In the twenty-six years that I have been consulting in the limousine industry, it often seems the following ?secrets? have been deliberately kept from limousine businesses.
However, they are not really secrets, and they certainly have not been kept from limousine business owners. They are readily available to any limousine operator who desires them. In fact, this is not the total list of secrets of the highly successful; it is simply the seven most common ones that I can share given the space limitation of this article.
Conduct an Annual Audit Large corporations, both public and private (Hertz, Greyhound, Carey International), have annual audits in addition to annual reports to shareholders and management. Most medium-sized companies (local banks, a Ford dealership, the local utility company) perform annual audits for the same reasons, and also to ensure accuracy, compliance to standard accounting procedures, detect fraud and ensure that the company is performing to industry standards and company forecasts.
Successful small companies (less than $20 million in annual revenues, i.e., local equipment rental companies, local furniture stores and limousine companies) will have less formal and less expensive audits by accountants, industry specialists and consultants. The purpose is the same as with the large and medium-sized companies; however, the results can often be more impacting. Why don?t limousine companies take advantage of this important tool?
The limousine business is just like any other business. It is very easy to get too involved in the day-to-day operations (selling, reservations, dispatching), and all the crises that require the owner?s attention. It is easy to find yourself working in the business instead of on the business.
Another reason that limousine businesses don?t conduct annual audits is the misconception of the cost, and under estimating the business value of the audit. Yes, audits for large and medium-sized companies can cost tens of thousands of dollars. However, audits for limousine companies and other small businesses can cost as little as a few hundred dollars ? usually $500 to $1,500.
In January of this year, while performing a financial audit and budget review for a New York-based client, it was discovered that $72,000 could be saved on one line item. This client runs a highly successful company, and does more than $5 million in annual sales. Time, technology, tradition, customer demands, personnel changes and being too close to the business all make a case for annual audits, and in turn create opportunities for limousine companies to improve profit performance.
Focus on Closing Sales Inquiries Approximately 23 years ago, I promoted a great secretary to the position of manager of our limousine company. The company was doing a lot of marketing and advertising, and one of my goals for the new manager was to make outside sales calls to complement our sales and marketing efforts.
The manager convinced me that her time would be better spent by first improving our ability to close the inquiry calls that our sales and marketing efforts were already producing. She was absolutely correct.
I was so focused on growing our business by increasing sales and marketing, that I forgot one of the fundamental principles of sales ? maximize closing the inquiries you currently have before spending money to get more inquiries.
It is far easier and less expensive to improve the skill level of your current sales staff and close a greater number of your current inquiries than to spend more money and effort getting more inquiries, and only closing a smaller percentage of the inquiries. Example: Would you rather close 10 percent of 20 inquiries and obtain two $150 reservations, or close 30 percent of 10 inquiries and obtain three reservations totaling $450 in sales. Why spend the time, money and effort to get the second 10 inquiry calls?
Highly successful limousine companies provide the proper training and sales environment conducive to closing the highest percentage of inquiry calls received. Successful companies recognize how precious each sale opportunity is. If you sell an inquiry, it is worth $150. If you do not close the inquiry, you lose $150. One hundred and fifty dollars each day for 365 days equals $54,750 in lost sales. Nine lost sales out of 10 inquiries each day totals $492,750 in lost sales in one year!
What should you do? Start by measuring your inquiries each day. Measure the number of sales your staff actually sells out of the total inquiries for the day. Set some expectations. Hire professional sales trainers if you do not have that expertise.
Town & Country Limousine in Upstate New York was able to increase closing percentages from nine percent to 33 percent in a few weeks by implementing a simple sales system involving measuring, training, reinforcing, encouraging and setting goals for his reservation turned sales department.
Hire Coaches, Account-ability Partners, Expert Advice Sometimes I feel limousine operators believe that they have to do things the hard way ? figuring things out by ?the school of hard knocks.? It is almost as if it isn?t fair if they use someone else?s experience or expertise. There is this mentality that, ?if I don?t do it myself, I can?t really take credit for the success.?
One of the most common conversations I have with limousine business owners involves the owner explaining to me how different, unique and difficult his or her business is, and how only he or she can do things right. Yes, each business has its own personality and nuances. It is sometimes rewarding to be able to say, ?I did it my way.? However, at the end of the day, the purpose of business is to make a profit. Business is, after all, business.
Highly successful limousine businesses have come to the conclusion that ?doing it my way? involves securing every talent, expert, coach and business partner necessary to accomplish goals and desires for the long term.
Most limousine business owners will never reach their full business potential because they will not seek experts, be accountable nor will they measure their activities and results. If you examine highly successful limousine businesses or any other highly successful business, the owners have probably committed to training their people, being trained themselves, being accountable to someone outside the business, hiring the best experts and measuring results regularly.
Hire Professional Business Brokers to Sell Business Ron Sorci, president of Precept Transportation, discussed selling businesses in his presentation at the LCT Show this year. At one point, Sorci said, ?Business owners who don?t use business brokers to sell their businesses usually sell for 20 to 40 percent less than those who do.?
I agree with his statement. The same is true for professional real estate brokers. Real estate brokers consistently sell homes for more money than ?for sale by owner? transactions. Highly successful limousine business owners are experts in the limousine business. They recognize that they are not experts in selling limousine businesses. They also understand that selling their business is probably going to be the largest financial transaction in their entire life.
The successful sales transaction will be their single most significant accumulation of wealth obtained during the owner?s lifetime and the key to a content retirement or transition to another career.
Collect Loss of Use (Down Time) and Diminished Value from Wrecks How much are you collecting from the insurance company for each day your car is out of service? Zero? $100? $500? Many operators collect nothing. Highly successful operators use professionals to collect loss of use, minimize charge backs from third-party insurance companies, collect storage, collect towing, receive higher appraisals and save time and money administering claims.
Are you collecting for diminution of value? Diminution of value is the difference in value of a vehicle before it was wrecked and after it is wrecked. If you are trying to sell two identical 1999 Town Cars and one has been wrecked, you might get less money for the one that has been wrecked. Insurance companies should pay you for this loss.
A large operator could literally leave hundreds of thousands of dollars on the table by not collecting for diminution of value. A subrogation claim for a Las Vegas client resulted in the client collecting $23,000 for diminished value.
Collecting loss of use and diminution of value is difficult. Insurance companies employ thousands of attorneys and other professionals to keep limousine operators from collecting fees. It is no wonder why it has been so difficult to collect. Subrogation companies study tort law relative to insurance claims and often are more versed than general-practice attorneys.
Don Petroski, owner of Air Brook Limousine in New Jersey, used an attorney for years to collect third-party insurance claims. He has found that attorneys do not always achieve the best results. Petroski has been both surprised and pleased by the amount of money he has received using a subrogation service. Other industries, such as the rental car industry, have been using subrogation companies for years. Subrogation services can easily be found on the Internet.
Perform Regular Business Valuations (a way to Increase Personal Wealth) In 1996 a client on the East Coast paid The Geneva Companies $35,000 to perform a business valuation of their business. In the agreement Geneva agreed to:
Recast the financial statements of the client?s business to present the past financial history of the business.
Research the client?s industry and markets.
Develop revenue projections and a pro forma financial statement for the future five years.
Determine the fair market value of the business.
Prepare a document that describes the client?s operation including (as applicable) its product, service customers, sales and marketing efforts, organization and facilities.
As it turns out, the best service provided by Geneva was getting the company owners to understand what the value of their business really was and to understand items that affect the value of a company. Today that company is worth $8 million instead of the $1 million it was then.
There are limousine companies operating today with the same sales volume as this East Coast Company, but only worth $2 million ? 75 percent less! There are major differences in the efforts you make to increase the value of the business, as opposed to the efforts you might take to increase growth in general.
Valuations are available for $2,500 to $5,000 for most limousine companies. Highly successful companies will do valuations every two to three years, or when major events happen that could significantly affect the company?s value. Owners that are within two to 10 years of retirement or exiting the business for any reason should have a valuation done.
Valuations should be secured before any sale, purchase, merger, partnership and divorce or estate settlement. A valuation is an excellent tool to help obtain and keep personal wealth.
Study Best Practices and Benchmark The International Benchmark Clearinghouse in Houston exists for the sole purpose of benchmarking companies.
The automobile industry has used 20 Groups since 1947 to benchmark and study best practices. The Ford Motor Company did not have industry standards for dealerships. However, in 1947 a group of independent Ford new car dealers banded together to collect industry standards, benchmark, study and exchange information with each other to improve their individual dealerships. The original ?Ford 20? group became the first highly successful Ford dealerships in the United States.
The rental car, motor coach, retail furniture and many other industries have some form of benchmarking and best practice organization for their businesses to participate in.
Benchmarking is the idea that you can study another company?s best practices and use those observations to improve your own business. If done right... (please see March LCT magazine for further information)...