Industry Research

Livery & Frugality: Recession-Proof Your Operations for 2009

Posted on January 7, 2009 by LCT Staff - Also by this author

It is hard to believe that 2009 is already here, and even harder to get a handle on what this year will bring for the economy.

Unfortunately, many operators didn’t do well during the down economy of the last two quarters in 2008. Financial experts are predicting things will get worse before they get better. For the chauffeured transportation industry, that means we need to sharpen our pencils, start evaluating every aspect of operations, and seek out new, non-traditional sources of revenue. Now is the time to think outside the box.

Improving Quality

Domenic Galdo, vice president of client services for BostonCoach, sums up the mission statement for 2009 best: “Quality matters more than ever when economic times get tough. We can’t afford to hunker down and wait for the storm to pass. Instead, we’ve got to work harder than ever to keep up and even improve service quality. That means transporting clients in quality vehicles, which are always clean, inviting, and carefully maintained for the comfort of our passengers.

It means offering a superior ride by picking up clients on time, helping them with their luggage, and even giving advice on where to have dinner. And it means driving clients safely and following a well-planned route. Quality improvements also enable us to cultivate new opportunities that will convert to greater ride volumes when the economic recovery arrives.”

Mistakes ranging from getting lost to arriving late can prompt a client to shop around for a better company. Clients lost to a competitor may never return. In a poor economy, every client matters, and the loss of a single major account could spell financial disaster.

Examining Costs and Creating New Profit Centers

GONE ARE THE DAYS when the airlines generously served you a complimentary meal en route to your destination as part of your fare. The same can be said for headsets, either to listen to music or watch an in-flight movie.

Even the free soda and peanuts are on the way out. Airlines realized some time ago that people enjoyed these amenities so much that they would indeed be willing to pay a nominal fee.

It may be time to examine how much it costs to provide free bottled water, soft drinks, champagne, cider, and alcohol. Selling champagne or any other alcohol is not recommended because you must have a liquor license in most states to “sell” alcohol. In states such as California, where such amenities are popular and considered normal, operators may have to encourage patrons to engage in BYOB (bring your own booze) to save costs. As for the other items, it is easy to see why the airlines began charging for snacks and beverages. A single can of Pepsi has an average cost of about a quarter. No one thinks twice about paying $1 for a soda. If you begin charging a fee for “beverage set-up,” you can easily earn a profit from each set-up that you complete.

Tim Wiegman Jr. of Kansas City, Mo.–based Boulevard Limousine is considering offering a small snack. “I like the idea of granola bars,” Wiegman says. “They are a little more healthy than a bag of chips, and there is a lower crumb factor. Perhaps for the early-morning runs you could offer a piece of fruit like a banana.”

Greg Phillips, with E & G Limousines Inc. in Olney, Md., says his strategy for survival is to avoid new debt. Phillips also says, “Although we are not downsizing, planned growth may be delayed. Even before the downturn, we were retooling to move away from the big cars and move toward the airport and corporate work since that is where the fertile ground lies.” Phillips adds, “We are definitely keeping cars longer, but have not sold anything off.”

This same opinion of keeping cars longer was expressed by Geoff Levine of Limo Kings Service in San Diego. As the cars are pressed into longer periods of service, some operators are reupholstering the interiors and changing out carpets in favor of replacing the whole car. This is something that airlines also do to keep their fleets looking new despite a plane being 15 years old.

Trade and Barter

ONE WAY TO STRETCH your dollars further is by bartering or trading for service. While limousine companies have long traded for advertising, many other services and goods can be traded through one-on-one relationships, or even established barter Renetworks such as ITEX, Barter Systems Inc., and BizXchange. Under these formal barter programs, fellow members write you a barter check for service received that is deposited into your barter account. When you obtain services from another vendor, you write a barter check using your accrued dollars from providing service to others.

Rodney Frame, fleet manager for Limousine Scene in Bakersfield, Calif., stated that mechanical services such as oil changes and repairs were bartered for the first time in 2008. After an analysis, Frame stated the company spent nearly $4,000 in barter dollars and actual costs of delivering service to barter club members was $1,500.

With a barter network, you can barter vehicle repairs, food, hotel visits, computer equipment and services, copiers, and office supplies. The list is virtually endless, allowing you to save thousands of real dollars. Phillips also has implemented his own barter network in his community.

Diversify & Strengthen Relationships

MANY OPERATORS HAVE A specific focus such as airport sedan work, corporate business trips, or luxury limousine work. Unless you are extremely good at what you do, are well known, and have an abundance of clients, focusing on one market is like putting all your eggs in one basket. Seeking a variety of work through vertical marketing provides many sources of income. Vertical marketing consists of specific proposals that address the unique needs of different types of clients.

Tony Franzetti of Marriton Limousine in Austin, Texas, says he tries to select targets such as travel agents or funeral directors that are sources of repeat daily business. Once an account is landed, Franzetti says he works on developing relationships by learning more about his client’s business and how he can adapt his service to better meet the needs of the client. That in turn causes these types of clients to encourage the use of your service. Relationships such as these are mutually beneficial to each other and complement each other well. Travel agents are being virtually squeezed out by the Internet, so they think highly of livery services that pay them commissions. The agents will promote your business with a vested interest.

Consider marketing services such as immediate courier services to distant cites. We all know FedEx can get it there by tomorrow, but sometimes tomorrow just isn’t soon enough. Examples include moving packages of blood for a blood bank or transporting human organs through an organ procurement network. They don’t ship kidneys by FedEx but they do use chauffeurs. Workers compensation insurance carriers use transportation for their patients daily. This is a lucrative business as the runs usually consist of long-distance trips. Also consider pairing up with a dentist to provide transportation to ongoing orthodontic appointments for parents who have trouble getting time off work.

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