Russia Blog has previously mentioned (see Golf in Russia") one of Mr. Post's major projects, the Krasnodar Country Club.

The owner, V.B. Mayerov, is best known as the local entrepreneur who built a chain of very popular clothing shops also called Maria Rafaela. In May, Mr. Mayerov soft-launched his new taxi service. At first, folks were both surprised and confused. Surprised that anyone would choose Mercedes as the vehicle for a local taxi service. Confused because the taxis didn’t have telephone numbers on them (they do now) and the brand Maria Rafaela has, until now, been known for the clothing chain.

After taking Maria Rafaela taxis the past two days, I think residents’ surprise and confusion will quickly turn into delight and demand. The rates charged by Maria Rafaela may been slightly higher than other taxis but they are also standardized. The rate is 20 Rubles for each kilometer. I live 8 kilometers from my office so the ride costs 160 Rubles or $6.40. Not cheap but not expensive either.

A small map of Krasnodar Krai on the Black Sea

My wife, daughter, and I were very satisfied with our first ride in a Maria Rafaela taxi. We called the main number +7-861-299-0000 and were greeted with a pleasant and competent dispatcher who asked where we were and where we wanted to go. The dispatcher then told us to hold on while she determined the nearest cab. The company currently has 120 taxis and expects to have over 200 by year end (I believe the vehicles are leased). So the wait is never more than 15 minutes max. Our wait was 7 minutes. When the taxi got to our apartment the dispatcher called us back to let us know.

The driver got out of the car and opened our doors. He was clean shaven (a rule) and even smiled when he greeted us (unusual). The taxi itself is clean and air conditioned (a necessity when the temperature reaches 98 degrees like it did all last week). We chatted with the driver and he told us that the owner, Mr. Mayerov, has emphasized that the drivers themselves should be on par with the Mercedes automobiles. Both drivers I have met have been impressive.

The jury is still out whether the business model will be successful.

The price of the B Class 5 door in Britain is approximately 18,000 pounds or $35 to $40K US dollars. That would translate to about $60K new in Russia. If we assume a three year lease with residential value of 50% (a little low but conservative) then the cost of amoritization is $30K or $10K per year. $10K per year equals $833 per month or $27 dollars per day. Let’s throw in a Money Factor of 10% and using very simply calculations we get a additional finance charge of $18K or $6K per year or another $16.43 per day. So that brings us to $44 dollars per day.

Front of a Mercedes B class taxi

I was told that the average taxi does about 5,000 kilometers per month. That works out to about 36,000 miles per year. Sounds a little low to me. I would guess 50,000 miles per year is more realistic. That means the average taxi will drive 83,333 kilometers per year.

1 American gallon equals 3.79 liters. The cost per liter here is just under 20 Rubles (so price per gallon is approximately $2.97 per American gallon). Let’s assume that Maria Rafaela bulk purchases gasoline and gets it at 15 Rubles per liter. Let’s assume that the Mercedes B 170 gets 10 kilometers per liter. So it would need 8,333 liters per year at 15 Rubles per liter which works out to 124,999 Rubles per year or $4,901 dollars. So the cost for fuel per month is $408 or $13.42 dollars per day.

So for the cost of the taxi and gas Maria Rafaela needs to cover approximately $58 per day. If we throw-in repairs and insurance we are probably closer to $75 per day per taxi.

The cost of labor is unknown. I don’t know whether they get a flat hourly rate of whether it’s a percent of fares. Hopefully for Maria Rafaela it’s a variable cost and based on fares. Let’s assume that the driver gets 25% of every fare. That would work out to $9,803 labor cost per taxi per year. This is not what the average driver would make. Rather take $9,803 divide by 365 days and then divide by 24 hours and you get approximately $1.12 per hour. For a driver who works 8 hours, 5 days a week that works out to $193.98 per month. I would guess that there’s also a fix wage involved. Let’s assume that the fixed wage is about the same so the driver takes home almost $400 per month. Since the first half of this driver pay is variable we can leave it out of our calculation. Instead, we need to add approximately $25 per day per taxi.

Our cost per day is now up to an even $100 per taxi. What do revenues look like. Fortunately, we know the charge per kilometer is 20 Rubles. We also know that the average taxi drives 83,333 kilometers per year. However, what we don’t know is the yield of billable kilometers to “deadhead” kilometers. Interestingly, this number is a measure of a taxi services efficiency and I would guess it’s failure or success. Anyhow, let’s guess that out of a total of 83,333 total kilometers per year, each taxi has a yield of 85% and bills for 70,833 kilometers. I have no reference points in my brain to know whether this is realistic or not. Write me if you know.

So, if we assume that the average taxi bills 70,833 kilometers per year at 20 Rubles per kilometers then we now know that the revenue per taxi will be 70,833 times 15 Rubles (remember we took out 25% for the driver or 5 Rubles). This number works out to 1,062,495 Rubles per year or $41,666 dollars. That then works out to $114 dollars per day.

Let’s finally assume administrative and marketing costs of $5 per day per taxi which would give the company over $30,000 per month for SG&A.

That leaves us with $9 dollars per taxi per day profit. That is not a lot of margin for error. My guess is that our numbers (with very little hard information) are too conservative. Since there will be 200 taxis that then works out to $1,800 profit per day or $657,000 per year. My guess is that the real profit is probably higher.

Anyhow, let’s hope that Mr. Mayerov has done his homework and made his calculations and that Maria Rafaela is a smashing success. Everyone in Krasnodar should be happy that there are some pure entrepreneurs out there willing to roll the dice and make a bold bet. I will write an update in a year when we all know more.

All photos by Timothy Post. © 2007 All rights reserved. Republished with permission.

Timothy Post, a native of Boston, Massachussets and an MBA graduate of Babson College, is a real estate developer in Krasnodar Krai. You can read the original post on Tim's blog, Inside Krasnodar. If you have more questions about doing business in Krasnodar, you can email him at email@timothypost.com.