Insider Secrets for Starting a Successful Business

Starting a Medical Transportation Business

Joel Davis, author of How to Build a Million Dollar Medical Transportation Company, shares tips about how to start a non-emergency medical transportation business. He discusses getting started, researching the local market, choosing the right wheelchair van equipment, marketing, and more. [29 min.]

What is non-emergency medical transportation?

Ironically enough, it’s a service that very few people ever think to consider when starting a business, or when they need a service. A non-emergency medical transportation company primarily deals with transportation of the elderly and disabled. You’re going to be transporting people who need some form of assistance more so than you would if you needed a taxicab or similar service. Predominantly we transport people who are in wheelchairs, a lot of people who are in stretchers, and a number of people who are ambulatory. Ambulatory meaning that they can walk like me and you, but many times they move a little slower, maybe because of a disability or because of their age, they may have a walker or cane, and therefore they do need a little bit of assistance. So non-emergency medical transportation is, unlike an ambulance service, we are non-emergency. We don’t transport people that need life support or anything, but we do transport people who are wheelchair-bound, stretcher-bound, or just need some general assistance getting in and out of a vehicle, in and out of their medical appointment or destination.

How much can you make in this business? What kind of profit margin is reasonably achievable?

You know that will vary, as you might expect. For my specific business, my own company, my target is always 25%. There are times I shoot for 30% profit margin. Gas has gone up a little bit and insurance has gone up. With the increase of gas that also brings a little bit of an increase in terms of your maintenance costs and things like that because parts being delivered and supplies, those costs will also increase slightly because, again, vehicles and parts are being delivered so their fuel expenses are going up so they’re going to pass that on to you. But I typically shoot for no less than 25%. The actual profit margin will vary significantly depending on where you are. I have clients all over the country that honestly are making more money than I am, so when I say my profit margin is 25%, there are people in other places around the country that are making more, some maybe a little bit less. So it will vary.

You hear everybody talking about the aging baby boomers. Is this market growing?

I tell you what, if you read any article or you watch the evening news, periodically you’re going to see something about the baby boomers, and growing elderly population. It’s not hard to see it around you. I know in my community, and when I travel around the country, and when I talk to different people, and talk to different clients, the elderly population is continuing to grow dramatically across the country, and what that’s doing is that’s also bringing an increase in the number of senior centers, nursing homes, nursing facilities, and even hospitals. So when you see all that, that means that there is an opportunity. The one thing I tell my clients, I’ve had a lot of people approach me and they talk about the real estate market, and right now the real estate market is beginning to suffer. Fortunately for this industry our future will be very bright, because the elderly population is continuing to grow. What are the exact numbers? You know what, if you’d asked me a few months ago I probably could have quoted them for you, but they continue to grow, and they continue to change and compound, that I honestly don’t even know what the exact numbers are right now. But the elderly population is growing, and it is growing all around us all across the country.

Describe the type of situations that non-emergency medical transportation is used. Is it for people going to and from doctor’s appointments or for outpatient services like dialysis?

Very good question. First off, with non-emergency medical transportation it’s really a service that people really never consider until they actually need it. If you needed to go from point A to point B and you just needed a taxi service, we’re all familiar with what a taxi service is, so you just call up your local cab company and ask them to pick you up, they pick you up at the curb and drop you off. Non-emergency medical transportation, most people really don’t know what it is until they need it. We have a lot of people that we transport in and out of the hospitals. Now, some people may be brought to the hospital for an emergency situation, but once they’re there, if they do require a wheelchair or a stretcher, well, no longer can you just call a cab, so now what do you do? So, in the hospital situation many times that’s the first time that people are really introduced to non-emergency transportation. They see people in wheelchairs, they see people in stretchers, but they never really seem to consider, if I need one of those how am I going to get around. We also have a number of people that we take to and from dialysis appointments. Now, a lot of people who are on dialysis, they can still drive like the average person, but some people, depending on their situation, they may have a physical condition that can’t allow them to drive, or a lot of people after dialysis they’re in a condition where they can’t drive, their blood sugar level may be too low, they may be feeling drowsy and they can’t drive. Also, there’s a lot of people that are just up there in age, they can’t get around as well, now they need to get to their medical appointments, so again they can’t call a cab, they’re in a wheelchair, how are they going to get to their appointments? And that’s where the non-emergency medical transport comes in. We actually go to their place of residence or the nursing facility, wherever they are, we actually go in and we get them, whether they’re wheelchair-bound, stretcher-bound, or they’re ambulatory and just need a little bit of assistance. We go in, we actually help them, get them to the vehicle, properly secure them, transport them, unload them, get them to their medical appointment or their destination, and that’s why our service, our profit margin, tends to be higher, because the service tends to cost more because of the extra service that we’re going in to provide. The going in and getting the patient, bringing them out, securing them and transporting them.

So, right now if there’s no medical transportation service in your community, the service that you provide is being handled by ambulances or taxicabs?

A lot of times they’re going to call an ambulance service. That being said, if you have to call an ambulance service, your cost is going to be dramatically inflated. Why? Because you’re going to be calling an ambulance service, someone who’s over-equipped for what they’re doing. And if I was going to transport your mother, your grandmother, in a wheelchair, and there’s no local service and you call an ambulance service, they’re going to charge you hundreds upon hundreds of dollars, just to get from point A to point B, whether it was one mile down the road, ten miles down the road, or twenty miles. Why? Because you had to call an ambulance. The cost is dramatically higher and they have to pass that on to you. Most local counties, their department of social services, they want to use a non-emergency transportation service. Why? Well, for the reasons we just expressed. It’s going to save them a lot of money. Instead of paying top dollar, several hundred of dollars, just to transport a wheelchair bound patient from one point to another point, they would rather call us because we’re much more cost-effective.

Is there a lot of competition in most markets?

Again, I would say it depends on where you are. What I typically tell people is if there’s competition, that means that someone’s making money. Most people would shy away, if there’s no competition they don’t want to be in business. Whereas I say, if there’s competition, that means someone’s making money, why don’t you go and enjoy some of that pot, too. Typically like I said it’s going to vary around the country, in my community when I started, there was really three predominant services, a fourth was trying to make it. I came in by myself and I did fairly well, and continue to do well. Again I have clients all over the country who give me a variety of feedback on their level of competition. In 2007 and 2008 there are some communities that still have no non-emergency medical transportation companies. So they’re required to call the ambulance services. Some of my clients were actually coming in and starting their own service where there really is no competition, so they’re doing really, really well, they’re having phenomenal success. But you get into some of the bigger cities, the Chicago’s, the LA’s, the New York’s, things like that, sure there’s competition there, but again I go back to my point. Don’t be scared of competition, competition is a good thing, it allows you to make money and better serve the customer and it forces you to be at your best.

I guess competition might actually make your job easier because there’s already some familiarity in your community with the type of services you provide, and then you just compete on service instead of trying to get people to understand what type of services you’re offering.

I’ll tell you what, that’s a great point you bring up. What you just said is that people are already familiar, and that’s true. If you go into the nursing homes, the dialysis centers, the senior centers, because there’s already competition there, most people are already familiar with that type of a service, and that will already provide you with an advantage. I’ll tell you what I do with my competition before I jump into the business. I did a great deal of research, and I literally would follow my competitors around, I would make notes, and I would evaluate their strengths and their weaknesses, and it came to a point in time where I actually, in my biased opinion, knew more about my competitors than they probably knew about themselves. I knew how many vehicles they had, what type of equipment they had, I basically created a general bio of a lot of my competitors before I jumped in, so it really allowed me to assess the strengths, the weaknesses, and the opportunities that I had in my community, and realistically when I sat there and I spent a few weeks, and spent a few months, watching my competitors I knew 100% that I could be successful in my community within this industry. And that’s really what I did, by creating this bio, by assessing the strengths and weaknesses of my competitors, I had a really firm commitment to what I was doing and I was very confident that I would be successful.

How do you receive payment for services in this business. Do you take their credit card or do they pay cash, or do you bill clients directly?

We accept credit cards, we don’t have them inside our vehicles. There are some people I know who do. Again, it really comes down to adjusting your business to the local needs of your community. In our community we don’t. People who do want to pay by credit card, they call our office and they make the payment over the phone. What I tell people predominantly there’s two forms of payment. You have your private pays, your private pays being anybody who would pay out of pocket. We would invoice them, they could pay on the spot, they could pay by cash. What you have to understand a lot of the people that we’ll be transporting, some of them don’t handle their own monetary affairs. They may have a son or daughter, they may have a unit secretary or an aide at a nursing facility responsible for paying their bills. Sometimes those people don’t even understand how much the cost is or what they’re paying. In a situation like that, you would bill the responsible billing party. Again, that could be a son or daughter or a third party caregiver. The other method is the department of social services. The department of social services does pay for non-emergency transportation. Years upon years ago there was actually a law passed allocating specific funds for non-emergency transportation. It will vary across the country per county. The county that I’m in, the payment method may be different than the next county. And that’s where you want to be well versed in actually what the policies and procedures are with the counties which in you’re going to operate. So let me say predominantly you’re going to have your private pay and your Medicaid payments. We do get some credit card, it’s not overwhelming, we do have a lot of private pay people that we invoice and pay cash on the spot or pay by check on the spot. We do a phenomenal Medicaid business. And I tell people there’s nothing better than that because it’s guaranteed money. Typically you get one big check each month, and every time you go to the mailbox to get that check it always brings a smile to your face.

So state Medicaid programs often pay for non-emergency medical transport as a less costly alternative for people who maybe don’t need an ambulance but because of a wheelchair or other disability can’t safely ride in a regular car?

Exactly. Like I touched on early, by investing in more non-emergency medical transportation they could actually save money. Let’s be honest, government and everybody, they’re all under a tight constraint, so they have to find a way to do more with less and cut costs, and using non-emergency transportation versus an ambulance saves them a lot of money. For example, it’s cheaper for them to pay us $60-$70 for one way and round trip, than paying $300 to $400 to $500 for the exact same transport being performed by an ambulance. So using non-emergency transportation makes sense to the department of social services, for the hospitals, for the nursing homes, whoever is going to pay, it makes sense because it’s going to save you a heck of a lot more money than using an ambulance. And we have a couple of contracts with some area hospitals that they actually have over time transitioned into more non-emergency medical transportation than using an ambulance service. Why? To cut costs. You’re accomplishing the same mission, and you’re going to be saving a lot more money.

What about private insurance companies? Do some cover non-emergency medical transport?

I’ve been in business since 1999, and I can’t tell you how many thousands upon thousands of people we’ve transported, and we have probably had less than five private insurance companies pay for transportation. Typically it’s either private pay or Medicaid payments. Now, when I say private pay, that can also be workers’ comp. Workers’ comp insurance, they will pay for such transportation. The only time that an insurance company will outright pay for such transportation is through no-fault insurance. But people a lot of times will call up and ask if Blue Cross/Blue Shield will pay for this. Unfortunately they won’t. Blue Cross/Blue Shield, they will pay for a portion of emergency transportation, i.e. if you needed an ambulance they’ll pay for a portion of that. But again, Blue Cross/Blue Shield and other private insurance, they will not pay for non-emergency transportation.

Let’s get into some specifics. What types of vehicles and equipment do you need?

I’ll be honest with you. There’s a lot of people out there who are biased toward Ford, they only like Chevy, they only like Dodge. I want a vehicle that’s going to work effectively and accomplish the mission and be easy to maintain, easy for my drivers to operate. I have a number of Fords, I have a number of Chevy’s, I have a number of Dodge’s. The most important thing is that you have a vehicle that has a lift or a ramp. When I say a lift, there’s some that are manual, there’s some that are hydraulic. What I typically prefer are hydraulic lifts versus manual ramps. There are still a number of people out there who have manual ramps and they prefer manual ramps. You have to remember a hydraulic lift is a machine within itself. It is subject to wear and tear, periodic breakdowns, and you do have to maintain them. A manual ramp, you don’t. But the difference is with the hydraulic lift, it better serves the customers, the customers feel a lot more safe going up on a hydraulic lift than being pushed up or tilted back on a manual ramp, especially if that person is heavier in body weight, especially if it’s in the colder or wet rainy season or snow, they’d rather be more secure, and it makes more sense. And I’ll also put in as a side note, another reason why you typically want to lean towards vehicles that have the hydraulic lifts, is because of workers’ comp issues. If you’re pulling and pushing someone up a ramp that’s a heavyset person, realistically you are not only exposing that client to potential hazard but also your driver. He could risk pulling out a back and that’s a potential workers’ comp case. In the past I have had manual ramps, and if I was driving myself, I don’t have a problem with manual ramps. But for my drivers I really prefer hydraulic lifts, especially for my clients as well. So when you ask about the specific vehicle, it’s not make or model, as it is what kind of vehicle? Does it have a hydraulic lift or manual ramp? Is is a side mount or rear mount? You’ve got to look at your vehicle as an asset. Are you going to take good care of it? Absolutely. Why? Because it’s going to make you money. Does that mean that you take it outside and spit shine it everyday as if it was your own prized private antique car? Of course not. It’s going to get wear and tear, so unlike, let’s say, a limo, you compare an ambulette to a limo. A limo is going to be much more upscale, you definitely have to polish it all the time, take good care of it. And you’ll have to do the same thing with your ambulette. You’ll have to make sure that you have a good maintenance program, but there’s going to be a lot more nicks and dings and bangs because you’re loading and unloading a person in a wheelchair, sometimes a stretcher, so it has to be much more rugged than a limousine. And that being said, I also encourage people to consider getting used vehicles. A lot of people just starting out, they think they absolutely have to get a new vehicle. Absolutely not, that couldn’t be farther from the truth. Again, I’ve been in business since 1999 and I will not hesitate to invest in a used vehicle, because there are just some great deals out there.

Can a sole proprietor operate this business with a single vehicle or will you need a fleet of vehicles and employees?

I started my company with one used vehicle and a cell phone, so can a sole proprietor start by himself? Absolutely. I’m not expecting people to go out there and start with $50,000 and $100,000 and $200,000, rather I encourage people to start like I did. Start small. Slow controlled growth. You can be very successful in this industry starting with one vehicle, a lot of motivation, a lot of hustle, and being able to go out there and build a very prosperous business. So I transitioned from one vehicle into many vehicles, and over time my business has grown, there’s been times I’ve contracted it based on economic and market demand, so again, I started with one, and now I have many. And my fleet of vehicles continues to turn over over time. I get new vehicles, I take old ones off the road. So to answer your question directly, absolutely, you can start with one vehicle.

So, for someone thinking about starting this type of business, how much is it going to cost them to get started?

I literally started my company with roughly in the ballpark of about $10,000, and that includes some waste. When I say that, my very first vehicle, I got a used vehicle, I got a great deal, it was a Dodge van, a great vehicle. I ran it into the ground, I used it for many, many years, but afterwards I gave it away. But actually the old Dodge van that I got for $3,500, I paid the taxes, I had a manual ramp installed on it that I got a great deal on, I had a cell phone, I had the van painted and lettered, I bought some uniforms, some business cards, I put a deposit down on my insurance, and realistically once I was approved by the Department of Transportation, I was technically in business. I couldn’t transport Medicaid patients but I could transport private pay. So I was really in business, believe it or not, for around $10,000. And again, I go back to telling people, you don’t need to buy a brand new vehicle to start this business. This is not like a limousine business where you have to go out and buy a very nice vehicle starting out. Was my vehicle nice? Sure it was nice. It was a mid-nineties vehicle, again remember I started in 1999, I started with a vehicle that was, I believe it was a ’94 Dodge, and it was in great shape, it ran like a charm, it really served me well. And then over time I just continued to compound, I was smart with the money, I was able to grow from one vehicle to the next, to the next, to the next. And again, I have clients all over the country who are doing the same thing. They’re starting very smart. They’re starting slow, controlled growth with one vehicle, they’re buying a used vehicle for anywhere from the $6,000 to $10,000 price range, and they’re having phenomenal success. Another great aspect about this industry, you do not need tens upon tens upon tens of thousands of dollars to start. You really don’t.

Obviously, if you’re buying a vehicle often banks will give you a loan, but do banks want to loan money to people who are starting a medical transportation business?

My answer to that would be it comes down to how well you develop a business plan, and how good your personal credit is. I firmly believe that everyone should write a business plan. I will tell you from firsthand experience, I built a business plan, I took it to the banks, now did I actually follow that business plan to a T? No, but developing a business plan is an excellent practice. And if you plan on getting a loan, you’re going to need that business plan when you go to the bank. But the banks starting out in your first two years of the business, are they going to look at this as a great opportunity? Yes, because the banks going to see there’s longevity to this business for sure. You know, as we sit here right now, the real estate market is having some troubles and turmoil, but if you look towards this industry, there’s definitely a future, there’s definitely growth. But will the banks give you a loan? Ultimately if you’re within the first 2-3 years of your business and you’re starting anew, they really also want to see, do you have a good business plan, do you have a good credit history, but in general I have a great relationship with my bankers, I have for a number of years, I do a lot business with them. I like to say they’re proud of me because I bring my business to them and they in turn make money. But typically banks want to see the business you’re going in to, is it unique, and is there longevity. And the good news about this industry, it is definitely unique, and it definitely, definitely, definitely has longevity. I think the last projection I read a few months ago was saying that by 2030 the elderly population will have doubled. Now, 2030, that’s sounds like a long way off, but realistically it’s not that far for an entire elderly population to double, that is a phenomenal growth rate.

How do you handle reservations and scheduling and dispatching? Can you hire an answering service or a call center to do it for you?

Honestly, I know of a number of people around the country who do that, and they do it very well and they’re very successful with operating like that. For my own personal business, in the typical scenario most people handle it in-house. When I was starting by myself, again, I literally had a cell phone, I had a notepad, I took the phone calls when they came in, I would pull over on the side of the road, I was very smart in how I did it. But then eventually my very first employee, ironically enough, was a dispatcher, and now over time I typically have anywhere from two to three people working in my office. We have our own internal call center, people call us, we set up reservations. Most people will call, set up their transportation well in advance. Anywhere from, they’ll give you 24 hours notice, some will give you weeks in advance. You will get a lot of repeat business. People who are on dialysis, they’re going to travel with you several times a week. They really come to know and befriend your drivers, as well as your dispatchers when they call and talk to your dispatchers.

What are some effective techniques you can use to market your medical transportation service?

There’s a variety of ways. The single biggest thing that I talk about is personal promotions, especially when you’re starting by yourself. You really need to get out there, putting your name out there, being visible, talking to people, and there’s a number of strategies you can use. Let me focus on what not to do. I’ll tell you what, a lot of people will tell you when they start a business, especially if they’re new in the industry, they always talk about how they learned from their mistakes and wasted money. Well, let me tell you something, speaking from firsthand experience, I wasted a lot of money, made a lot of mistakes, and one of the biggest areas is marketing. You want your marketing efforts to be very focused, very targeted. I’ve done the radio spots, I wasted a lot of money. I’ve done the TV spots, I’ve wasted a lot of money. I’ve done the big paper ads, I’ve wasted a lot of money. It’s really not effective because if you were a taxi service it might be more applicable, but what I found over the years is you really want to find your target audience. The hospitals, the nursing homes, the people who are going to be going to the senior centers, to dialysis centers, and you want to focus all your marketing efforts, all your marketing dollars, into targeting that market. Success breeds success. Once you start transporting people I can absolutely tell you people talk. The elderly people we transport, they talk. And they’re either going to say good things or they’re going to say bad things. And if you give them a good experience when they ride with you, they’re going to talk about it, and they’re going to continue to call you, and they’re going to tell their friends. So word of mouth advertising has been phenomenal over the years for my business as well as for many of my clients.

You’ve watched a lot of people go through the process of starting this type of business. What are the most significant mistakes you see people make when they’re getting started?

Good question. You know, there’s a wide variety. But one of the biggest mistakes is people will get the wrong equipment, or they jump in too soon, they don’t research the local market, or they don’t research the business itself. I’ll give you a classic example. Our vehicles, all across the country, they have to be regulated by the department of transportation, typically within your state. You have to be on top of those rules and regulations. A quick story about the great mistake that I made. I literally invested in a vehicle, I got cocky, I thought I was well abreast of the changes in policies and procedures, and I went and purchased a vehicle. After I bought this vehicle, it was two years old, I got a great deal on it, and I still was left with a nice chunk of change on it, that vehicle actually did not pass department of transportation inspection because the emergency door was two inches too narrow. Now, had I bought that vehicle a few months before, then that vehicle would have been grandfathered in, the emergency door would have been fine, but I was rolling, doing extremely well, and I just did not pay attention to the details. I made a foolish mistake, and it’s not like you can go return it like you can a garment that you buy at a retail center. We were able to convert it and turn it into a great ambulatory vehicle. But, initially that was a great concern, here I was, I wasted a lot of money, what was I going to do? And I’ve seen a lot people go out there, they jump into it too fast, too soon, without paying attention to details, and they’ll invest in equipment that’s just not applicable, doesn’t accomplish the mission, and they end up wasting money.

To wrap things up, what piece of advice would you give to people getting started in this business?

Let me tell you, this has been a great business for me. There’s no question, I’ve made a lot of money, and even more so, I’ve made phenomenal friendships in the local community. The thing about this business is you can literally become a fixture within your community, and you befriend so many people in the hospitals, nursing homes, and even the customers themselves. They come to rely on you and you build friendships, and you can’t help but feel good about yourself when you’re involved in this kind of business. And you see a wide variety of people, backgrounds, and if I had to give advice to people, in actual operating your business, be a smart businessman, be a smart businesswoman, and know that you at the end of the day have the responsibility and obligation to your customers. And when I started, I was literally out there driving myself. And I drove for a number of years, you really have to be smart and cautious and careful, and you have to have a high degree of compassion for these people. Are we the actual caregiver? No. Are we a nurse’s aide, will we actually help to bathe and clean and care for the client? No. But what you have to understand is a lot of these people who are in nursing homes, who are in elderly care and senior centers, they don’t get out much. They actually look forward to their medical appointments. They look forward to seeing your driver come in, greet them, and take them out to a medical appointment. Why? Because that’s their outing for the day, for the week, for the month. They get to get outside the nursing home, they get to feel the sun on their face and they get to feel like they’re going out and doing something special. Realistically, all they’re doing is going to a medical appointment, but if you’re compassionate, you’re caring, you’re understanding of the needs and you’re sensitive to the needs of your client, you can’t not be successful. As I repeatedly tell my clients, if you want to be successful in business, don’t chase money, don’t focus on the money. Focus on the client, and when you focus on your client, the money is going to be there, it’s going to follow you. The money is right behind your client, and in this business you definitely can build a lasting, repeat client√®le. I literally have clients that I’ve had from the very beginning, and they refuse to ride with anybody. I’ve literally had clients that have actually been in an emergency room, they’ve been taken in for whatever reason, and now they’re going to be discharged to go back to the nursing center, go back to their residence, and they absolutely refuse to ride with anyone else but our company.

Joel Davis is the author of How To Build a Million Dollar Medical Transportation Company.