Operations

How Should I Charge Wait Time?

Posted on December 13, 2016 by Anne Daniells - Also by this author

PHOTO/ILLUSTRATION: WWW.FREEPIK.COM/FREE-VECTOR
PHOTO/ILLUSTRATION: WWW.FREEPIK.COM/FREE-VECTOR
Time is money, more so in this business than many, as we depreciate vehicles, pay fuel for idling, and shoulder the labor costs while a passenger moseys to a vehicle. Every business must know the cost of its product or service. Wait time is part of what we must include in our cost of doing business, but only to an extent. At some point, usually at a precise moment, a customer starts paying for being late. What to charge and when came up in a recent Facebook discussion in the LIMO group.

Rebecca Schmuck with Going Green Limousine in Chicago wanted to know how others in the group handle timing and pricing for a late client.

The industry standard is generally a grace period of 15 minutes, but this is changing. Gary Cooper with Affiliate in Indianapolis summed it up nicely, describing late charges as starting after “15 minutes on all pickups except airport arrivals, 30 minutes after a flight lands, or 45 minutes after a flight lands if it’s an international flight. $1 per minute after that to one hour after pick up time, then the trip goes hourly with a two-hour minimum.” Gagan Bahad with SFO Golden Limo agrees with this fairly standard approach.

However, it may be time to reconsider and make customers pay more directly for the time they choose to take. Delayed rides can affect whole grids, making a well laid out day become an expensive one with farm-outs and lags between rides — truly a dispatcher’s worst headache. In addition, labor has increased dramatically in the last couple of years. There is much talk about reducing the allowable wait time to only 10 minutes. But many are adopting the view of Executive Limousine’s Doug Schwartz: “We handle ours a little differently. We don’t want the passengers using the 15 minutes on every trip. If they go beyond the 15 minutes, we bill from the original pick up time. On flight arrivals, we allow an hour as that is out of their control.”

And the wheels must be rolling, not loading luggage and finding the last passenger. If we are “on time,” i.e. 15 minutes early, then a grace period of 15 minutes can mean half an hour of non-billable time. Do not let clients take advantage of this. It can be a costly mistake if not charged accurately.

If wait time is a dollar per minute, at least the overhead costs get covered. Converting to hourly is part of the pricing strategy, too. Fifteen minutes may be tolerable, but after 30, it makes sense to go to your hourly minimums. That’s the service the client is really getting anyway, so don’t be afraid to charge it.

California operator Anne Daniells has more than 25 years of experience in corporate America and the limousine industry, and once owned an LCT Operator Of The Year Award-winning limousine company. She can be reached at [email protected]

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