The veteran dealmaker, operator, and former NLA President characterizes the chauffeured transportation industry environment as “desperate.”
ARLINGTON, Texas — Look for two more years of hard times in the chauffeured transportation industry as struggling operators take steps to grow or get out of the business this year and next, says Charles Tenney, a leading industry broker/consultant and former operator.
In a recent interview with LCT Magazine, Tenney predicted the industry would not shake out and seriously bounce back until 2012, with this year and 2011 marked increased mergers, closures, and sales among operators.
“The overall environment today is desperate, no matter what anyone is saying about the economy getting better,” said Tenney, founder and owner of Charles Tenney & Associates of Arlington, Texas. “Most operators in this country are in dire straits. They’ve lost tremendous amounts of revenue, with 20% to 50% of their revenue bases down over the last two years.
The latest preliminary estimates for LCT Magazine’s annual Fact Book indicate that the number of operators nationwide has fallen below 8,000, down from about 9,400 in early 2008.
“We have people dropping out faster than they are dropping in,” Tenney said. “The new people are not near enough to catch up.”
Many operators have exhausted all of their cash trying to keep their doors open, by tapping savings, IRAs, retirement accounts, loans, and second mortgages to sustain their businesses, Tenney said. “I’ve seen more financials than anyone in the world of operators over the last 35years, and most operators don’t make money. They get a salary. Most people don’t make money in this business. They just have jobs.”
The trickle down effect of increased business travel in 2010 won’t hit the limousine industry for a long time, Tenney said. “It will take a few years, until 2012, before most of the industry is healed from the effects of this recession,” Tenney said. Even then, “those able to survive by exhausting their savings will not be paid back by that time.”
For Tenney & Associates, the number of chauffeured transportation deal transactions increased by 50% in 2008, compared to In 2007. In 2009, the firm handled 100% more transactions than in 2008. Tenney, who adds that his business is among those benefitting from the recession, predicts deal volume to climb again this year and in 2011.
“There is a major need for operators to replace lost revenues, a major need to buy accounts, and a major need for people to get out of the business,” Tenney said.
Getting It Right
On the bright side, about 20% of the industry now is in a heavy growth mode, Tenney said. “There are some very smart people in this industry, which follows the 80/20 rule. There are about 20% of operators who are good professional business men and women, that not only have business acumen within themselves, but have gone to accountants and advisors and allowed them to help them through these hard times. They have gotten out the emotions, and made tough decisions that need to be made. Those already are in good shape.
“The 20% have right-sized their businesses immediately,” he said. “The smart people in this industry eliminated vehicles, people, reduced overhead; they did the very difficult things so they didn’t have to use cash, savings, credit, etc. Now they have a great starting place.”
Tenney, who calls himself an optimist, said, “The good news for the industry is there will some really good companies that come out of this cycle on the other side.”
Tenney advised that for operators wanting to sell, merge, or get out, the quality of the decision depends on its timing. “Too many people are waiting too long,” Tenney said. “A lot of people could leave this business with money in their pockets, or not be in debt, or not spend the next seven years repairing their credit.
When To Sell
“Selling non-performing businesses is really difficult,” Tenney said. “Selling good businesses is much easier.” Most businesspeople never have the experience of selling a business in a lifetime, since most failing businesses simply close shop, Tenney said. For those that do choose to sell, “they were astute enough to get market analysis done,” Tenney said. “It is a business tool. It helps someone know all of their capabilities, resources, and assets they have to deal with.”
Tenney founded Tenney & Associates in 1973 and gradually expanded the brokerage and consultancy into a firm that focuses on chauffeured transportation. He served as president of the National Limousine Association in 1987 and 1988, and owned and operated Corporate Limousine Service of Dallas from 1983-89. He also operated a courier business called Corporate Express and a Dallas-Fort Worth area airport shuttle service.
— Martin Romjue, LCT Magazine