If most people are asked to define a limousine, the first thing they would think of is luxury. This is because limousines are often associated with the rich and celebrities. Therefore it is not wrong to assume that starting a luxury business requires a sizable amount of money. However, many established limo companies such as Arizona Sedan and Limousine will attest to the fact that starting such a business is possible with the right plan and strategy execution.
Like starting any business, one of the most important steps is the initial research process. Doing proper research in the industry you want to venture into helps determine the best strategy, gauge the strength of your competition and make projections.
But even before you analyze the market, it is essential to remember that the limo industry has gone through quite the transition over the past couple of years. For example, IBIS, a chain of hotels, estimates that the industry has been growing at a rate of 8.3% annually since 2014. This is primarily due to the increase of millionaires and better lucrative job avenues, especially in the tech and internet business niches, which have created more opportunities. Furthermore, people are more ready to spend money on luxury experiences as the stigma associated with limo rides and the rich slowly reduces.
Competition from apps like Uber and Lyft, which also offers luxury cars, has led to more competition, lowering limo prices. While, on the surface, reduced limo prices may seem detrimental to the industry, the reality is that more customers can now use the rides, leading to a somewhat guaranteed market.
The capital needed to start a limo company can vary. However, research shows that you will need about $150,000 to start a small business and about $500,000 if you want to start with about 5 or 6 cars. A luxury car costs around $20,000 and another $5000, $10,000 for the detailing. If you want a stretch limousine, expect to spend about $60,000 to $80,000 per car plus the detailing.
You will also have other recurring expenses such as car maintenance, uniforms, garage space and parking fees.
After the initial research, where the aim is to understand and learn more about the industry, this next step still involves research but goes in-depth.
Target market: During the business overview step, the first thing you need to understand is your target market. As we have mentioned, the limo industry is growing. As a result, there is a lot more diversity now, and you can select which target audience works with you most. For example, you can decide to target commercial clients, which means your limos should be business-oriented. You may also decide to target parties such as birthdays, bridal showers and the like. In this situation, the theme should lean more toward fun, bright colors and music. You may even choose to target celebrities, which may mean your cars are more detailed and elegant making them scream luxury.
Type of Cars: There are different types of limos ranging from luxury sedans, SUVs, party buses and stretch limos. By determining your target audience, you can better understand which type of car you should go for. Parties need more space, and you would probably go for a party bus as it offers more room for your clients to enjoy and indulge. If you decide to target celebrities, stretch limos showcasing luxury might be the best direction for you. For corporate events, SUVs are your best bet since they show class and professionalism but also offer a fun environment.
Location: the location you decide to start your business will determine your clientele, how much you can charge and the best marketing approach.
Any successful business needs a good business plan. Many people who start a business as the sole investor, i.e., sole proprietorship, neglect to create a proper business plan. This is because they think a business plan is only meant for entrepreneurs looking for funding. However, a business plan will help you plan better and make better decisions. So what should a business plan include:
- Executive summary: This is perhaps the most important part of a business plan. It summarizes the business plan and carries all the major points.
- Target audience: this needs to detail who your services are aimed to serve and what characteristics they share.
- Structure: do you plan to have more people on your team? In this part of the business plan, you will lay out the personnel involved in the business and their roles.
- Capital, spending and projections: since this is a business, the capital you need should be carefully calculated and laid out. This should be followed by the spending, and finally, your projected returns.
Once you have your business plan, the next step is to register your business, making it a legal entity. Depending on your business structure, you can opt to register the company as a sole proprietorship, partnership, cooperation or a Limited Liability Company(LLC). The business registration process should also include business licenses and insurance to ensure you are working both ethically and legally.