Building the Bottom Line - Jay Allen of Limousines Incorporated

Posted on March 1, 1990 by Scott Fletcher, LCT Editor/Publisher

Jay Allen has run Limousines Incorporated of Dallas, TX, full-time for the past seven years. The limousine service is an offshoot of a related business started by Allen’s father in 1956. Over the years, the Allen family has developed Limousines Incorporated into one of the most reputable and successful companies in the livery industry. Today, Jay Allen operates a fleet of 34 vehicles and is the Dallas affiliate of Carey Limousine.

“My father sold hearses and limousines to the funeral industry,” Allen recalls. “It got to where, at least locally, when the funeral home needed more vehicles, they called Dad to borrow a car and he’d loan it to them. Finally he decided to start renting the vehicles. It remained that way for a number of years.”

The company, known as Limousine and Coach Rentals, expanded from Dallas to include several other cities in Texas. “We would buy funeral homes’ limousines and funeral coaches,” explains. Allen, “and then turn around and set up a rental company and they would rent from us. Eventually, we sold the funeral coach, hearse, and limousine distributorship and we got out of that business. We also sold all the limousine and coach rental branches in the various cities. Eventually, we evolved into more of a corporate type of limousine service with just one location here in Dallas. It’s been that way for the last 15 years.”

Jay Allen joined the family business after earning his degree in business in 1966. “We had the funeral coach distributorship, we had school buses, and we also manufactured ambulances,” he says. “I was basically involved in the management side. I did not work full-time in the limousine business until about six years ago. About three years ago, I bought the rest of the family out. Now, this is the only family business left.” This family business is now the largest limousine service in Texas.


Vehicle Management

Allen’s fleet includes stretch limousines, formal limousines, sedans, vans, and buses. The fleet expanded considerably in December 1988 when Allen acquired Carey Limousine’s Dallas affiliate. “I am very pleased to be with Carey,” he says. “It has worked out very, very well for us.”

In looking at the vehicle aspect of his operation, Allen feels that one of the keys to success is to have the right mix of vehicles. “We try to analyze the vehicle needs in our company. By that I mean how many sedans, limousines, vans, and so forth. To me that’s a very important aspect of the business because the market changes so dramatically,” he says.

Allen explains that his company conducts an internal tracking procedure to monitor the use of each type of vehicle. “We keep track, on a daily basis, of the number of revenue producing hours that each vehicle and each type of vehicle in the fleet produces,” says Allen. “We keep track of the hourly revenue that each one produces as well as the monthly revenue. We keep track of the number of farm-outs by vehicle type. Then we take all of that data and look to see where our demand is. We compare it to last year’s figures and we watch the trends.”

The most recent trend in Allen’s fleet has been toward sedans. He has also noticed a decreasing demand for formal limousines. “We use 60-inch stretches... not any bigger than that,” he says. “It seems that the demand for the smaller limousine is going away,” Allen continues. “People either want a sedan or they want a limousine and, when they say “limousine,” they are basically referring to the stretch with the TV and all that kind of stuff. We had six or seven smaller limousines a year ago and I think we have three now. When we sell those, I doubt that we’ll replace them.

“When we acquired the Carey franchise and combined our two fleets,” he continues, “we were able to get rid of some vehicles that were under utilized. We have since had much better vehicle utilization than either one of us had prior to that.” Allen has added four sedans to his fleet in the past year, but stretch limousines still outnumber sedans by about three to one.

Although Allen has found it more economical to purchase his vehicles in the past, he has begun to favor leasing over the past year. “We buy and lease,” he says, “but we’ve swung a little bit more towards leasing because the limousine industry is not as strong as it was two or three years ago. Consequently, the used limousine market is not as strong as it was two or three years ago. So, I prefer to shift some of the burden of that two or three-year-old vehicle back to the lessor if possible. Of the last eight or ten vehicles we’ve gotten, we’ve probably leased 75 percent of them.”

Allen keeps limousines roughly two years. “It depends on the vehicle but, once they get 70,000-80,000 miles, it’s usually time to turn them. We do not maintain vehicles ourselves.” Instead, the company uses a former Cadillac service technician who roves Dallas in a van stocked with tools and parts.

Armbruster/Stageway limousines make up most of Allen’s fleet. He buys the vehicles through a Dallas distributor who has a track record for reliable service. “Price is not the main factor when we buy a limousine,” Allen explains. “I don’t want to go crazy and have somebody sell me something for a lot more than the market price, but we try to standardize the fleet as much as possible. We try to stay with vehicles that we get good service out of, and we’ve had good luck with Armbrusters in the past.” Allen’s stretch limousines have televisions, moonroofs, and bars.... but no VCRs. Allen stocks the bars with soft drinks since alcoholic beverages cannot be provided in Texas.

What’s the “Bottom Line” on vehicle management...? “I think you have to look at yourself as being in the transportation business and be able to provide a variety of different vehicles,” he says. “I don’t think a company can survive by being strictly in the limousine business anymore.”

Operations Management

Allen has always considered his chauffeurs as employees rather than independent contractors. “They’re paid an hourly rate,” he says. “We talk with other Carey system members to find out how they’re handling their employees as far as their pay is concerned. We do enough volume that they’re pretty well assured of making a good income — particularly our core drivers. We have 30 or 40 core drivers that we use all the time.”

Gratuities are not automatic, but Allen’s chauffeurs earn enough in tips and wages that turnover is minimal. Chauffeurs receive a commission for business they bring the company, and Allen is considering incentives for safe driving.

Allen monitors the dispatching procedure to maintain impartiality. “I haven’t heard any complaints from the chauffeurs,” he says, “so I assume we’re doing okay.” The company’s senior dispatchers have all been with the company as long as Allen himself. “I feel our staff is stable in customer service, in the sales area, and in operations,” he says.

Allen spends much of his time reviewing his operation for efficiency. “I’m pretty much a believer that if you take care of the little things... the big things pretty well take care of themselves.

“I sit down each year with my top people,” he continues “and plan our year out — the budget forecast and so on. I also review my numbers on basically a daily basis to see what’s happening. To me, it’s vital that we get good financial information. We invoice every day. We’ve computerized so our system can virtually tell us what we’ve done, where we stand profit-wise, at any point in the month. We run our financial statements on the first of the month for the preceding month so, for example, I know on March 1 how we did financially in February. We have a number of reports that we generate that I can just kind of glance at. I don’t put a whole lot of stock in them because the business is so strange. It may appear that yesterday was great, but tomorrow you want to commit suicide. So, I don’t put a lot of stock in a single day, but we do look at some information on a daily basis.”

One way that Allen monitors his expenses is by breaking a cost area down as a percentage of sales — and comparing it with the previous year. This provides perspective on non-fixed costs such as marketing. “Unfortunately,” he says, “you can’t really control costs such as car insurance, workman’s comp, and those types of things. They’re killers. You go along thinking everything is great, and suddenly you get hit with a big number. There’s not much you can do about it.”

Close attention to his accounts receivable keeps Allen’s bad debts to roughly 1 percent of sales. “I run a receivables report every other day to see what it’s looking like,” he says. “I think our situation is pretty decent right now but you have to stay on top of it. We run our invoices daily, and we have a person who stays on the receivables daily. Our controller also keeps an eye on that.”

The collection process begins with a phone call — followed by a series of two or three letters. “I don’t think the letters are nearly as effective as the phone calls,” says Allen. “If an account gets 60-90 days old, we’ll just turn them over to a collection agency unless they’re an old customer or they’re having some problems we’re aware of.” Customers are not allowed to place orders when their account reaches 60 days.

Marketing will be a priority for Allen in 1990. “We’ll be putting more time and money into marketing,” he says. “It’s a competitive game out there today and there are a lot of good companies. I don’t think there are as many fly-by-night people as there may have been five years ago. The ones that are staying in it are better businessmen than they were five or ten years ago. The competition is just better. So, I think that makes everybody stay on their toes a little bit. I’m sure we’ll be expanding our marketing budget. We’ll add some more people and some new programs.”

In looking at prospects for the limousine business in coming years, Allen recommends that operators plan aggressively, yet cautiously. “You have to look at what’s happening in your marketplace,” he says, “and you’ve got to be flexible. Don’t confine yourself to the mentality of... I’m a limousine company and I don’t rent sedans or mini-buses or this or that.’ Those vehicles just open up additional ways to serve your existing clientele. I think you’ve got to look at new types of services that you can offer to your existing client base. You’ve got to be very customer oriented. Ask the client what he wants that you’re not giving him.

“I suppose receivables are also as high a priority as anything else. I’ve seen a lot of people get in trouble when they’re not really staying on top of their receivables. Most operators in this business are not extremely well capitalized. If you don’t stay on top of those things you can get in deep trouble quick.”

What’s the “Bottom Line” in operations management...? “Make sure you’ve got a system that gives you good numbers on a timely basis. And be sure you understand what those numbers mean.”

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