The U.S. seller of Van Hool motorcoaches recently distributed this advisory about its operations and crisis resources.
If there is a single, most widespread mistake that people getting into the limousine service business make, it is that they forget that it is indeed a business. Running a limousine agency is far more than merely driving customers around town. If we eliminate the more glamorous aspects, a limousine service is operated best on the same fundamentals that guide most businesses.
Richard Hundley, president of The Limousine Connection, in North Hollywood, California, has found success in the limousine service field precisely because of the very business-like manner in which he approaches it.
“The times of just putting an ad in the Yellow Pages and sitting by the phone and waiting for it to ring are over. We aggressively go out and solicit accounts,” said Hundley. “You have to first determine who to contact. Who moves people? Travel companies. Travel managers of corporations. Then, you zero in on them.”
Hundley started The Limousine Connection less than five years ago with a year-old stretch Lincoln and has steadily built his operation to a total of 10 limousines. He also has two 15-passenger vans and a Lincoln sedan.
Hundley has based his business on establishing tight controls; being cautious with credit; learning very quickly from mistakes or miscalculations; and actively seeking business. He has recently begun a consultant business, counseling newcomers to the field on the management practices that he has found through experience work best.
“We’ve developed a tight system,” he said. “I think the lack of controls is one element that works to the serious detriment of a limousine service company.
“It’s the little things that can take the profit out of the car.”
Hundley’s business expertise was well-honed before he began The Limousine Connection. He had always been interested in automobiles and, in fact, had been successful in sales management for a car leasing company. He also had his own insurance agency, which he sold during what he jokingly refers to as “a sort of mid-life crisis.”
An acquaintance got him interested in the possibility of opening a limousine service and he spent the next six months investigating the idea.
“I saw that the service end of it in several companies was marginal,” Hundley said. “I felt that a company that was very service oriented had a definite chance for growth.”
Before actually purchasing a limousine, however, Hundley felt it important to learn firsthand what the chauffeur’s responsibilities were. He hired on with one of the largest limousine agencies in Los Angeles as a driver. Not only did he learn the chauffeur’s view of the business, but also, Hundley said, “I learned a lot of the tricks a driver can pull.”
Hundley believes in keeping a close watch on how the car is used through mileage and maintenance records. “If something’s way out of line, that’s a signal,” he said.
For example, when mileage figures appear to outstrip incoming cash, it could mean unreported trips by the drivers (Hundley allows the driver to keep the limousines while on call). If brakes wear out faster than normal, it could mean the driver may not be giving as smooth a ride as possible.
In regards to selecting drivers, Hundley said he does not necessarily look for experience as a critical factor in hiring. “It makes it easier if the driver is experienced but I’ve seen drivers who were experienced but they had developed a lot of sloppy habits, so for my purposes, their experience was a negative factor.
“I treat the drivers well,” said Hundley. “I’m demanding, but once they know the ground rules, it works out great.”
The Limousine Connection has not had a driver turnover in more than a year and Hundley said that one important reason is his policy on tips. He asks clients to pay a 15 percent tip to the driver and he makes sure the drivers get that tip, even if the payment was made via credit card or on account.
Beyond the basics of being polite and providing a smooth ride, Hundley said a good chauffeur never initiates conversation with the customer. This is particularly critical in regards to The Limousine Connection because the company is regularly commissioned for rides by the famous.
In the matter of passenger-caused damages to the car, Hundley instructs his drivers to eyeball the passenger compartment at the end of a ride for any damages to the interior. If there are, the drivers are to attempt to collect the cost of the damage according to guidelines Hundley gives them. For example, the most common type of passenger-caused damage is the cigarette burn. The cost of fixing it, said Hundley, is usually the price of replacing one panel of upholstery. That is the cost the passenger must pay. In this manner Hundley said he collects for roughly 75 percent of all his passenger-caused damage.
The chance of having an unprofessional chauffeur representing your firm is one of the greatest dangers in farming jobs out to other limousine services, according to Hundley. In doing such business, he advises that one make sure that both the chauffeur and the limousine will meet your standards. Also, deal with companies where you can feel safe the driver will not try to “card” the customer and coax him or her into changing limousine agencies. In doing farm-out work for other limousine services, the primary concern is in working with a firm where you are confident you will indeed get paid.
“Companies have to be careful who they farm out to or farm out from,” said Hundley. Credit is another delicate area in the running of a limousine service. It is also one reason Hundley believes limousine services sharing a market should remain in touch with each other, such as through an association, in order to communicate bad credit risks to each other.
There is something in the nature of the limousine service business-perhaps the attraction of the limousine itself-that seems to attract fraud, Hundley said. Phony credit cards and people opening accounts and refusing to pay are two very common examples.
Anyone wishing to open an account at The Limousine Connection must fill out a credit application. “I don’t care if it’s just an individual walking in off the street or a major corporation, if they don’t want to fill out a credit application, I don’t want their business,” he said. The only time a person or company would be offended at this procedure, Hundley believes, is if they have something to hide. In the case of a major corporation, the credit application procedure will also clarify who is responsible for approving rides in order to prevent disputes in the future.
In accepting a charge to a credit card as payment, Hundley said he instructs his drivers to always get the driver’s license number of the client in the event of a dispute or possible illegal use of a credit card.
In cash deals, Hundley asks how long the car will be used; estimates the final bill; then asks that 50 percent of the estimated total be given to the driver at the beginning of the ride. For prom nights, because of incidents when young people order limousines then change their mind without notifying the agency, Hundley requires that 50 percent of the expected total be in his office five days before the date of the rental.
Such protective measures have been added to The Limousine Connection’s methods of doing business as a result of unfortunate experiences in the past. Hundley remembers well the times he lost money because such measures were not in force. It may have been a famous musician, a corporate executive or the holder of a relatively exclusive credit card...Hundley has learned that you can have trouble getting paid from all three if the wrong circumstances prevail.
On a smaller scale, another lesson learned by Hundley is that the profits in an evening’s rental can be literally consumed in the amount of liquor the client drank. An agency must make sure that controls are instituted so that liquor does not intrude on profit margins. Hundley now offers pint decanters of scotch, bourbon and vodka that are a part of the regular fare, with a $5 charge made for mixes and ice (he gives the driver the $5). After the pint has been consumed, the client pays for additional liquor. In this way, Hundley can offer the liquor as a part of his service but is protected from losing money from it.
The diversity of the customer base is also critical to the success of a limousine service, Hundley believes. “We diversify,” he said. “Some people I’ve known have concentrated in just one area, like the record industry which was great a few years ago but has had serious problems lately. Some of the limousine services are no longer around because they were just too specialized.”
In recruiting customers, other than by direct contact, Hundley has found that mail campaigns are not effective. They can be expensive and the material may never get into the hands of the right person. Advertising can work, said Hundley, but he believes it is necessary to find an advertising vehicle directed at a good target market, such as people planning weddings. Magazine ads can often be too expensive for the business they actually draw, he said.
The Limousine Connection continues to expand, although Hundley believes in steady growth, being careful not to build a fleet that is larger than his business. “If there is one guiding principle, it’s utilization. That car has to be on the road so many hours or you don’t need it.
“We’ve been adding very gradually and very cautiously and we still do a lot of farm-out work. We’re very cautious about adding cars based on a hot month or a hot six months.”
Hundley said he keeps a car for an average of 2 ½ years. They are washed every day and detailed at least once per month.
He has turned the day-to-day operations of the business over to his son Chris, who is vice president, general manager. Hundley wishes to devote more time to his consulting business where he has already worked with five limousine agencies.
Hundley does not believe he is creating competition for himself. “There has always been plenty of room and there still is for well-operated companies,” he said, “The future looks tremendous for us.”
The U.S. seller of Van Hool motorcoaches recently distributed this advisory about its operations and crisis resources.
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