OCT. LCT: If you want to attract and keep more customers, then you need the tools to reach them where they’re at.
Each month more than a hundred entrepreneurs open luxury limousine companies in this country. Handfuls are started by well-funded, experienced business people. Most are started by inexperienced business owners, often ex-chauffeurs, who believe their knowledge and industry experience will steer them to success. Unfortunately, many times experience and good intentions are not enough.
A business plan is the single most important document in any successful small business. It is a critical tool used to secure bank financing, convince suppliers to extend credit, attract partners to invest, and even attract key employees to your company. The Small Business Administration requires potential borrowers to attend a class to formally write their own plans. Your business plan is a living document, which will change as your long-term circumstances change. The most important function of this document is to keep you focused on a long-term plan for success.
Using data taken from the 2002 LCT Fact Book, here is a sample plan for a three-car limousine service, Executive Limousine of Mt. Laurel, N.J. (Note: This is not a real company. It is strictly for instructional value.)
Executive Limousine 111 S. Route 70 Mt. Laurel, NJ 08054 (609) 555-5466
President: Stephen Miller Vice President: Lee Mayberry
Dear Sirs, Thank you for considering an expansion loan for Executive Limousine. I submit for your approval our business plan.
Respectfully, Stephen Miller President, Executive Limousine
1. Title Page/Table of Contents: This section contains a brief, organized outline of your business plan. It includes page numbers of the major sections of the plan.
2. Executive Summary: After completing the “meat” of your plan, go back and create a brief two-page summary and drop it in here. Remember, many busy lenders will only read this section, so make it as comprehensive and compelling as possible.
a) Purpose of the Plan: The purpose of this plan is to give potential lenders and investors an accurate picture why Executive Limousine will continue to develop and become a profitable venture in 2002 and beyond.
b) Company Overview: This privately-held limousine service is in its second year of operation. Stephen Miller and Lee Mayberry are equal partners. The company operates three vehicles with 2001 first year sales of $103,000.
c) Significant Service Features and Benefits: Executive Limousine is a properly licensed and insured company with one 2001 Cadillac Sedan de Ville, one 2000 120-inch Lincoln limousine and one 2000 85-inch Lincoln stretch. All vehicles are black. Executive Limousine operates 24 hours a day with a company owner or employee answering the office phone 16 hours and an answering service manning the phone for the remainder of the day. The new limousine company offers competitively priced services. Executive Limousine operated accident free in its first year of operation. Customer surveys and follow-up calls suggest that Executive Limousine passengers have been satisfied on all but a few trips in 2001.
d) Market Potential: The southern New Jersey/Philadelphia market is relatively stable and prosperous considering the current national recession. South Jersey is still experiencing a building boom with numerous new luxury homes under construction or completed within the last five years.
e) Status of Competition: The southern New Jersey market is dominated by small, home-based operators who primarily focus on weddings and special occasion work. There are approximately 4-5 office-based companies in the area who do much of the corporate sedan work to and from downtown Philadelphia and the Philadelphia Airport as well as to New York City and the New York area airports.
f) Management Qualifications of Principals: Stephen Miller is a graduate of the University of Tennessee. Lee Mayberry is a graduate of Texas A & M. John Peduzzi is a full-time chauffeur/general manager who drives the bulk of the trips. All three members of the Executive Limousine team have attended the LCT Show the last two years including the complete seminar program. Executive uses the LCT Chauffeur Training videos and testing materials. The company has joined both the National Limousine Association and the South Jersey Limousine Association.
g) Financial Projections: Executive Limousine did $103,000 in sales in 2001, its first year of operation. The company projects second year revenues of about $140,000. Executive Limousine operated at a small ($3,000) profit in 2001. With significant start-up costs, the company was only able to turn a profit because neither principal took any salary in year one. In year two, Executive Limousines has the modest goal of allowing both principals to take $10,000 in salary and a percentage of year-end profits. Executive Limousine has a goal of operating at a 10-12 percent profit margin and continued growth in the range of 25 percent per year.
3. Company Direction
a) Management Team Currently in Place: Stephen Miller, president; Lee Mayberry, vice president; John Peduzzi, general manager and lead chauffeur.
b) Services Offered: Luxury sedan and limousine service for airport transportation and special occasion luxury services.
c) Market Status: Executive Limousine is a start-up, three-vehicle company in a market that is extremely fragmented. Local companies such as James Limousine, Park Lane Limousine and a few others are solid mid-sized companies with less than 20 vehicles. There are at least 25 small companies with five vehicles or fewer operating within 10 miles of Mt. Laurel, N.J.
d) Prices and Profits: Executive Limousine is a mid- to high-end provider. The company has point-to-point prices for airport sedan service. All other work is priced on an hourly price structure with sedans renting for $50 per hour with a two-hour minimum and the limousines priced at $65 and $75 per hour with also a two-hour minimum. The company’s 2001 first year sales were $103,000 with a 3 percent profit margin.
e) Customers: Executive Limousine’s first customers have been friends and acquaintances of Miller and Mayberry. Both principals are professional football players in their 5th and 6th seasons. Almost 90 percent of the first year revenues were derived from charter and as-directed work to Philadelphia and New York City. Toward the end of the year, Executive has attracted traditional local executives using the company for airport transportation. The company is actively working to build word-of-mouth advertising. f) Current Financial Status: The company has a current account balance of $13,432 in First Union Bank. Accounts receivable are $6,595, all monies due are 30 days or less. 2001 sales were $103,000.
g) Mission Statement: Executive Limousine’s mission is to provide quality limousine service at competitive prices in new or nearly new vehicles and to realize a profit for its efforts.
4. Company Overview
a) Company Description and History: Stephen Miller and Lee Mayberry started the company. The two entrepreneurs saw a need for an upscale, full-service ground transportation company that could provide both executive sedan service and special occasion limousine service. The two principals are popular professional athletes, active in both their respective churches and the community with numerous contacts and friends who are regular buyers of luxury limousine services. The company began operations in a garage adjacent to Mayberry’s home in January of 2001. The garage can shelter both limousines and provide space for a small desk and phone. The three vehicles were purchased used for a total price of $90,000. Financing at 7 percent interest through First Union Bank is for 36 months. Payments are $3,300 per month. The company pays $300 a month in rent to Mayberry.
b) Legal Business Structure: The company is set up as an S-corporation. It is legally known as Eagle Transportation t/a Executive Limousine. The corporation is owned in equal shares by Miller and Mayberry.
c) Stage of Development: The company is in its second year of operation and is in a growth mode. They are poised and ready to go from $103,000 in sales in 2001 to $140,000 in 2002.
d) Management Team: See 4a.
e) Board of Directors: In addition to Miller and Mayberry, the company’s banker, Gerard F. Crafts and friend Troy Vincent serve on the board.
f) Staff: In addition to Peduzzi, there are three part-time chauffeurs and a part-time phone person.
5. Services Executive Limousine provides luxury executive sedans and stretch limousines for airport transportation, as well as point-to-point transportation and various “as directed” trips such as wedding charters and day trips to New York City.
a) Major Benefits of Using Executive Limousine: Executive Limousine answers company phone with owner or manager more than 16 hours a day. Vehicles are immaculately maintained and less than two years old. Executive Limousine vehicles complete a 60-point “readiness test” before being sent out on a trip. By being both NLA and SJLA members, Executive Limousine upholds the highest standards and business ethics in the limousine industry. Executive carries $3 million worth of liability insurance, twice as much as required by law. Executive Limousine has carefully trained chauffeurs.
b) Advantages Over Limousine Company Competitors: Chauffeurs receive 12 hours of training. Unlike large competitors, owners are hands-on and will drive clients when necessary. Owners are well-known, articulate, well-connected professional athletes. Small fleet allows for maximum attention to condition of vehicles, both mechanically and cosmetically.
c) Future Service Expansion: Executive Limousine is hoping to add a Cadillac Escalade to the fleet within one year. The company eventually will purchase a small brick one-story building in the Mt. Laurel area.
6. Market Analysis
a) Industry Description: According to the industry’s leading trade publication, Limousine and Chauffeured Transportation magazine, the limousine industry is a $5 billion per year business which has been hurt by both a national recession and the events of September 11, 2001. According to LCT , there are approximately 10,000 limousine companies in the United States. About 450 of those companies have fleets of more than 20 vehicles. Executive Limousine represents the typical limousine service.
b) Target Market: Executive Limousine seeks three distinctly different clients as target customers. First, Executive seeks athletes and high-net worth individuals that rent chauffeured vehicles for evening charters. Second, the company seeks engaged couples looking for wedding limousine services. Thirdly, the company seeks business travelers looking for airport transportation.
c) Competition: The competition is fragmented. There are many small, home-based operators. The chief tool in selling against them is newer equipment and an upbeat, professional presence on the telephone with 16 hours per day covered by company owners and staff.
7. Market Plan
a) Overall Strategy: The basic plan for Executive Limousine is to grow the company from the inside out. All energies are focused on serving current clients. Executive Limousine believes that referrals from current clients will steadily increase and allow the company to continue the current growth trend.
b) Sales Strategy: Miller and Mayberry both believe that selling limousine service is done by diligently working to create a network of “limousine salespeople.” Both men consistently network with local wedding planners, hotel concierges, professional athletes and meeting planners. Both keep in close touch with Executive’s key clients.
c) Advertising and Promotions: The company will begin advertising in the South Jersey Yellow Pages in 2002. The small advertisement will cost $1,500 for one year. The company has also begun mailing wedding solicitation postcards at a rate of 100 per week to brides in the region. Miller is developing a Web site that will be operational by January of 2002.
8. Financial Plan
The business owner, working with an accountant or financial planner, must carefully construct the financial plan section.
a) Summary and Analysis of Financial Statements: Your accountant should insert current financial statements and statements covering the past two years. Also, include projections for the next two years.
b) Income Statement or Profit and Loss Statement: Include a summary of earnings and expenses over the course of a month, quarter, or year.
c) Balance Sheet: Show your company’s assets, liabilities and capital here.
d) Cash Flow Statement: Detail the amount of money coming into and going out of your business.
e) Break Even Analysis: Identify the level your business must operate at to meet your current expenses.
f) Capital Requirements: If the plan is used to borrow money, estimate the amount that will be needed.
g) Payback Methods: Describe how and when you will pay back investors.
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