decision: Take the next available fare and risk the outcome.
  • Risk: Driving 2 am on Sunday morning. Increased likelihood of drunk person barfing in my car.
  • Decision: Don’t drive at 2 am.

The lesson? There is risk involved in running your own business. First, you need to know if you can tolerate that risk (not everyone can – and that’s okay). Second, to the best of your ability*, you need to consider possible outcomes or consequences for the risks you take.

Had I known I had the option to cancel a fare once I knew it was for that Sunday airport trip… Had I thought through ahead of time how I would respond to that request… Had I considered possible outcomes ahead of time… I would have made a different decision that netted a better outcome.

* I know it’s impossible to predict every potential risk and every potential outcome – just do your best to educate yourself and prepare.

The ultimate lesson

Will I ever drive for Uber again? I don’t know. If I did opt to drive again, I’d choose to learn from my mistakes and do my best not to repeat them.

As business owners, we’re bound to make mistakes. Heck, as humans we’re bound to make mistakes. The ultimate lesson is whether we choose to learn from our mistakes. When we do, we vastly increase the odds of our success.

We will make mistakes as business owners. They key is whether we learn from them. Click To Tweet

8 thoughts on “What an Uber Driver Can Teach You About Your Business”

  1. Hey Carrie, great post. Most people don’t calculate the costs to revenue like you did. I will include you analysis in the lyft vs uber debate. It helps if tips can make up the balance, but it’s really not worth the time if you have a full time job. Thanks for the post.

  2. “Drivers have no clue where a fare is headed until you pick them up”

    The few times I’ve used Uber the app asked for both the pickup point and the destination. Maybe it is different were you live.

  3. Pingback: Making a living without client work, with Carrie Dils • Post Status

  4. I’m certain that the last time I got in Uber to go back to my hotel (which I entered on the iPhone app) the driver knew what hotel I was going to and I could see the route on his iPhone mounted to his dash. He also got voice commands… which was good because he must have been new and didn’t know his way around Chicago all that well. (I went from the Art Institute up to a well-known 4-star hotel on Michigan… a pretty simple route.)

    Why wouldn’t the driver know the drop-off point? How else can they decide if they want to do the pick-up? If it is, say an airport run, maybe they don’t want to drive that far from the city or maybe they are ready to call it a day and want to go home?

    Well, you were behind the wheel, so I guess you know better than I, but I’m wondering if maybe this is a local issue. Maybe some localities don’t allow drivers to know the drop-off so that they can’t discriminate?

    1. Sorry, I should clarify. Once the driver accepts the ride, the destination is displayed with map/directions/etc. I suspect it’s not displayed prior to that for the reason you mention – someone may not want to pick up a fare that’s going a long way off, which isn’t good for the customer.

      If you pick up a fare and then, seeing the destination, decide you don’t want it, you can cancel the ride at that point. I’m not certain of the exact penalties for canceling too many rides as a driver, but from what I’ve read, it can get you deactivated or put in an Uber time out.

      That’s not to rule out the possibility of different rules for different locales – I’m sure that exists.

  5. I just did some research and it I’m WRONG in my post above. The driver does not see the destination until after I tap “accepted.” That is why I saw the route on his iPhone when I got in the car.

    I travel a lot. I truly love Uber. I used to dread hailing a cab not knowing whom I might get as a driver or what condition the car would be. With Uber the drivers always seem to be friendly and ‘clean’ and the cars spotless. I don’t have to pull out cash or a credit card… and I don’t have to tip, but I usually do. From and to airports I always use a limo/black car service which I can arrange in advance (which you can’t do with Uber) but for intra-city travel I ‘live’ in Uber cars.

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