Operations

How To Prepare Your Business For Growth

Jim Luff
Posted on April 25, 2018
Kyara Kahakauwila, owner of L.A. Limousines & Transportation Services in Victoria, BC, and Tracy Salinger, manager of Unique Limousine in Harrisburg, Penn. hosted the roundtable session Preparing Your Business For Growth on Tuesday, March 13, 2018 at the International LCT Show in Las Vegas, Nev. (LCT photo)
Kyara Kahakauwila, owner of L.A. Limousines & Transportation Services in Victoria, BC, and Tracy Salinger, manager of Unique Limousine in Harrisburg, Penn. hosted the roundtable session Preparing Your Business For Growth on Tuesday, March 13, 2018 at the International LCT Show in Las Vegas, Nev. (LCT photo)

While hiring chauffeurs is an obvious need, there are so many other positions that must be filled in order for a company to grow, according to a March 13 roundtable discussion during the International LCT Show.

The roundtable, titled “Preparing Your Business For Growth,” was moderated by Kyara Kahakauwila, owner of L.A. Limousines & Transportation Services in Victoria, BC, and Tracy Salinger, manager of Unique Limousine in Harrisburg, Penn.

Essential to growth is hiring people to allow owners and managers the time to get out of the office to engage in business development.

Whether that means attending a convention or visiting local clients, it is imperative to get out from behind the desk to promote growth. Most operators begin as a one-man show. Eventually the volume of paperwork, regulatory compliance, payroll, bill paying, vehicle maintenance, and other duties becomes overwhelming and you must hire people to avoid being buried in the avalanche of paperwork.

Hiring Goals
Before you run out and start hiring warm bodies just to have some help, you need to decide why you are hiring. Are you hiring someone to handle overnight dispatching? Are you hiring someone to bring in more sales? Are you hiring someone just to come in and help you so that you can go to sleep at night without worry about the things that you didn't get done today? What exactly are you trying to achieve?

This is an important question to answer based on your business growth goals. If you just want to sustain what you have already built and reclaim some of your life back, you probably need an assistant who you can delegate your workload to. But if you are looking to grow, maybe you need a seasoned sales or marketing person. In other words, find experts or at least trained personnel. Tired of washing vehicles? Perhaps a part-time detailer is a good place to start. You must define what you hope to accomplish before recruiting effort begin.

Liza and John Raftery (L) of Executive Limousine & Coach in Ventura, Calif., listen to participants at one of the small group roundtables (LCT file photo)
Liza and John Raftery (L) of Executive Limousine & Coach in Ventura, Calif., listen to participants at one of the small group roundtables (LCT file photo)
Can You Afford To Hire?
Kahakauwila cautioned attendees about the responsibility of hiring someone. “One of the things I tell my own staff is I don't have to just worry about my mortgage. I have to worry about theirs. I have to make sure that they can make their payments, they can make their rent and look after their families,” Kahakauwila said. While hiring is a big decision to make and becomes an additional expense, freeing up your time to develop new business can increase your revenue and grow your business. There is a trade-off. Not to mention, the value of your time is important as a business owner, so freeing you up from tasks such as washing cars and taking reservations will naturally increase your bottom-line profit.

Taking Risks
All businesses have risk. The risks increase with the size of business and risk must be managed. We all seek “big” accounts. But is the risk of servicing one big account more or less than five smaller accounts? The decision is yours. Servicing a large account can be demanding, and if you fail to please them and they leave you, will you be able to survive? If you have five small accounts and one leaves, the risk of collapsing is smaller because it’s only one out of five that left. A large account may require farm-outs and one single screw up by an affiliate can cause you to lose the account. The risk of farm-outs is exponentially higher because you lose a certain element of control. Salinger illustrated the danger of a single large account representing most of your eggs with the comment, “God help you if you drop that basket because at that point you’ve got scrambled eggs.”

Salinger oversees one of the peer-to-peer small groups as they share strategies to improve their operations (LCT file photo)
Salinger oversees one of the peer-to-peer small groups as they share strategies to improve their operations (LCT file photo)
Affiliate Relationships

The industry is made up of affiliate networks. While most operators want to engage in both inbound and outbound affiliate work, some don’t want to take that risk, and the amount of affiliate work you perform can be a blessing or a peril. You must determine how much of affiliate work you want to engage in. Relying on a single affiliate network is certainly dangerous. If they pull the rug out from under you, it can tank your business if you don’t have enough of your own clients to survive.

The ratio of affiliate work varies among operators with some holding a revenue limit of five percent of their business while others are as high as 80%. You must decide if you want to grow your own business or help an affiliate network grow their business. If you try to lure inbound work and are able to earn the business and double your revenue, do you have the infrastructure to support the increase? Taking on too much work at once can place a high demand on vehicle inventory and chauffeurs. What would happen to your local client base if you constantly turn them away because you are doing affiliate work? You can see why planning for growth is an important consideration.

Diversification Matters
The one thing that remains constant in business is change. Whether that means the disruption is caused by TNCs or you serve a specific industry such as petroleum that sometimes crashes, diversification is crucial to continuous growth. If you succeed in developing a specific type of business, you should repeat that building process with another type of business to protect yourself in case of an economic downturn that affects one of the industries. Fleet diversity is also a factor in growth. In the 1980s and 90s, super stretch limos were all the rage. In 2018, only a handful of limousines graced the show floor at the Show while buses, vans, and motorcoaches dominated. In the early 2000s, everyone started running party buses. After many accidents, insurance companies started running away from buses with high-energy sound and light systems and copious amounts of alcohol flowing. Today, you would be hard pressed to find an insurance carrier that will insure a so-called party bus. As times change, the demands for service and the rules of the game change.

Contract Work
A sure way to maintain revenue is to engage in contract service. This can include anything from handling airline crew transportation to serving hotels and entertainment venues. Having contracts ensures there will always be some revenue coming in while you are out marketing for new business. Contract work may demand you completely change how you bill and how you structure rates. “Airlines, they are cheap as heck. They don’t want to pay our rates,” Salinger says.

Instead of paying an hourly rate or even your airport transfer rate, an airline might offer a fixed amount for transporting crews between the airport and hotel. You must decide how much you are willing to discount in exchange for daily work. Evaluate what you can do within your own markets, outside of your market, and within your business community to stay busy while you grow other aspects of your business.

The Overnight Dilemma
The biggest dilemma for small- to medium-size operators is who will answer the phone in the middle of the night or on Sunday afternoon. Will you carry a cell phone with you forever? Taking reservations at the grocery store, on the golf course, outside of a movie theater and anywhere else you happen to be can’t last forever. You will burn yourself out. Not to mention, did you start your business to be glued to it 24/7? What is the value of your time? What is the value of your sanity? What is the value of your family and hobbies? Can you rotate on-call time between staff members? Do you have a lead chauffeur who might take the phones two nights a week? Is there enough work coming in to hire someone to take the phones on Sunday using the revenue they book? You can’t effectively grow your business if you are constantly tied to the phone as an order-taker.

Compensating someone for handling calls from home might be one method. We have heard that some operators pay a flat $50 to $75 a night for home dispatching. However, this type of arrangement can run afoul of labor laws in heavily regulated states like California where such compensation must be equal to minimum wage. You could hire them as independent contractor who get paid commission on the jobs they book. You also might use an overnight dispatching service. These services are as low as $1 per hour. There are several that specialize in the industry. Make sure whichever method you use that all agreements are in writing.

Related Topics: building your clientele, business growth, How To, ILCT 2018, ILCT 2018 education, industry education, operation growth

Jim Luff Contributing Editor
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