Bill Goerl, author of Wheels of Gold, shares his expertise about how to start a limousine business. He explains what steps to take to get started, buying the vehicles that you’ll need, services that offer maximum profit, how to market your limo business, and more. [17 min.]
Tell us a little bit about your experience in the limo business.
I’d been introduced to the limousine industry when I was about 17 years old taking my mom’s friends to the airport when I was on a break from school, and I discovered that I really enjoyed interacting with the passengers and found it enjoyable because I enjoy driving and finding out about people’s vacations and their travels and I just branched it off into starting my own business, and I worked my way through college doing that. After four years of college I realized that a career in electrical engineering just wasn’t for me, and I should kind of follow what I enjoyed doing, and that was transportation.
Give us kind of an overview of the limousine industry.
When most people hear that term they think of stretch limousines taking proms, weddings, funerals, but it’s come a long way in the past 20 years. It really got off the ground back in the 1980’s, with Wall Street booming and people started taking out their clients to restaurants and had big expense accounts, and it was the “in” thing to take a limo out on a Friday night or Saturday night just for no reason at all, and it has changed, but not just being a special occasion or a wedding, it’s your average person that would just take a limo out and just enjoy the evening as opposed to going on a weeks vacation, they’ll just have a nice night out on a Saturday or something like that, and it just turned into commonplace for any special occasion.
Can you briefly outline the steps for starting a limousine business?
You don’t actually need a limousine, believe it or not. You need a business card, you need to project that image that you can handle somebody’s transportation, and you can work with limousine companies already in business. Once you receive a reservation you can ask a company that you’ve built a relationship with to cover the work. Once you start having enough business your first step would be to buy a Town Car or a stretch limo and produce a website, because most of the shopping is done on the Internet at this point. And get a toll-free number which broadens your horizons on your market because with the Internet people like to have that toll-free number to call to actually make the reservation. One of the big issues now, though, is insurance is a little bit difficult to obtain. So, once somebody delves into buying a car, they really have to have insurance in place. It’s called for-hire livery insurance. And that’s something which a little research should be done before actually purchasing the vehicle, because it can take a good four to six weeks to get insurance in place.
Is this a good time to start a limo service, or is the market generally saturated?
No, there’s a misconception. People think that there’s so many limo companies out there. There’s a lot of business out there. It’s an excellent time to start a limousine business, because like anything being that there are so many companies out there, there’s a lot of room for improvement for somebody to get into a niche market as far as perhaps just doing wedding transfers or getting into the funeral end of the business or doing airport transfers, or winery tours are very big, you can really develop your own niche and there’s a lot of business out there and there’s always room for another good operator.
Bill, how much money do you need to get started?
Really, believe it or not, you don’t need that much. To get started the right way I would say you would need about $50-$100,000. And that’s purchasing a limo, getting insurance in place, getting business cards, building a website, but by all means you really don’t have to have that. You can start with just getting business cards and a phone number. They’re called virtual call centers, you can be your own virtual call center, where somebody calls you, you take the reservation, and you subcontract it to somebody in the limo industry already, somebody who actually owns the vehicles, and you could make like a 20% commission. Say, if you take that approach, there’s a lot of money to be made without really outlaying a lot of your own money.
So, you’re like a limousine service broker, in a way?
Correct. And there’s many large companies who have built empires and they don’t own one limousine.
Talk about choosing the kinds of vehicles to buy.
If someone’s going to venture into buying the vehicles, I always recommend purchasing one Town Car that’s your bread and butter to do airport transfers, taking someone in for business meetings, basically your corporate personnel, they like having a Lincoln Town Car. Then I would always recommend getting at least one stretch, that’s a popular 120-inch ten-passenger stretch Lincoln, white, is very popular, so one Town Car and one ten-passenger stretch should make you a pretty well-rounded limo company.
Do you recommend leasing limousines or buying them outright using financing?
I would always recommend purchasing using financing and would steer away from leasing.
Talk about airport transfers. Are these a big part of the limousine business?
They are, they’re about 60-70%, they are considered the bread and butter of the limousine industry, and it’s a small profit margin. The airport transfers are good for keeping you busy during slow times because they’re not seasonal. Twelve months out of the year there’s always airport work, as opposed to proms and weddings which can be more of a seasonal type of business.
Talk about wedding limo service. What does it entail, and what can a limo operator do to differentiate themselves from the competition?
A wedding limousine operator, that’s somebody he may have a full-time job Monday to Friday and he just wants to make some extra money on the Friday or Saturday afternoon, which there’s nothing wrong with that. You can build up a nice business. You have to elevate yourself to a different level. The chauffeurs are going to have to be in tuxedos, you’re going to have to have champagne beverages, the vehicle always needs to be immaculate and updated fairly new. Drivers should be well versed in how a wedding is supposed to run because there is an aisle runner which is supposed to be brought down the church, the chauffeur should help space the bridal party, so there’s quite a bit of extra effort involved on the chauffeur. So it’s not quite as quick and simple as just shuttling somebody to the airport, there’s a lot more interaction with the chauffeur and the bride, so it is much more service oriented.
Are proms and graduations lucrative?
Oh, very much so. They’re the biggest part of the limousine industry for profit. Unfortunately, it’s only two months out of the year, so you really can’t run a full-service limousine company only doing proms. But a good operator will always target the prom seasonal business because during that two month you can really make this business worthwhile and pocket a nice bonus for yourself.
How about limousine and sedan service for funerals?
That’s very steady work twelve months out of the year, unfortunately they’re dying most times. It’s terrific work, I was involved in funeral work for quite a long time, and the funeral directors that you work with are very, very meticulous. The chauffeur has to be in a solid black suit, a pressed white shirt, solid black tie. Usually they do like chauffeurs caps, the car has to be immaculate, black stretch limousine of course. Nothing too long, it can’t be too ostentatious where it has a lot of mirrors and lights and lasers and stuff going on, it has to be a very low-key black limo and they don’t want any liquor in the car, so your clientèle is very easy. It’s very low-key work, it’s usually Monday to Friday, every once in a while there will be a Saturday funeral, but it usually starts at 8:00 in the morning, it’s done by noon, you can really run a nice business just doing funerals and you’d have every afternoon off and you’d have the weekends off, for the most part.
What amenities such as food and beverages should you have available in the car to customers?
Years ago everybody was including champagne, liquor, beer, pretty much a full stock bar, but now because of liability issues limousine operators are worried about lawsuits buying liquor. So it’s just become customary to supply ice and bottled water, and if a passenger wants to bring anything they’re welcome to.
How can someone starting a limousine service find good chauffeurs?
I found my best place to find chauffeurs is going to the airport and waiting in the baggage claim area where there’s already chauffeurs working, and if I see a neatly attired chauffeur standing there, I usually hand him my business card, and let him know that if he’s ever looking for a job to please give me a call. Whenever you do see a good chauffeur you’d want to approach them and let them know if they’re not happy working where they are that you are looking for some employees. Posting help wanted ads on craigslist, you will get a lot of responses, but finding good candidates is always difficult.
Talk about the contract. What should be in it?
When you do have a contract with a potential client, what happens quite often, generally with prom kids, is that they’ll have a group of twenty, and they’ll rent a big 22 passenger Escalade or a Hummer, and then a week or so before their prom, their twenty people have dwindled down to seven or eight, and all of a sudden they can’t afford the limo that they rented, that they put a deposit on two months ago, and they’re looking for their deposit back, they don’t want the limo anymore, so it’s important to have a parent sign the initial contract and make it very clear that the deposit is non-refundable, or they have to give you at least thirty days notice to get a different size vehicle.
How much of a deposit should you ask for?
Usually a twenty percent deposit.
What if you get a job that requires a type of limo that you don’t have, or let’s say you’re already booked for that day? Do you just turn the business away?
No, never. We always take the work, we never say no. I’m a strong believer in joining the limousine association, there’s the National Limousine Association, and there’s also your state limousine association. You become very active in those and you network with fellow limousine operators and you find out who has the vehicle that you need and you give them work and they’ll return the favor.
How do you price your services?
Well, that’s another good one. Many people have hired accountants and financial analysts and calculated these formulas on what we should be charging, and really it comes down to what the market will bear. We try to get as much as we can, but you can’t overprice your service or the cars will be sitting. And you try to use a strategy like the airlines and hotels use, where when it’s busy their rates are higher, when it’s slow the rates are lower. So basically what the market will bear at the time.
What are some ways you’ve found to be effective for marketing and advertising a limousine business?
Well that’s changed over the years also. At this point the Internet is the way to go. Google Adwords, pay-per-click, that really brings in the revenue. The problem with Internet advertising is people will find you, they’ll book a car with you, you’ll make the reservation, but people quickly forget who they booked, there’s very little loyalty, so once you make that reservation, you service the client, it’s very important to put them on a mailing list and send them hard mail, send them your business card, thank you card, and try to make them into loyal customer and get them off of the Internet for the next time they need a limousine or whatever product you’re selling.
So the bottom line is, it’s always cheaper to retain a customer than to find a new one?
100%. For finding new customers the Internet is terrific, but you’ve really got to build them into loyal customers so you’re not constantly paying for that pay-per-click.
I’ve seen limo operators offer evening Christmas light tours during the holiday season and things like that. Talk about some creative ways to generate business.
Networking with clubs or restaurants to include packages, dinner theater package is very popular that’s not too seasonal, that’s something that’s year-round. There’s always somebody’s anniversary or birthday where they would like to go to dinner and a show. The lights package, I see a lot of operators promoting that, but I don’t know how profitable that is, how many people really drive around to look at holiday lights. Concert packages are very popular, to get somebody show tickets and a night out in a limo. Bundling those types of packages with local vendors is definitely very profitable.
Bill, talk about taking your business to the next level. How do you grow from being a small limo service to a million dollar company?
That’ll depend on your ability to manage, and if you’re able to hire the right people to build a team. It’s a very fragmented industry. There’s really not that many people who have managed to build it into a multi-million dollar company. It’s a highly “mom and pop” industry because it is very seasonal, the hours are very erratic, it is difficult to bring it to that next level. It’s possible, you can make a very nice living running it as a mom and pop organization, but to bring it to a corporate entity, its really going to come down to how well you are as a manager. A small limousine service would be somebody with ten cars or less, it’s pretty much an owner-operator. The owner of the company is answering the phones, he’s driving on weekends or helping out, he hasn’t really put himself where he has dispatchers, managers in place, and he’s really running an organization. One of the problem with “mom and pop” organizations is they have the mentality that they are the only people who can do what they’re doing, and they’re not very good managers. It’s a hurdle to get over, get out of that mindset of where you have to do everything yourself, you have to drive, you have to answer the phones, you have to do the maintenance on the cars.
Can you recommend some good websites or magazines related to the limousine business?
Sure, LCT Magazine, that’s Limousine and Chauffeured Transportation, is an excellent resource. Limos.com is another great place for advertising and finding out what’s happening in the industry. For purchasing vehicles, LimoForSale.com is terrific.
Talk about the biggest mistakes people typically make when getting started in the limo business.
One of the biggest mistakes is they don’t realize what’s entailed in the industry. They think it’s going to be more glamorous than it is, they don’t realize that a lot of the reservations are made last minutes, and it’s late hours, you’re dealing with people who drank too much or are partying too much. They really don’t understand what the work is about. They have a misconception, they don’t realize that they’re going to be working every Friday, Saturday and Sunday, and usually Mondays, Tuesdays and Wednesday they really won’t have much to do and it’s quiet. It’s definitely not a 9-5 job, and people get burnt out quickly because they’re working three or four days, 20 hours a day, and then they have two or three days off. The hours are a little crazy.
To summarize, what’s your best piece of advice that you’d give to someone getting started in the limousine business?
To research that they’re in a good market, and the way they would do that is to open up the phone book, find out if there’s limo companies that exist in their area, which is always a good sign. I’ve seen a lot of people, they have an attitude that there’s no limo companies around, so it would be a good idea for them to start one. They soon find out that the reason why there’s no limo companies around is because there’s really no business. You’re much better off starting a limo company where there is a lot of business, there’s a lot of activity.
Bill Goerl is the author of Wheels of Gold: A Complete How-to Guide for Starting a Million-Dollar Limousine Business. In 1999, Robin Leach from Lifestyles of the Rich and Famous presented him with The Industry Achievement Award for Outstanding Safety and Service. In 2001, 2002 and 2003 he was nominated and obtained the industry’s most prestigious award, Limousine Operator of the Year.