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Limousine owners finding profits hard to come by
By Kathy Gurchiek
The Salt Lake Tribune

Running a limousine service was a bit of a stretch for Salt Lake City's Chris Crowder, who four years ago went from climbing telephone poles for AT&T to chauffeuring concert artists, Wendover casino guests, prom dates and New Year's Eve revelers.
What started as a lark when he bought a $4,500 hearselike limo has grown into LMS Limousine, a full-time business with six employees, five cars, one van and two 50-seater buses with DVD players.
Crowder's customer base includes couples attending high school proms, United Concerts' performing artists and the occasional airport service, wedding or holiday party. But his company's lifeblood has become promotional packages that include round-trip limo service, a dinner buffet and a hotel room at the State Line Nugget casino -- and he soon will provide daily bus service to Wendover.
Nevertheless, Crowder has found the business to be one of the toughest he could have chosen.
LMS Limousine will take in about $350,000 in gross receipts by the end of 2003 but will not reap a profit, and has not since Crowder's initial $10,000 investment; today, that investment is at $500,000. In addition, Crowder has been forced to downsize, moving from a $150,000 house in Clearfield to a 30-foot trailer in Salt Lake County. He lives off tips from customers, noting that "without my casino trips, I would have nothing."
Expenses run high. His business costs include:
* $300-$350 per vehicle, per month, on cosmetic care, such as repairing broken glass and worn carpet; 200 to 300 people ride in all five of his limousines each month.
* $3,000-$6,000 in insurance per vehicle per year. A limo seating six to eight people costs $3,000 to insure, and his 26-seater costs $6,000. Insurance for a 15-passenger van or black four-door sedan also is $6,000 per year.
* $8,000 annually on Yellow Pages advertising and $10,000 on print ads in newspapers, magazines, coupon books, as well as commissions to drivers who bring in new business.
* More than $25,000 annually in vehicle maintenance.
"I don't take a dime out of my business," said Crowder, who reinvests his income into the operation.
For instance, the four cars he added since opening range in price from $20,000 to $200,000. The costliest is 40-foot model that seats 26 -- a favorite with rock stars and their entourages -- outfitted with leather couches, a satellite system for watching HBO and other programs, a rest room and a bar.
Limo companies typically are dominated by small businesses with one to five cars, said Francis J. Shane, executive director of the New Jersey-based National Limousine Association (NLA). Utah is no exception. There are about 20 limousine businesses in Utah and only seven operate more than one vehicle, according to Crowder, president of the newly created Utah Limousine Association.
While he thinks a small operator could make about $500 per month per vehicle after expenses, Utah Executive Limousine owner Fred Boam has not made a profit in the two years since opening the one-vehicle business he runs out of his Layton home.
Like Crowder, Boam's first limo was a used car he bought as a personal vehicle -- a six-passenger '79 Lincoln Town Car. It was not until friends urged him to go into the business that he bought a 1995 stretch limo for $23,000, beginning his company with an initial investment of nearly $39,500.
School dances are Boam's largest source of revenue. Like Crowder, he has yet to realize a profit; unlike Crowder, he has a full-time job in addition to his business. However, with his car paid off at the end of 2003, Boam hopes to see a small profit in 2004.
He advises others interested in the business to go slow and start as a side business, as he has done. "They're not going to make a lot of money out of it," Boam said.
Potential limo-service owners should realize they are providing a service beyond driving clients from point A to point B, NLA's Shane said. It's all about service.
"People are buying the experience. It's like being an entertainer. You're on all the time," Shane said. "They expect your best performance every time you're out with a customer. If you're a limo driver you're . . . creating an atmosphere for them."
kgurchiek@sltrib.com

The limousine business

* Minimum initial investment: Varies, depending on whether the vehicle purchased is new or used, and how much work is needed on a used vehicle. There is also $3,000-$6,000 in insurance per vehicle; business license and registration fees, and marketing expenses, including Yellow Pages ads and business cards. LCT, the magazine for Limousine & Chauffeured Transportation, advises business owners to know fixed costs, expenses per hour and per trip, and to identify which clients will pay more. Establish "a set of rates that takes into account your costs, what clients are willing to pay, and anticipated demand."

* Type of car to use: It depends on your market niche. The National Limousine Association (NLA) recommends a new or nearly new Cadillac Sedan de Ville or Lincoln Town car in a dark color for corporate transportation; for special-occasion customers, consider a stretch or super-stretch limo, or a sports utility vehicle, preferably in white. Among SUVs it recommends the Cadillac Escalade or Lincoln Navigator.

* Pricing: The NLA recommends researching your competitors' price structures and setting your prices at mid-market levels.

* Revenue: The number of vehicles a company has affects gross revenue -- an NLA survey showed nearly 78 percent of respondents with one to three vehicles expected to gross less than $100,000; only 18 percent expected to gross between $100,000-$499,000. Of those with four to 10 vehicles, nearly 60 percent expected to gross $100,000-$499,000.

* Risk factor: Low demand in Utah, according to Crowder.

* Resources: The nonprofit National Limousine Association in New Jersey, founded in 1985, http://www.limo.org or
800-652-7007; LCT, the magazine for Limousine and Chauffeured Transportation, http://www.lctmag.com; and Utah Limousine Association in Salt Lake, 933-9313; business start-up guide available at the Service Corps of Retired Executives (SCORE) offices. Call the Salt Lake City SCORE office at 746-2269 for more information.

Steve Walker
Azusa, CA
steve@capriceshop.com
http://www.capriceshop.com