Operations

LCT Show: Small and Medium Operators' Issues

LCT Staff
Posted on March 2, 2003
By Rebecca Christiansen

LAS VEGAS – Small and medium limousine operators can improve their chances for success by instituting a strong revenue forecasting system, embarking on an effective advertising program and making sure their cars are immaculate, a panel of three operators advised at the LCT Show.

The operators each offered tips on one subject relating to operating a limousine company:

Financial planning
Developing a revenue forecast is a key to the success of any keyes any successful small or medium-sized business, according to Steven Qua of Cleveland’s Company Car, which has 13 cars and six employees.

“The forecast is the roadmap,” he said. “If you don’t forecast your profit, you’re never going to get there.” He suggested hiring an accountant and/or a financial planner to help map out revenue streams and compile them into a forecast. Often, this leads to what he called “a scientific guess,” but even that is better than having no clue at all.

What are the areas an operator should focus on? First, Qua suggested, look at the company’s business mix and determine “what business you are in.” Do you have more corporate clients or retail? Does a large percentage of your business come from airport runs or longer ground transportations? When you have the answer, figure out how many runs per vehicle per month you have to make to meet your revenue forecast.

Assume that you want to make $8,000 to $10,000 per vehicle a month – a “pretty good” range for small to medium operators, Qua said – and you are currently only running at $4,000 to $6,000 per vehicle a month. Your revenue forecast will indicate if it’s a bad idea to add cars, for example. Instead, you should try to add affiliates.

Qua noted that many smaller operators are tempted to add cars because their businesses are booked beyond capacity every Saturday night. Still, if the cars are running at an overall lower-than- desired per-vehicle revenue rate, it is better to farm out some of the weekend runs until the monthly vehicle revenue reaches the operator’s preferred forecast.

When building the forecast, also factor in your company’s history, what you can expect from old customers, and the four types of expenses: variable expenses, such as fuel cost and washes; semi-fixed expenses, such as maintenance; fixed expenses, which you cannot avoid, such as insurance and car payments; and labor expenses.

“Twenty-five percent to 28 percent of every dollar [of income] is [spent] on payroll,” added panel moderator Tom Mazza, executive director of the National Limousine Association.

Determine what these expenses are on a per-trip basis, Qua said, adding that operators need to know their monthly trip count in order to determine their overall revenue per trip.

Target Advertising
In looking at the benefits of various types of advertising, the Yellow Pages deserve special note, said Bill Goerl, of Bayshore, N.Y.,-based Clique Limousine, a six- car, 15-employee operation. “It’s very expensive, but it definitely works.”

To limit the cost of this type of ad Goerl suggested advertising only in the local Yellow Pages and making sure the ad is effective in drawing potential customers’ attention by including the company logo and mission statement.

Also, he advised operators to track the success of the ad to see if the investment is worth the cost. He also suggested listing a local phone number instead of an 800 number because it gives customers a local feel.

Secondly, Goerl suggested sending direct mail pieces only to existing customers. In these difficult economic times, marketing is better done through a rifle, rather than a shotgun, approach.

Additionally, Mazza suggested it’s better to send a quality item to a fewer number of customers than to send a cheap item to a large number of potential customers. The customers that receive the more expensive items are likely to think more highly of your company for sending them a quality item and may very well bring you as much business — if not more – than the larger audience would.

Goerl also addressed the impact of the Internet on limousine operators, saying that, “In today’s society, people want instant gratification.”

It is no longer enough to have your company information listed on a Web site, he said. Make sure your Web site is professionally built, has a brochure of the services and vehicles you have available – with prices – and the company’s history. “And don’t just list the types of vehicles,” he said, “but describe them.”

Also, it’s often worth the extra expense to pay the search engines to list your company’s Web site in a top position, Goerl said.

Maintain Your Investment
Randy Tooker
, who has been in business for 20 years, pointed to preparation and maintenance as a recipe for his success.

“I strive for perfection,” he said. “I want the car to smell, feel and look as if I were getting in it.”

Tooker, who runs Lake Forest Limousine of Orange County, Calif., suggested developing a pre-trip inspection list that all drivers should follow. By thoroughly checking every car prior to every trip, Tooker believes he has fewer than average breakdowns with clients in the car.

“It’s a team effort,” he said. “It’s good, because I hate to think that I messed somebody’s wedding up.”

Tooker said he relies on Bounce dryer sheets and a smoke- free environment to keep his cars smelling fresh. He also demands two sets of mats when purchasing a new car so that they can be hung out and rotated between runs, and said he believes that investing in a carpet extractor could be a good idea.

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