NOV. LCT: What operators can learn about building a steady client base from a leading fleet vehicle seller.
Whether he’s operating a limousine service, presiding over the local association, running an international limousine network, or overseeing a large department for defense contractor, Glenn Barrons isn’t one to rest on his laurels. As a matter of fact, he hardly rests at all.
At a glance, you might think a workload like this would overwhelm a person, but each of these activities has become an important part of maintaining and improving Barrons Limousine Service in Lawndale, CA, a nine-car livery operation just south of Los Angeles International Airport. As president of the Limousine Owners Association of California (LOAC), Barrons is working toward legislation that would eliminate the licensing fees required by many cities and airports in the state. In establishing Barrons International Inc., he is “filling a void in the limousine business” by providing an affiliation of reliable limousine services across the U.S. and Europe. And he does all this while still employed as an operations manager. Barrons has adapted some of the efficient computerized analysis techniques used in his work to the limousine operation to improve the business’ profitability.
“You have to make a decision in this business whether you’re going to be proactive or reactive,” he says. “A lot of operators say to themselves, ‘Why should I expend energy becoming involved in an issue when I will benefit from the outcome anyway?’ Being proactive means making an effort to make sure that something is done right the first time rather than having to react to something—either legislation or a screwed-up run—after it becomes a problem. It is a waste of a lot more time and energy to be reactive than proactive.”
Barrons believes it is very important for operators to know what a business entails before they jump into it. before he opened his service five years ago, Barrons analyzed the market and the profit available to be made. He determined it was not beneficial to establish a livery service with just one car, so he developed a plan to have four cars within a year.
“The profit just isn’t there with one car. After you book out your vehicle, you can’t handle any more runs,” he says. Fred Ruppert, an industry veteran who has been with the company for one-and-a-half years, agrees. “A small, one-car operator would be better off just marketing himself available to other operators for farm-out business than investing money in Yellow Page advertising. After he books his car for one run, then all the other calls he gets from that ad are worthless because he can’t fill them.
Barrons currently operates a completely Lincoln fleet except for one recently purchased 1990 Cadillac Brougham sedan. “We may be turning to Cadillacs in the future,” Ruppert says. “I’m not sure how the public will react to the redesigned Town Car yet. I like the styling—it reminds me of a Mercedes-Benz.” The fleet consists of three sedans and six stretches. With 83 percent of his business devoted to corporate clientele, Barrons believes there is a market for small corporate stretches.
Like many in the industry, Barrons is worried about the public perception of the limousine business. “The public has an image of the limousine operator as a guy who’s just out to make a buck. Whenever you see a chauffeur pull up with his shirt unbuttoned and smoking a cigarette, that hurts the industry,” he says.
In order to help improve this image, Barrons is not afraid to share his profit strategies with his colleagues. He recently conducted a business management seminar at an LOAC meeting. “If an operator knows that is actually involved in running a limousine service business, then that knowledge will improve his business and the professionalism of the industry as a whole because operators will not have to cut as many corners.”
Barrons believes there are two primary elements to effectively managing a business: control and visibility. Control is the single most important element to running a business, according to Barrons, because it directly impacts the bottom line of the company. An entrepreneur must have control over many aspects of business, including costs, the image of the company, and the price and quality of service, he says.
By visibility, Barrons means understanding every part of the operation. “For example, to establish your price per hour or per mile, you need to know what it costs you to operate per hour or per mile,” Barron says. “Once an operator told me about a run he had made down to Palm Springs for $225 and was very happy. I asked him, ‘How many miles is it to Palm Springs?’ and he said, ‘It was about 110 miles each way, round trip approximately 220 miles.’ ‘Then you just barely made expenses on that trip because it costs you at least one dollar per mile in operating costs,” I told him.
“An operator needs to know how to prepare an operating budget, how to forecast the business picture for the coming year, how to develop reasonable goals, and to know how much the service is making per month.” He believes a good accounting system with accurate records of income, expense, and financial performance is the root of good visibility. Banks, leasing companies, and the IRS require financial reports anyway.
As one would expect with his background, Barrons is a proponent of personal computer usage in the limousine business. He uses the Limo-Magic system produced by Systems Design Group, Inc. in Franklin, OH. “There isn’t a thing I can think of that this system doesn’t already have,” he says. “Bookkeeping is a very time-consuming task which can be made very simple with the use of a personal computer. There are two exceptional limousine management systems on the market—the Limo Magic System and the LMSPlus from Limousine Management Systems in Hacienda Heights, CA. Even smaller operators should purchase a computer if he intends to grow. Either system will pay for itself through time savings, error reduction, and greater visibility.” According to Barrons, computers are the most useful business tools available because they are relatively low in cost, fast and accurate, and capable of producing a multiplicity of reports which increase the operator’s financial visibility over his business.
In his profitability seminar at the LOAC meeting, Barrons detailed to the members the basics of an accounting system ideal for livery operators. In the system, a chart of accounts is developed identifying each type of asset, liability, equity, revenue, or expense by account-number which are carried throughout the system. Briefly, some of the assets an operator needs to take into account include cash, accounts receivable, and vehicles, among other things. Likewise, a sampling of some of the categories in a liability journal should include accounts vehicle loans, and state and federal taxes.
These are just a few examples. The equity, revenue, and expense categories in a journal are even more detailed. Barrons suggests that each journal be used to create a general ledger. Finally, the end product of an accounting system is an income statement and a balance sheet. An income statement reflects performance during a particular time period, while a balance sheet tracks performances to date.
What does all this work lead to? The resulting income statement allows an operator to fully understand every aspect of his business. It also allows an operator to plan a budget for the upcoming year. According to Barrons, some of the basic comparisons include revenue and expense for the current month with hose from the preceding month and those form the same month one year ago, and year-to-year results with the preceding year.
“Your income statement becomes the starting point for budgeting and forecasting,” he continues. “An operator should adjust the numbers on the income statement according to the best estimate of how revenue and expenses will differ in the year ahead.” If an operator is under-budgeted, Barrons suggests examining categories of expenses that affect profit, such as discontinuing advertising or cutting back on labor, supplies, etc. meanwhile, an operator should find other ways to increase revenue.
“The worst thing a company can do is be undercapitalized,” Barrons says. “New operators get themselves upside-down into payments for a car and when business slows down or receivable are late, the individual does not have the capital to continue in business.”
Seasonal fluctuations and new limousine purchases must also be taken into account during budgeting. He doesn’t have a set budgetary indicator for buying another vehicle, rather he examines the books and makes a judgment. “If an operator sees in his account system that he is billing out $7,000 a month in farm outs, it doesn’t necessarily mean that he needs another car,” he says. “That $7,000 may be divided among sedans, stretches, and buses. So which one of those does he buy? A sedan won’t get any of the stretch work and vice-versa. Also, an operator may have duplicated services by doing a three-car order. He can’t go out and buy three new cars. A company needs to decide if it’s in a profit mode or a growth mode. If it’s in a profit mode, then it needs to reinvest its money into increasing the business base through advertising, sales, and promotions—or purchasing new vehicles.”
Financial planning is not Barron’s only area of expertise, he also is a leading proponent of livery associations. Barrons is a founding member of the LOAC, which currently has about 175 members.
There are some really bright minds in the industry,” he says. “the business has a real image problem. I knew we had to be proactive and do something about it. It can’t be done alone. That’s the impetus for LOAC and our involvement with the Gwen Moore bill and improving relations with the state Public Utilities Commission and the state legislature. This legislation gives the state PUC the additional enforcement power it needs to clean up the problem with illegal operators. Once the illegals are off the streets, then the industry will have paved the way for increasing its hourly rates—which needs to be done. I can’t stress enough the benefits of joining a trade association. For every operator who participates in the business, it is important to join an association.”
According to Ruppert, “Hourly rates ought to be $40 for a sedan and $55 to $60 for a super stretch. Instead, the bandit operators are running vehicles at much lower rates.”
After years as a successful operator and association president, Barrons is creating a formal network. Barrons international will begin operating January 1, 1990 in eight cities and will encompass 34 different markets by the end of the first quarter of 1990.
“One of the keys to our concept is that payment will be made to performing affiliates within 50 days,” Barron says. “I know cash flow has been a sticking point with other networks.”
The system calls for each affiliate to guarantee payment within 30 days of receipt of billing—whether they have been paid or not. Corporate billing cycles, which may extend to 120 day periods, will make no difference regarding affiliate payment. Among the other requirements include at least $1 million in auto liability insurance and the purchased of Limo Magic software to facilitate automated costing, accounts receivable, and reservations.
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