LCT With You: Jim Luff talks a bit about the COVID-19 situation and how operators can make it through times.
The limousine and chauffeured transportation industry has endured some steep downturns in this century, most notably the aftermath of 9/11 and the Great Recession of 2007-2010. Going back further, the industry survived a milder recession in 1991. What all economic upheavels show is that ambitious entrepneurs continue to puruse luxury ground transportation.
A down economy means a smaller pool of potential business, especially in the business travel sector as more companies keep more of their employees local, or just lay them off. On the retail side, Americans continue to go to the prom, get married, “do the town,” and even go away on vacation. But those events all get scaled back, and as the Great Recession proved, many couples delay marriage, child birth, and vacations.
In any event, if you are determined to start your company regardless of present or future economic conditions, here are a number of steps to take to give yourself the best possible chance at success.
Start-up companies will almost never be deemed creditworthy. The most common scenario is that the new business owner will be forced to obtain credit under his or her own name. Get a copy of your credit report to find out your credit score. Resolve any negative information on your report as quickly as possible. This may involve writing letters to old creditors, or in some cases it may involve paying off some old debts.
If you have negative credit information that can be explained, document the explanation. For example, you were incapacitated in 2013 with a back injury, and due to lost wages you were chronically late on your mortgage. Provide documentation on these circumstances, and you may still be deemed creditworthy. It is very important to remember that in a down economy, banks and other lenders are eager to connect with solid prospects.
Should you take a home equity loan for start-up capital for your business? That is a difficult question. In some instances, the rate for this loan is much lower than any other rate the borrower may be able to obtain. But potential pressure from your spouse may make it more attractive to get financed another way.
Figure on a minimum of six months before you could possibly take any money from your business. If you need money sooner, consider becoming an owner-operator for a reputable company. If your credit score is so poor that you will clearly be a D-rated borrower, you probably would be wise to delay going into business. Save some money. Get your financial life in order. There is nothing wrong with letting common sense defer your dream.
It is a difficult but necessary task. Every entrepreneur needs a clear plan for success. A business plan has many uses. The most important one is a roadmap for you and any potential lenders to follow. If you have never written a business plan before, then you should either get a business consultant to help you or search your local library or bookstore. Remember, in a down economy your margin for error has been reduced. You must make good decisions from the outset.
LCT 2016: How To Create A Business Plan
Your business plan will force you to do some serious market research. Learn as much as you can about the business and about how to deliver quality service. If you learn to do things the right way, you will put yourself in a position to compete for customers. Get a copy of the current LCT Fact Book, which has the latest stats and facts about the industry and every possible vendor who could provide the products and services outlined in your business plan.
Research the type of vehicles in your immediate area and the basic price structure of your competitors. Develop an idea of what your market niche will be. Set your prices in the middle of the market. Often, start-up limousine companies are started by a man or woman with a traditional 9-to-5 job. Being available at nights and on weekends dictates you will be a 24/7 operation available for airport runs and special evening occasions. Write your business plan accordingly.
The Small Business Administration (SBA) is a government agency that aligns itself with local lending institutions around the country. Its mission is to lend money to entrepreneurs interested in starting or expanding a business. Most large banks are SBA-approved lenders. The SBA requires borrowers to submit a business plan. It also can connect the borrower with a volunteer business consultant who is most likely a retired executive working with an agency called S.C.O.R.E.
When you are in the planning stages, do the necessary research on the correct permits and licenses that your city requires. Avoid the temptation to take shortcuts. Getting into business without the proper licenses definitely increases your likelihood of failure. Your local limousine association can provide you with this information, as can the National Limousine Association.
Designate a specific part of your home as your office. Get a separate phone line, and start answering that line the same way every time. Get into the habit of logging every call. If you cannot have the phone answered by a live person from 8 a.m. to 7 p.m., set up a voice-mail system that assures the caller a fast callback. If you decide to forward your calls to a cell phone, maintain the consistency and professionalism when you answer each call.
Set up a website and social media accounts with basic information on you and your company. Use the site as a potential customer’s information source. Set up deals that link your site to other related vendors, such as florists and wedding planners.
The biggest question start-up operators always have is on what vehicles to buy. The answer is, there is no absolute answer.
If you are going into the corporate transportation business, you probably are going to purchase a new luxury sedan and/or SUV. Often the owner will use this as a personal car in the beginning to save some money. A special-occasion type company will most likely start with a Sprinter van, limo bus, and/or stretch or super-stretch limousine. A sedan or SUV needs to be black or a very dark color. However, white is still the color of choice in most of the country for weddings.
Try and finance your first vehicle for three years or less, especially if you have opted to purchase used. You will more than likely be covered for a good part of the loan under a warranty. If an extended warranty is available, buy it! Keep a close watch on the mileage driven and on maintenance. Develop a relationship with your local dealer. Learn as much about your vehicles as possible. Your vehicle is your storefront, so make a commitment to keeping it in pristine condition. Consider getting GPS-based maintenance software or fleet management software that can track every facet of your vehicle and how it runs. This data can help you discern trends, habits, and waste, thereby saving you money and increasing vehicle longevity.
A down economy means a better quality of applicant for full- and part-time positions. Take advantage of this by being selective. An applicant with a clean driving record and experience in hotel or customer service should be given strong consideration. Many experienced industry people believe it is a plus to find applicants without industry experience. In the beginning, drive your clients as often as possible. You will learn the business and get to meet many people. When you have more work than one driver can handle, hire the best chauffeur you can find. If you are asking an employee to commit to being available for a full-time schedule, then make them some modest guarantee as far as their wages. You will become frustrated if you simply tell your driver to “be available” as a substitute for a work schedule.
Related 2017 LCT article: Finding And Hiring Employees With A Servant Heart
This is the most difficult part of the plan for start-up business owners to comprehend. It takes a mind-boggling number of potential customers to keep even a one-car operator busy. You have to meet people who are legitimate prospects for your service, and you have to keep meeting them every single day. In a down economy, there are fewer people in your pool of potential customers. Your job as an entrepreneur is to create wealth for you, your family, and eventually a team of employees. You are in a battle every single day. You must put yourself in a position to meet potential customers daily!
Related 2018 LCT article: The No. 1 Sales Mistake Limo Operators Make And How To Fix It
Related 2016 LCT article: 6 Ways Limo Services Fail And How To Avoid Them
LCT With You: Jim Luff talks a bit about the COVID-19 situation and how operators can make it through times.
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