So you’re thinking to dig your feet onto a new business? You want to start a car service business and you’re not sure where to start? We interviewed 10 successful car service owners and asked them to share what they think someone needs to do to be successful in the limo business. Here is what we found out.
Photo by Mohamed Almari
1. Drive for another company first
Number one mistake that new start-ups make is not understanding the industry. Before you go out and buy a fleet of vehicles you must either work for someone else or at least drive Uber/Lyft for a minimum of 6 months. This way you’ll understand the driver side of the business and will get familiar with your local airports, frequently visited hotels, attractions, etc. So, this is the first piece of precious advice: you need to chauffeur firstly.
2. Get necessary licenses and permits
Once you are sure you want to start the business, it’s time to apply for necessary permits and licenses. Each state has its own name for these permits, and some common names for these licenses are For-Hire and Transportation Charter Party(TCP). It won’t too hard or much expensive to obtain them, but it will take some time. For example, to operate in Washington DC you’d need a WMATC number (Washington Metropolitan Area Transit Commission). The application process takes about 2 months and costs $250 a year. This period varies state-to-state, but it usually should not take more than 4 months from start to finish.
3. Get Commercial insurance
This is non-negotiable. Without the proper insurance you would not be able to get your For-Hire tags. So, connect with an insurance agency and get the ball rolling. If you have a clean driving record and are over 25 years of age your premium should be around $350 a month. Note you must be at least 25 years old to be eligible for commercial For-Hire coverage.
4. Start small and grow gradually
All entrepreneurs that we spoke with have businesses that do revenues of $1,000,000 and more, but guess what? They all started with one car and had no loans. Well, except for the car payment. You need to be the driver at first to provide the best service you possibly can to create repeat business for your car service start-up. Once you have 5 or more reservations a day think about getting the second driver. Rule of thumb: each chauffeur can daily handle 4-5 jobs. So, if you have 25 reservations a day you should have at least 6 drivers working for you. Don’t go out and rent an office space when you can do this from the comfort of your home. Do whatever is handy: sketch a brief marketing plan, use your savings to advertise, buy the best necessary tools needed to run your business.
5. What is your competitive advantage?
You must have an advantage over your competitors or else you will not succeed. It is a tough market out there but the ones that find an advantage are taking in great profits. So think hard and find an advantage that you can capitalize on. Is your wife a marketing specialist and is she willing to do the work for free until the business is on its feet? Do you know someone that will give you a contract to start with? Do you use a limo software that automates all the manual and boring tasks so you can focus on what matters the most? You must somehow stand out; it’s as simple as that.
6. Happy drivers generate happy and loyal customers
Make sure that when the time comes to expand you get the right team in place. Once you do keep the best ones happy you want them to stay with you as long as possible. Finding great chauffeurs is a hard task. If you come across a special one, ensure they are satisfied and well paid. In time, they will bring you more money than you can imagine.
7. Don’t waste money at marketing you don’t understand
Many companies use Google Ads to promote their business but only a few understand how it works, people have burned through millions of dollars by bidding on keywords that have nothing to do with your business or location. Google offers free consultancy today. Take the time to speak with them or simply learn the basics to do it on your own. It might take you 20 hours to understand how the platform works, but it will save you countless dollars that would go into Google’s pocket. You got to be smart not make them rich and yourself poor in the process. Dig deeper to understand where your hard earned money goes. This was common wisdom that all car service company owners mentioned during our interviews.
We hope you found this guide helpful. When we searched the web for “How to start a car service business?” we came across generic answers that had nothing to do with the particulars of this industry. Avoid guides that tell you to get a business plan, none of our successful company owners had a business written business plan. They had a dream, they worked hard and long to make it into a reality. We wish you the best of luck and if you have any questions feel free to drop us a line. Our real community of limo operators is always happy to help our fellow entrepreneurs. We must stick together otherwise the Ubers and Lyfts of the world will be the last ones standing in a few decades.