Driving Forwards: Community Transport Finance and Business Model Ideas

Jun 13, 2024 | Community Transport

Community transport finance and business models are crucial in enabling community transport schemes to operate and supporting local communities, particularly in rural or underserved urban areas where public transport options may be limited.

These services enable access to employment, education, healthcare, and social activities.  However, ensuring financial viability can be challenging due to limited funding and fluctuating demand.

This article explores various financial and business models that community transport operators usually adopt to maintain and enhance their services sustainably.

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traditional community transport finance models

Traditional Community Transport Finance Models

Traditional funding models, which often rely on government funding, grants, donations, and fundraising initiatives, play a crucial role in supporting community transport services.

Let’s take a closer look at each of these funding sources:

Government Grants and Subsidies

Community transport services often rely on government grants and subsidies. These funds can come from local, regional, or national governments (including district councils) and are typically used to cover operating costs, capital expenditures, and specific projects to improve service quality.

To secure these funds, operators must demonstrate their impact on the community and align with government priorities, such as reducing social isolation or improving access to essential services. It usually starts with an application form.

Advantages:

  • Stable source of funding.
  • Often, significant amounts can be secured.

Challenges:

  • Competitive application processes.
  • Potential dependency on government priorities and policies.

Best Practices:

  • Develop strong relationships with grant administrators.
  • Regularly report on outcomes and impact to justify continued funding.
  • Diversify funding sources to mitigate the risk of cuts.

Fare-Based Models

fare based models

Fare-based models are another common source of revenue for community transport operators. These models involve charging passengers a fare for using the transport services.

The fare can be based on various factors, such as the distance travelled, the time of travel, or a flat rate.

Implementing fare-based models requires careful consideration to ensure that the fares remain affordable and accessible for the community members who rely on these services the most.

Operators may need to offer concessions or discounted fares for certain groups, such as students, seniors, or low-income individuals, to ensure equitable access.

Flat Fare Systems

Implementing a flat fare system is straightforward. In this system, passengers pay a fixed rate regardless of the distance travelled. This simplicity can encourage more users, as it is easy to understand and predict.

Distance-Based Fares

Alternatively, distance-based fares charge passengers based on the length of their journey. This model can better reflect the service’s cost but may be more complex to administer.

Booking Fee Plus Mileage

A more sustainable model involves applying a booking fee and then charging a mileage fee for the distance travelled.  This ensures you receive revenue for the admin work required for booking and accommodates your driver’s travel distances.  This is a good model for adopting community car schemes as they are simple to understand and scale to demand.

Subscription Models

A subscription or membership model can provide a steady income stream. Passengers pay a regular fee for unlimited or discounted travel over a specified period, such as monthly or annually. This model can encourage regular use and foster a sense of community ownership and membership.

Advantages:

  • Direct correlation between service usage and revenue.
  • It can be adjusted based on demand and operating costs.

Challenges:

  • It may not fully cover operational costs.
  • Requires robust ticketing and fare collection systems.

Best Practices:

  • Conduct market research to set fares that balance affordability with cost recovery.
  • Implement fare concessions for specific groups (e.g., seniors, students) to increase accessibility.
  • Use technology to simplify fare collection and reduce evasion.

Community-Based Models

community based models

In addition to fare-based models, community transport operators can explore community-based funding models.

These models involve engaging the local community and other stakeholders to contribute to the financial sustainability of the service.

One example of a community-based model is fundraising campaigns.

Operators can organise events or initiatives to raise funds from the local community, businesses, or philanthropic organisations.

These campaigns can include sponsorship opportunities, donation drives, or crowdfunding efforts.

By involving the community directly, operators can raise funds and awareness about the importance of community transport and build a stronger relationship with the community.

Here’s a closer look at these types of models:

Volunteer-Led Services

Using volunteers to operate services can significantly reduce costs. Volunteer drivers can drive vehicles, provide administrative support, or assist with fundraising and marketing efforts.

This model fosters community involvement and ownership but requires effective volunteer management and retention strategies to accommodate travel requests.

Community Shares and Bonds

Community transport operators can raise capital by issuing shares or bonds to residents and supporters. This approach provides funds and engages the community by giving them a stake in the service’s success.

Advantages:

  • Strong community engagement and support.
  • Reduced operational costs through volunteer contributions.

Challenges:

  • Recruitment and retention of volunteers.
  • Compliance with regulations regarding community shares and bonds.

Best Practices:

  • Develop comprehensive volunteer management programs, including training, recognition, and support.
  • Ensure transparency and accountability in financial matters to maintain trust.
  • Promote the social and economic benefits of investing in community transport.

Partnership Models

partnership based model

Partnership models are another effective way for community transport operators to secure funding and enhance their financial sustainability.

These models involve collaborating with various organisations, businesses, or government agencies to pool resources and share costs.

Public-Private Partnerships (PPP)

Collaborating with private sector companies can provide additional resources and expertise.

PPPs can involve joint ventures, sponsorships, or service contracts where private companies contribute funding, management skills, or technology solutions in exchange for a role in service delivery or branding opportunities.

Corporate Social Responsibility (CSR) Initiatives

Many companies have CSR programs to support community projects.

Community transport operators can seek partnerships with these companies for financial support, in-kind contributions (e.g., vehicles, technology), or employee volunteer programs.

Advantages:

  • Access to additional funding and resources.
  • Expertise and innovation from private sector partners.

Challenges:

  • Aligning goals and expectations between public and private entities.
  • Ensuring equitable distribution of benefits.

Best Practices:

  • Clearly define roles, responsibilities, and expectations in partnership agreements.
  • Monitor and evaluate the impact of partnerships to ensure mutual benefits.
  • Leverage the strengths of each partner to enhance service delivery.

Revenue Diversification Models

revenue diversification

Apart from partnerships, community transport operators can also explore revenue diversification models to ensure financial sustainability.

These models involve generating income from various sources, reducing reliance on limited funding streams, and expanding financial resilience.

Here are some effective revenue diversification models:

Advertising and Sponsorship

Selling advertising space on vehicles, shelters, and marketing materials can generate additional revenue.

Local businesses might also be interested in sponsoring community transport services to demonstrate their commitment to the community.

Service Diversification

Community transport operators can diversify their services, including shuttle services for events, non-emergency medical transportation, or school transport.

These additional services can create new revenue streams and increase the overall utilisation of resources.

Advantages:

  • Multiple revenue streams reduce dependency on a single source.
  • Potential to leverage existing assets for additional income.

Challenges:

  • Need for effective sales and marketing strategies.
  • Balancing core services with new initiatives.

Best Practices:

  • Develop a comprehensive advertising and sponsorship strategy, including pricing, target markets, and sales channels.
  • Explore opportunities for service diversification based on community needs and market gaps.
  • Monitor and evaluate the performance of new revenue streams to ensure sustainability.

Technology-Driven Models

technology driven model

Technology-driven models can also significantly contribute to the financial sustainability of community transport services.

Community transport operators can use digital platforms and innovative solutions to optimise operations, improve efficiency, and generate revenue.

Here are some technology-driven models to consider:

Digital Platform with Call Centre

Using a dedicated community transport app can streamline booking processes, provide real-time tracking, and offer passengers convenient payment options.

This improves the overall customer experience and attracts a broader user base for passengers and drivers.

Community transport operators can partner with existing technology software services to expand their reach and generate additional revenue.

They can also support those less technologically able via a call centre, ensuring passengers can ring in to book journeys within call centre hours.

This way, you can accommodate all forms of passengers and provide a blended community transport service, opening up further contract opportunities to include public transport services.

You can learn more about how to do this here.

Data Analytics and Forecasting

Leveraging data analytics and forecasting tools can help community transport operators identify demand patterns, optimise routes, and allocate resources more effectively.

By analysing historical data and passenger demand, operators can identify areas of improvement, reduce costs, and ensure better service provision.

This, in turn, can lead to increased productivity and potentially attract more funding from stakeholders.

Intelligent Fleet Management Systems

Implementing intelligent fleet management systems allows community transport operators to track vehicles, monitor maintenance needs, and optimise fuel consumption.

By utilising GPS technology and telematics, operators can better manage their fleet, reduce operational costs, and extend the lifespan of their vehicles.

Ride-sharing and Carpooling Platforms

Using technology to facilitate ride-sharing and carpooling can optimise vehicle usage and reduce costs. Apps and online platforms can match passengers with similar destinations, making services more efficient and accessible.

Demand-Responsive Transport (DRT)

Implementing DRT systems allows services to be scheduled based on real-time demand rather than fixed routes and bus timetables. This flexibility can improve efficiency, reduce operational costs, and better meet the needs of passengers.

Advantages:

  • Enhanced efficiency and service quality.
  • Potential cost savings through optimised operations.

Challenges:

  • Initial investment in technology and infrastructure.
  • Training staff and passengers to use new systems.

Best Practices:

Grant Funding and Philanthropy

grant funding

Grant funding and philanthropy play a crucial role in supporting community transport finance. Many organisations, foundations, and government programs offer grants specifically targeted at community transport initiatives.

One avenue for grant funding is through government schemes that aim to improve public transport accessibility and sustainability.

These grants can support implementing DRT systems, purchasing vehicles, developing infrastructure, and integrating existing DRT software systems.

Community transport operators should research and apply for these grants to secure project funding.

In addition to government grants, philanthropic organisations and foundations may also provide funding opportunities for community transport initiatives.

These organisations often focus specifically on social welfare and transportation accessibility. By aligning with their goals and demonstrating the impact of community transport on the local community, operators can attract philanthropic funding.

Securing grant funding and philanthropic support requires careful planning and preparation.

It is important for community transport operators to clearly outline the goals of their projects and how they will benefit the community.

They should also provide detailed and accurate financial projections to showcase the need for funding and its impact on the organisation’s sustainability and service provision.

Building relationships with grant-making organisations and fostering partnerships with other community organisations can also enhance the chances of securing funding.

Foundations and Charitable Trusts

Many foundations and charitable trusts provide grants for community transport initiatives. These funds can be used for operational costs, capital projects, or innovative programs to improve accessibility and sustainability.

Crowdfunding

Crowdfunding campaigns can attract funds from a broad base of supporters, including community members, local businesses, and philanthropists. They can also raise awareness and support for community transport services.

Advantages:

  • Access to dedicated funding sources.
  • Potential for significant one-time contributions.

Challenges:

  • Competitive and time-consuming application processes.
  • Dependence on donor priorities and interests.

Best Practices:

  • Identify and apply for grants that align with the mission and goals of the community transport service.
  • Develop compelling crowdfunding campaigns with clear goals, stories, and incentives for donors.
  • Maintain transparency and accountability in using funds to build trust with funders.

Summary

summary

This article highlights a collection of community transport finance and business models which can be adapted or combined to enable sustainable transport services.

There is no one-size-fits-all solution, and community transport services require a multifaceted approach that uses various financial and business models.

Community transport operators can build sustainable services supporting local communities by diversifying revenue streams, engaging the community, forming strategic partnerships, and embracing technology.

Each model presents its unique advantages and challenges, and operators should carefully consider their specific context and need when selecting and implementing these strategies.

Any operator’s goal will always be to create a resilient and adaptable transport service that meets the community’s evolving needs while remaining financially sustainable.

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