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Some groups consist exclusively of affiliate managers, while others are made up of owners or general managers. Other groups are organized by operators who add affiliates or friends. And a third type is organized by companies such as Driving Results, a business owned by Arthur Messina, best known for his 30-year industry career running Create-A-Card, a marketing company.
Messina contracts with operators and former operators to facilitate the groups and spark conversations about challenges they face. Members share their perspectives on issues and offer peer-to-peer advice. The groups meet in various cities around the nation offering operators a chance to participate in onsite visits with other ground transportation companies.
While the groups are visible on social media for their team-building events, local tours, and dinners, the meetings typically run all day and focus on learning, sharing, and critiquing each other. Each member signs a non-disclosure agreement swearing them to secrecy as no subject is off limits from accounts receivable balances to financial health of the companies, hiring and training matters, and just about anything else.
Below are some of the critical challenges impinging on operators’ bottom lines:
The biggest challenge facing most operators isn’t the TNC issue itself, but the competition that narrows the availability of qualified chauffeurs. From New York to Los Angeles, Tucson to Charleston, simply finding chauffeurs to interview, let alone hire, has turned into an ordeal. Operators collectively blame this on shrinking profit margins limiting how much pay and benefits they can offer.
TNCs contribute to this problem as chauffeurs have defected to Uber and Lyft to get more hours, be their own bosses, and work when they feel like it. Operators have shared their sources of recruitment including Craigslist, Ziprecruiter, LinkedIn, and even Facebook. While Craigslist is a free service, the level of quality falls below that desired by most operators. Operators have dismissed Monster.com across the board as being too expensive.
LinkedIn has been determined to be a place where mostly professionals visit to look for professional jobs requiring a college degree. In a recent group meeting, operators shared moderate success working with military recruiters or “family readiness” units of the military to offer employment to service personnel returning to civilian life. All agreed these recruits appear clean cut, are usually squared away, and have no problem following orders. However, once they get acclimated back to civilian life, they are likely to jump ship or use their military education benefits to return to school.
Another possible source of potential chauffeurs is Services Corps of Retired Executives (SCORE), a non-profit group that connects retired executives with businesses seeking business advice from experts who have retired from their fields of expertise, but desire to stay active through volunteer work. Other sources include police and fire union hall bulletin boards to advertise for part-time or event work. Retaining employees is also a problem. One creative operator in the Los Angeles area has enjoyed success by providing employees with a new car. The operator shared his cost information: $250 per month for the lease of a brand new Honda. Leave the company, give up the car. While it might seem unconventional, the fact is, the cost equates to about $62 per week or less than $2 for each hour worked.
The second biggest challenge is collecting money from corporate clients after service is delivered. While most operators have shed the practice of invoicing clients since the recession of 2008, some corporate accounts still must be billed for one reason or another. Some small- to medium-size operators have reported carrying accounts receivable balances of $70,000 as an average debt, with some of that amount in the 90-120 day columns.
When profit margins are 7% or less, it is nearly impossible for small operators to enjoy the fruits of their labors as they are using their profits to pay for fuel, payroll, and insurance premiums of jobs completed long ago but not yet paid for. While cash flow can appear to be positive by constantly collecting old debt, the cost of inflation diminishes the value of the money by the time it is received. A $3 per hour net profit earned 120 days ago will buy less when it is received due to inflation.
If the operator raises his prices, TNCs look more appealing to clients, yet TNCs don’t invoice. Operators worry about taking any actions that might make their corporate clients rethink their relationships. They are literally scared to eliminate the practice of invoicing for fear a client will find someone else who will invoice them. While $3 per hour isn’t much, a corporate client who uses 50 hours of service monthly is worth $1,800 towards the annual bottom line profit.
The Internet has changed how consumers shop. From booking hotel rooms to ride reservations, we have become a “now” society. We want to buy laundry detergent online at 3 a.m. if that’s convenient. TNCs have created a convenience by being ready at any time. For operators trying to keep up, this means having staff on-call around the clock at great expense hoping an order will come in, or developing a robust system of independent operators spread across a metro region such as New York City ready to go on a moment’s notice. For operators who established their businesses years ago on a pre-arranged basis, the challenge of adapting to on-demand has been a struggle. Combine this with the lack of qualified chauffeurs to hire, the challenge is a painful one to most operators trying to run with the pack.
Hiring a chauffeur with a basic driver’s license is tough. Hiring one with a Commercial Driver’s License (CDL) is even harder. Operators in focus groups have shared frustrations as they seek to differentiate themselves from TNCs by modifying their fleets to include shuttle buses, limo buses, charter buses, and other specialty vehicles TNCs lack. These vehicles require specialized licenses to operate. CDL drivers are in such demand they command salaries of $70,000 or more to start. To add more frustration, many operators report their insurance companies won’t allow them to hire CDL drivers without a minimum of two years of prior experience. This means even if an operator asked the placement coordinator of a commercial driving school, a recent graduate could not be hired.
Insurance represents the biggest operating expense today. The costs of vehicle insurance, worker’s compensation, and liability insurance are suffocating operators everywhere. Many carriers who once provided coverage for the industry have bailed out. This has created a haven for the remaining carriers to gouge operators with limited options for shopping. The insurance companies dictate the way companies run and insist operators with party buses force people to sit down while the vehicle is moving.
This diminishes the value of party buses equipped with entertainment poles, enhanced sound systems, and custom lighting. Many operators report their insurance carriers refuse to include party buses on policies rendering them useless. If they do cover them, the insurance premiums are so high the cost exceeds a tolerable hourly charter rate.
Group Participation Benefits
By participating in focus groups, operators gain more information about the issues they face and realize they are not alone. They learn new ideas and form stronger affiliate bonds by getting to know each other. Operators swap tips about fuel programs, GPS systems, software systems, and just about every aspect and nuance associated with running a ground transportation company in a competitive marketplace.
Disclosure: Contributing editor Jim Luff, who ran a limousine company for 25 years, is a part-time group facilitator for Driving Results. [email protected]
Ken Poblano of Shift Credit Card Processing is ready to help attendees make and save more money.
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