Operations

7 Secrets Of Highly Successful Luxury Limo Businesses

LCT Staff
Posted on April 1, 2001
Success is only achieved when you work smart for what you want.

Success is only achieved when you work smart for what you want.

These tips are not really secrets. They certainly have not been kept from limousine business owners. They are readily available to any operator who desires them. In fact, this is not the total list of secrets of the highly successful; it is simply the seven most common we can share given the space limitation of this article.

Conduct An Annual Audit

Large corporations, both public and private (Hertz, Greyhound, Carey International), have annual audits in addition to annual reports to shareholders and management.

Most medium-sized companies (local banks, a Ford dealership, the local utility company) perform annual audits for the same reasons, and also to ensure accuracy, compliance to standard accounting procedures, detect fraud, and ensure the company is performing to industry standards and company forecasts.

Successful small companies (less than $20 million in annual revenue, like local equipment rental companies, local furniture stores, and limousine companies) will have less formal and less expensive audits by accountants, industry specialists, and consultants.

Have someone help you understand what you're worth.
Have someone help you understand what you're worth.
The purpose is the same as with the large and medium-sized companies; however, the results can often have more of an impact. Why don't limousine companies take advantage of this important tool?

The limousine business is just like any other business. It is very easy to get too involved in the day-to-day operations (selling, reservations, dispatching), and all the crises that require the owner's attention. It is easy to find yourself working in the business instead of on the business.

Another reason limousine businesses don't conduct annual audits is the misconception of the cost, and underestimating the business value of the audit. Yes, audits for large and medium-sized companies can cost tens of thousands of dollars. However, audits for limousine companies and other small businesses can cost as little as a few hundred dollars—usually $500 to $1,500.

In January of this year, while performing a financial audit and budget review for a New York-based client, it was discovered $72,000 could be saved on one line item. This operator runs a highly successful company, and does more than $5 million in annual sales.

Time, technology, tradition, customer demands, personnel changes, and being too close to the business all make a case for annual audits, and in turn create opportunities for limousine companies to improve profit performance.

Focus On Closing Sales Inquiries

Approximately 23 years ago, an operator promoted a great secretary to the position of manager of a limousine company. The company was doing a lot of marketing and advertising, and one of the goals for the new manager was to make outside sales calls to complement other sales and marketing efforts.

The manager was convinced her time would be better spent by first improving the company's ability to close the inquiry calls the sales and marketing efforts were already producing. She was absolutely correct.

This operator was so focused on growing the business by increasing sales and marketing, that he forgot one of the fundamental principles of sales: maximize closing the inquiries you currently have before spending money to get more.

It is far easier, and less expensive, to improve the skill level of your current sales staff and close a greater number of your current inquiries than to spend more money and effort getting more inquiries and only closing a smaller percentage.

Answer questions, help potential clients, and they'll open their wallets.
Answer questions, help potential clients, and they'll open their wallets.
Example: Would you rather close 10% of 20 inquiries and obtain two $150 reservations, or close 30% of 10 inquiries and obtain three reservations totaling $450 in sales? Why spend the time, money, and effort to get the second 10 inquiry calls?

Highly successful limousine companies provide the proper training and sales environment conducive to closing the highest percentage of inquiry calls received. Successful companies recognize how precious each sale opportunity is.

If you sell an inquiry, it is worth $150. If you do not close the inquiry, you lose $150. One hundred and fifty dollars each day for 365 days equals $54,750 in lost sales. Nine lost sales out of 10 inquiries each day totals $492,750 in lost sales in one year!

What should you do? Start by measuring your inquiries each day. Measure the number of sales your staff actually sells out of the total inquiries for the day. Set some expectations. Hire professional sales trainers if you do not have that expertise.

Hire Coaches Or Accountability Partners And Get Expert Advice

Sometimes it seems limousine operators believe they have to do things the hard way. It is almost as if they think it isn't fair if they use someone else's experience or expertise. There is this mentality that if they don't do it themselves, they can't really take credit for the success.

One of the most common conversations with limousine business owners involves the owner explaining how different, unique, and difficult his or her business is, and how only he or she can do things right.

Yes, each business has its own personality and nuances. It is sometimes rewarding to be able to say, "I did it my way." However, at the end of the day, the purpose of business is to make a profit. Business is, after all, business.

Everyone needs a solid mentor...someone to coach them through the good times and bad.
Everyone needs a solid mentor...someone to coach them through the good times and bad.
Highly successful limousine businesses have come to the conclusion that doing it their way involves securing every talent, expert, coach, and business partner necessary to accomplish goals and desires for the long term.

Most limousine business owners will never reach their full business potential because they will not seek experts, be accountable, nor will they measure their activities and results.

If you examine highly successful limousine businesses or any other highly successful business, the owners have probably committed to training their people, being trained themselves, being accountable to someone outside the business, hiring the best experts, and measuring results regularly.

Hire Professional Business Brokers To Sell Your Business

Ron Sorci, president of Professional Consulting Resources Inc., discussed selling businesses in a presentation at a past LCT Show. At one point, Sorci said, "Business owners who don't use business brokers to sell their businesses usually sell for 20% to 40% less than those who do."

You may not be the best person to sell your business. Trust someone who does it for a living.
You may not be the best person to sell your business. Trust someone who does it for a living.
The same is true for professional real estate brokers. Real estate brokers consistently sell homes for more money than "for sale by owner" transactions. Highly successful limousine business owners are experts in the limousine business. They recognize they are not experts in selling limousine businesses. They also understand selling their business is probably going to be the largest financial transaction in their entire life.

The successful sales transaction will be their single most significant accumulation of wealth obtained during the owner's lifetime, and the key to a content retirement or transition to another career.

Collect Loss Of Use (Down Time) And Diminished Value From Wrecks

How much are you collecting from the insurance company for each day your car is out of service? Zero? $100? $500? Many operators collect nothing. Highly successful operators use professionals to collect loss of use, minimize charge backs from third-party insurance companies, collect storage, collect towing, receive higher appraisals, and save time and money administering claims.

Are you collecting for diminution of value? Diminution of value is the difference in value of a vehicle before and after it is wrecked. If you are trying to sell two identical cars and one has been wrecked, you might get less money for the one that has been wrecked. Insurance companies should pay you for this loss.

When your cars are trashed, you're not making money.
When your cars are trashed, you're not making money.
A large operator could literally leave hundreds of thousands of dollars on the table by not collecting for diminution of value.

Collecting loss of use and diminution of value is difficult. Insurance companies employ thousands of attorneys and other professionals to keep limousine operators from collecting fees. It is no wonder why it has been so difficult to collect. Subrogation companies study tort law relative to insurance claims and often are more versed than general-practice attorneys.

Don Petroski, owner of Air Brook Limousine in New Jersey, used an attorney for years to collect third-party insurance claims. He has found attorneys do not always achieve the best results. Petroski has been both surprised and pleased by the amount of money he has received using a subrogation service. Other industries, such as the rental car industry, have been using subrogation companies for years. Subrogation services can easily be found on the Internet.

Perform Regular Business Valuations

In 1996, a client on the East Coast paid The Geneva Companies $35,000 to perform a valuation of their business. In the agreement, Geneva agreed to:

  • Recast the financial statements of the client's business to present the past financial history of the business.
  • Research the client's industry and markets.
  • Develop revenue projections and a pro forma financial statement for the future five years.
  • Determine the fair market value of the business.
  • Prepare a document that describes the client's operation including (as applicable) its product, service customers, sales and marketing efforts, organization, and facilities.

As it turns out, the best service provided by Geneva was getting the company owners to understand what the value of their business really was and to understand items that affected the value of a company. Today that company is worth $8 million instead of the $1 million it was then.

Your value will change over the years. Be sure to keep up.
Your value will change over the years. Be sure to keep up.
There are limousine companies operating today with the same sales volume as this East Coast company, but only worth $2 million—75% less! There are major differences in the efforts you make to increase the value of the business, as opposed to the efforts you might take to increase growth in general.

Valuations are available for $2,500 to $5,000 for most limousine companies. Highly successful companies will do valuations every two to three years, or when major events happen that could significantly affect the company's value. Owners within two to 10 years of retirement or exiting the business for any reason should have a valuation done.

Valuations should be secured before any sale, purchase, merger, partnership, and divorce or estate settlement. A valuation is an excellent tool to help obtain and keep personal wealth.

Study Best Practices and Benchmark

The automobile industry has used 20 Groups since 1947 to benchmark and study best practices. The Ford Motor Company did not have industry standards for dealerships. However, in 1947 a group of independent Ford new car dealers banded together to collect industry standards, benchmark, study, and exchange information with each other to improve their individual dealerships. The original members of the Ford 20 Group became the first highly successful Ford dealerships in the United States.

Studying the best practices of your peers will lead to success.
Studying the best practices of your peers will lead to success.
The rental car, motorcoach, retail, furniture, and many other industries have some form of benchmarking and best practice organization for their businesses to participate in.

Benchmarking is the idea you can study another company's best practices and use those observations to improve your own business...if done right.

Related Topics: 20 Groups, audits, brokers, bus crash, business growth, business management, finance, fleet insurance, Limo Broker, limo crashes, mentorship, money, Sales & Marketing, selling your business

LCT Staff LCT Staff
Comments ( 11 )
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  • Hamza Nofil

     | about 5 months ago

    Giving customers access to acquiring limousine services through smartphone apps can also prove to be quite lucrative for a business. Whether the company develops its own app or buys a white label one from companies like CabStartup ( https://cabstartup.com/ ), it should only prove to be beneficial for the limo company

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