Those in the Know — Are Those in the Dough:

Posted on July 1, 2004 by LCT Staff - Also by this author

Your competitor has about the same amount of employees, vehicles and operating expenses, yet he makes twice what you do. What’s his secret?

How do you get to be the “one-man operation” that has conquered all the odds to become an industry giant?

What should you be doing to increase your profitability?

Dawson Rutter
CEO, Commonwealth Worldwide Chauffeured Transportation, Boston and New York City
110 employees, 71 cars, $14 million estimated revenue 2004

“High volume airport companies do pretty good margins, buy they need high volume. I think it’s more a function of how you run your business. Weddings and proms, that’s very seasonal and it’s only on weekends, but you don’t have the volume. Corporate limousine companies tend to be the most profitable. You tend to get reasonable pricing and you do get good levels of volume when you’re a corporate provider. The most profitable companies in the business are primarily corporate limousine companies.

“Million dollar companies have much higher profitability than $10 million dollar companies. The larger you get, the higher your fixed costs become. When we were $1.5 million in revenue we had a 22-percent margin. We’re now a $14 million company and we’re making a 10-percent margin. We have more sales people, a larger office, better technology, newer cars and far more employees.

“I started with one car in 1982. Why was I able to do it? I think it’s just hard work. A lot of companies are stuck in that $1 million range. They aren’t 24 hours. They don’t answer phones on weekends. And they don’t have the driving ambition to become a $10 million company. We were a million dollar company in 1998. And in 2004, we’re a $14 million dollar company. And now we want to be a $30 million company.

“There’s a famous quote: It goes something like, ‘The danger is not in setting your goals too high and not achieving them. The danger is setting your goals too low and achieving them.’ If you don’t want to be a network, how are you going to become one? If you want to be big, you have to think big. Instead of being comfortable, you must re-invest in your company in terms of technology, highly qualified employees, self-motivated sales people and always enhancing your customers’ service.

“We’re in the top 100 inner-city fastest-growing businesses in the United States, according to INC Magazine and Prof. Michael Porter of Harvard Business School. “Successful business in not about cost cutting, it’s about revenue generation. Generating extra revenue generates extra profits.”

Jon Epstein
CEO, Royal Coachman Limited, Orange, N.J. 800-4RC-RIDE
150 employees, 138 cars, $10 million est. revenue 2004

“There is no secret. It’s hard work. In order to affectively run your business you need to have cash flow. Without cash flow it hinders any kind of advancements. Right now 77 percent of our business is credit card business. We try to keep that figure above 75 percent to keep our cash flow strong. We also have someone who works on receivables daily. Once your debt becomes too old, it becomes uncollectible.

“My dad started the business in 1969. My sister and I came in on a fulltime basis in 1985. We’ve increased profits, technology, communications and revenues. These things don’t apply to just the limousine industry, they apply to every company. We continually review our vendors and our expenses. Any good businessman should do that. It seems small when you reduce expenses for one vendor by 10 percent, but when you can do that across the board it’s huge.

“A strong management team is critical to the success of any limousine company. Communication between chauffeurs, dispatch, owners, shop employees, customer service agents and the entire organization is critical. Everyone needs to know the common goal. Like a mission statement! We do chauffeur meetings every two months or so. We review safety information. All to make the customer the priority, the most important piece of the puzzle. It’s important for companies to prepare monthly profit and loss statements. You can’t stop the bleeding if you don’t know where it’s coming from.

“Higher revenues and higher expenses. You have to go out and get business. The easiest way these days is to go out and get affiliate networks. Receive work from affiliates. We pay by credit card to our vendors. We give them work, they give us work. It works on both ends. It’s hard in this day and age to get your corporate customers to increase their daily rates. They’re not interested in increasing their expenses anywhere. The bottom line is you need to continuously review your expenses and increase your revenues.”

Rob Hansen
President, Bayview Limousine Service, Seattle, 800-606-7880
62 employees, 35 cars, $3 million estimated revenue 2004

“My secret would be in the management, how well the customers are taken care of from when they first call in, the hiring and training of the chauffeurs, with the emphasis on safety, because insurance is such a huge cost right now and that makes a difference from being in the red or black. We put a lot of emphasis on safety this year.

“I think it’s very important too to be frugal with purchases across the board – vehicles, office supplies and look at everything. “I started with one car and got big. We’re the biggest in Seattle, but in comparison we’re small. We provide consistent reliable service. We try very hard to take care of our internal customers – our employees. The chauffeurs make the company! If they do a good job, we look good.

“Raise rates and add on a fuel surcharge because of escalating gas prices. In the past five years there haven’t been many raises. Insurance, fuel, minimum wage – we’re way overdue.

“It’s really important the people you have working for you. It’s by having quality employees.”

Mike Dozier
President, Signature Limousine Service, Nashville, 877-255-0033
36 employees, 15 cars, $2 million estimated revenue 2004

"Your competitor has about the same amount of employees, vehicles and operating expenses, yet he makes twice what you do. What’s his secret?

"Obviously, he’s embezzling! If all is the same according to these variables, it seems that the only difference in the income equation would be that he’s taking in more money. Employee wages and any cost cutting measures, two key factors in net income, are considered equal. I think that either his rates are higher (let’s assume they’re the same for the sake of the information we’re seeking) or he’s utilizing his vehicles and employees better.

“Dispatching techniques, technology, communication in the reservation process, operating efficiencies and chauffeur training are factors that help in utilizing your fleet. Many operators like to inflate the size of their fleet, either saying that they have more cars than they do, or actually having more cars than they need. It seems that in their minds, size makes all the difference. It’s nice to have a parking lot full of luxury vehicles, but if that’s where they stay, you’re chopping into your profitability.

“Two weeks ago on a Friday night at 8 p.m., our parking lot was completely empty. Every vehicle, including passenger vans, limo coach, stretch SUV and sedans, along with all limousines, were on the road making profit. In order to accommodate our clientele, we also utilized two rental vehicles.

“Our limousines, which consist of 6, 8, 10 passengers, stretch SUVs and a Limo Coach, made an average of $4,811 per month in the first quarter of 2003. Through proper vehicle utilization according to the aforementioned factors, we have increased that to $6,721 per month for the same time period in 2004. That’s roughly a 40-percent increase in income for the same vehicles. Cost of operating those vehicles has stayed relatively the same for both time periods (the only exception being these outrageous gas prices).

“How do you get to be the ‘one-man operation’ that has conquered all the odds? We have to preface this answer by stating that by no means are we an industry giant. For that perspective, please refer to David Seelinger, Empire International, who started with one car and has become one of the top five largest operators worldwide. What we can address, is being the ‘one-man operation’ that has conquered all the odds to become the market leader.

“There are so many key success factors, but we’ll highlight a few. No ‘one-man operation’ can conquer all. As with any business, surround yourself with good people, train them, empower them and give them every tool possible to succeed in their position. Foster a long-term perspective to reduce turnover and reward them regularly. Operate with integrity and honesty.

“Be involved in your industry. By staying active in the industry, you will expose yourself to a knowledge base that most of your competitors don’t even know exists. Much of our success has come from national events and exposure with the NLA, LCT Magazine and National Networks.

“Active marketing: While most local operators tend to sit back and wait for the phone to ring, we have actively pursued our business. By placing strategic ads in the phone book and local directories, by focusing on relationship management with our clients, by establishing a strong Web marketing presence, we have quickly branded Signature.

“What should you be doing to increase your profitability? Start by knowing and then controlling your costs. In a recent price analysis and conversation, we realized that many operators have no idea what an average trip’s cost is. In a tough business with a low profit margin, you must know what your cost is and price your service accordingly.

“Do an expense analysis across the board. We examined our operating expenses, then we took 10 expense categories and set out to decrease them by 10 percent.

“Track your advertising. When establishing a name for your company, advertising dollars go quickly. By having a strong initial advertising campaign, then tracking where every booked run came from, we are able to determine where best to invest our advertising dollars. Our advertising expenses are down 45 percent with a 32 percent increase in revenue this year.

“Invest in technology. Real-time integrated flight tracking helps us utilize vehicles better and decrease down-time at the airport. Drive cams help us control driver behavior, which decreases fuel, maintenance and insurance costs. GPS vehicle tracking helps utilize the fleet through better dispatching, the ability to decrease response time and control extraneous usage. Online reservations increase our bookings and empower our clients, while decreasing call volume.”

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