New operators are entering this industry all the time, which means a greater number of competitors. The face of these new competitors is changing. Gone are the days of the service-minded small-business owner; the new competitor is an educated, tech-savvy entrepreneur that all current operators need to be ready for.
I received the following e-mail a couple of months ago from two 23-year-old brothers. Both brothers (twins) graduated from Texas Tech in Lubbock, Texas, in December of 2000. One brother, Matt, is working as a sales representative, trying to obtain the best sales training possible from a major corporation. The second brother, J., works for a service organization seeking experience that would help them in their efforts to own and operate a successful business.
After reviewing this letter carefully, giving special attention to the qualifications, I think you will have a clearer understanding about the level of competition limousine operators will face in the future.
A Look at the New Competitor’s Qualifications
College degrees would not be at the top of the list of qualifications for success in the limousine business, but a degree does say a lot about the individual. The degree shows that the individual has worked hard and was disciplined enough to deal with adversity to master subjects they previously knew nothing about.
A college degree equips individuals with confidence. This confidence is important when it comes to dealing with bankers, vendors, customers and employees. Handling oneself with confidence in business will win negotiations, encourage people to follow, and cause people to want to work for you and provide the courage needed to start a business.
Another important benefit a college education provides to an individual is the understanding that information and knowledge are available to anyone who is willing to search for it. Sales and Marketing Expertise
The element most missing in the talent pool of the limousine industry today is sales and marketing expertise. A city the size of Dallas, with 250-plus limousine operators, probably has only four or five experienced and trained salespeople employed. Conversely, in a 30 — 45 mile radius of Newark airport in New Jersey, one of the highest concentrations of limousine operators in the world, there are about a half dozen professional salespeople employed in the limousine industry.
The product knowledge side of the limousine industry as needed for sales won’t take long for these new competitors to learn. Sales skills are carried by an individual and can be adapted fairly quickly from product to product and service to service.
Capital & Financing
I truthfully cannot remember anyone telling me that they had $200,000 cash when they started their limousine business. Can you? As I try to help operators solve problems and improve their businesses, the No. 1 problem that I am presented with is cash-flow shortages.
Most people who started a limousine business started it with too little cash and continue to be plagued with cash-flow problems. However, starting businesses with too little cash is not unique to the limousine industry. National statistics report that almost all businesses are started with too little cash. This is the main reason for the high number of business failures.
With $200,000 cash and plenty of credit available, Matt and J. will probably start as one of the best-financed limousine businesses in the country. They will have the cash available to advertise, finance receivables, and take advantage of opportunities that under financed companies would never have. Technology
Younger generations, in this case two 23-year olds, have been raised on computers. They were raised with the Internet, Game Boys and challenging video games and toys. They had computers and computer training in kindergarten classes. They did their homework on computers. College courses, tests and grades were all via computers. It’s what they know.
The new competitor will not have to be persuaded to use computers. They will demand that our present software vendors provide more cutting-edge processes and equipment. The new sharper competitor will want to know why it can’t be done on a computer, instead of fighting to keep from using the computer.
Technology in almost all areas of our industry is only minimally utilized. For example, whether the limousine software is LimoWare, CARS, LMS, FASTRAK, or any of the other available software, our experience has proven only a few operators use more than 20 to 25 percent of the capabilities and features provided in the software.
The future operator, like Matt and J., is familiar with all types of programs and has used them often. Future operators will also have the ability to use new software quickly because they better understand the way it works. Thus their learning curve is shorter.
In our firm’s more than 20 years of consulting in the limousine industry, we have been hired by about 10 individuals to either do a feasibility study on getting into the limousine business or to assist in starting a limousine business. Only one or two of these had qualifications similar to Matt and J.
These brothers invested a good bit of time seeking out professional advice before they came to me. They had talked to accountants, discussing general questions about cash flow, taxes and financing. They had talked to an attorney about exposure and liability. They had talked to bankers to determine the climate concerning the limousine industry.
One thing that was quickly evident about these individuals was ... for more on this topic, see the October issue of LCT magazine.