DEC. LCT: Following gradual steps can ensure cool heads and sound judgment prevail.
Expansion. Company growth. More money. Are these things you have dreamed about for your company but have lacked the finances to make it happen? Could a larger, more prosperous company be in your future, or is this just a pipe dream?
Al Golub of Chicago is one operator who has explored different ways to make his operation grow. Through a series of acquisitions and management contracts, Golub has expanded his clientele as well as his earnings. Instead of following the normally prescribed acquisition route-slowly incorporating the new operation into the current one—Golub has maintained each new company’s individuality and its client base.
Golub and his brother Harold currently operate five different operations. They started the first company, Chicago Limousine, in 1968 with three vehicles. Later, they started City Lights and acquired Ribaldo Limousine. Golub also has a management contract with the owner of Gold Coast Limousine and Airport Express Limousine. By instituting a comprehensive, individualized marketing program, Golub has been able to yield an 18.7 percent increase in business over the past year and has increased the fleet from 40 to 65 vehicles.
KEEPING EVERYONE HAPPY
When purchasing an existing company, why not just absorb it into your current operation? Because people will always have certain brand loyalties, according to Golub. “When we bought Ribaldo, it was making in excess of $800,000 a year and we wanted to keep that client base. For instance, a salesman from the Spanish yellow pages called me to buy an ad for Ribaldo. He didn’t call us for Chicago Limousine or City Lights, even though those companies have ads on the first page of the regular yellow pages. When I asked him why he did that, he said he didn’t know. That is the reason I don’t incorporate these companies into the total operation. I now have the additional exposure these different names afford me,” he says.
Since the Chicago-area phone book has slightly over five pages of limousine classified listings, by being on as many pages as possible, Golub believes he will eventually get the business. “It might sound a little confusing, but it has worked for us since 1988 with City Lights and Chicago Limousine. I do have some plans for the future to acquire a couple of other companies in the same manner because we’re set up for it. What’s the difference how a car goes out? We have some clients who say they won’t deal with Chicago Limousine, only with Ribaldo,” Golub says.
This diversification started for the company in the mid-1980s Ribaldo was acquired in 1986. The company had about eight cars and concentrated on hotel business. “In 1988 we saw a trend towards sedans so we purchased two sedans and started a company called Chicago City Lights to compete in that market. That company now operates 25 sedans,” he explains.
Within the past few months, Golub has entered into a management arrangement with the owner of Gold Coast and Airport Express. “He still owns the companies and we are managing them for him. He gets a percentage and we didn’t have to come up with any capital expenditures. He kept the equipment and is now selling it. It’s hard to tell what is going to happen with this arrangement right now, but in the first month it did remarkably well,” he adds.
Golub has maintained the individual identities of each company. “Chicago Limousine, Gold Coast, and Ribaldo serve the upper crust clientele. City Lights and Airport Express cater to the sedan market for the average person,” he says. The operation has only two different rate structures to simplify things. Both City Lights and Airport Express offer sedan service to the airport for only a few dollars more than the price of a taxi.
Over the years, Golub has been able to streamline the operation to work efficiently. “Our phone lines are color-coded for each company. When one of our reservationists answers the phone, she says ‘Limousine service, may I help you?’ Often people will ask, ‘Is this Chicago Limousine?’ and the reservationist says it is. Our billing is sent out on one of five different letterheads. We recently put in a new computer system that should streamline things even more,” he explains. No one company in the Golub operation has a designated fleet. Vehicles are dispatched as needed for each run. “When our drivers go on the street, they wear one of five hats-Chicago City Lights, Chicago Limousine, Ribaldo, Gold Coast, or Airport Express. Chicago Limousine, Ribaldo, and Gold Coast have the same rates and City Lights and Airport Express have the same rates. However, if you order a sedan from Chicago Limousine, its rate is higher than if you order a sedan from City Lights,” he adds. Internally, all dispatching, reservations, and chauffeur management are handled identically. “The public is not aware of our operations, but internally we are obviously aware of it.”
Golub believes the most difficult aspect of running this type of operation is not in juggling the work between the different companies, but in running different types of vehicles. “It’s a very difficult thing to run two types of vehicles—limousines and sedans. Ten years ago, you didn’t have to worry about that. Now we might have a driver in a sedan at the airport who needs to be across town later in a limousine. It can be a problem for the dispatchers,” he adds.
So far, the two companies Golub is running under the management contract seem to be fitting nicely into his overall operation. According to the terms of the contract, Golub is in charge of all daily operations of the companies and the owner, who no longer has any say in the running of the company, receives a 20 percent flat fee. Golub provides all vehicles, drivers, office staff, advertising, etc. —everything involved in the normal operation of a livery service. “We give him a readout of the exact earnings of the companies every month. He gets 20 percent of the bottom line, after taxes and tips.
“I think this is a great idea. It’s good for the company that is managing the operation because it is extra business at no real extra cost, except for the yellow page ad. The key to this type of arrangement, though, is trust. If everyone involved doesn’t trust one another, it will never work,” Golub admits.
DEVISING A PLAN
Golub has been working on creating a marketing plan that will highlight the attributes of each of his companies. His main emphasis is on yellow page ads. As an offshoot of this plan, Golub plans on opening Ribaldo Limousine to the Hispanic market. “The area around Chicago has approximately 1 million Hispanic people in it. I want to tie a marketing push in this direction. Right now, there are two limousine companies listed in the Spanish yellow pages. One of those companies is already out of business and the other doesn’t have employees who speak Spanish,” he explains.
Golub plan to incorporate the Spanish yellow pages into a greater marketing plan for Ribaldo. Eventually, he wants to include radio, television, and newspaper ads into the plan. To coincide with this, he will be hiring Spanish speaking reservationists. “I don’t necessarily plan to have Spanish speaking drivers. We do have a few, but as long as we have people who can take the orders, I think we’ll do real well,” he adds.
All of Golub’s companies are listed in the regular yellow pages, throughout the “limousine” section. While this is costly, he believes it pays for itself. Golub pays $8,550 each month in yellow page advertising costs, “but we generated $8,000 the first month for Gold Coast with nothing but an ad in the phone book. That’s not great, but it’s not bad either,” he admits.
In addition to the yellow page marketing push, Golub employs many other marketing tactics as well. He works with many television talk shows and other entertainment groups providing transportation in exchange for publicity. “We’re really not a discount type of company. We are continually trying to be involved in meeting planner groups, and we try to get around to transportation coordinators from different companies. We also go after convention business. And, we’ve gotten the price down to an affordable level for the average person,” he says.
Another new area Golub is exploring is weddings. “Up to five years ago we never concentrated on weddings. We recently put a wedding package and contract together and when somebody calls, we send this to them. This way, people feel they are getting something substantial—that we are going to show up. We now have Saturdays where we are doing up to 20 weddings,” he explains.
As part of this wedding program, Golub has incorporated four white limousines into his fleet. Since white vehicles are a rarity in the Chicago area, Golub is able to charge a higher price for these limousines. “We charge $195 for a black car and $225 for a white one. That’s not because it costs more, but because it’s hard to find one to rent. If we run out of white cars, we have to get one and we have to pay for that.
For the most part, the majority of the Golub operation’s business is generated by corporate accounts. “We have 6,000 corporate accounts. It has taken a data entry person two weeks now to enter all of the information into our new computer, and it’s still not done. We also do a lot of airport transfers, board of director meetings, that kind of work,’” he explains.
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