Have you ever wanted to start a limo business? Do you think you know what it takes? Whether you are just curious or seriously considering the idea of running a limo service business, you are in the right place. We will overview the basic things you should know before you start such a business.
Overview of the limo industry
You have to understand the limo business well if you want to start one. So, you should definitely read up on it a lot. But here are some basics.
In this business, you will offer limo services to customers. Customers can include companies that deal with business people; individual people celebrating various occasions; celebrities using limos to get from one place to another. You could be both the limo owner and the chauffeur. Or you can have a whole fleet and hire many chauffeurs.
The limo industry is growing. It experienced steady growth from 2014 to 2019. Of course, it was affected by COVID-19 and experienced a decline in 2020 with the lockdowns. Read this extensive report on the industry in the US by Ibis World to learn more.
In this business, your customer is an affluent person. Often, customers only want limo services for special occasions. So you likely need to have a wide customer base to run a successful business. Corporate clients are considered good clients in this business because they are experienced and know their needs well.
Useful skills to start this business include auto knowledge, driving skills, navigational skills, interpersonal skills, and attention to detail. With auto skills, you could save on maintenance costs; with driving skills, you can be a chauffeur yourself.
Finally, all people want to know how much you can earn. The average hourly price for a limo is $75-150 in the US. It depends on the limo, time of the rent, location, etc. Read more about limo prices here.
What you need to research before you start a limo business
Research is crucial when starting any rental business. A limo business is no exception. You need a good plan and strategy to run a business well. And you need to research to create such a plan. Let’s overlook a few points of what you should find out.
Know about competition. What kind of limousines and limo services can you get in your town? Perhaps no one offers party busses. Maybe there are not enough shuttle or airport services. Of course, if your town is small, it might also not have many prospective customers. If there is no need, it can be very hard.
Do not try to have a little bit of everything. You can’t have what everyone wants because you probably do not have enough money to get so much money. Find a niche. Even a pink limo can be a niche thing that attracts some people. After all, it worked for the successful limo company Heaven on Wheels, which owns the only pink limo in North Texas!
Also, think about your buyers. Imagine them, maybe describe them to yourself. Customers can be companies, individual people, celebrities. Think about what will be your first buyer, as well as second and third buyers. You have to know their problems and provide solutions to their problems.
Another highly important thing to research is insurance. Read on to learn about it.
Expenses when you start a limo business. Insurance and inventory
There are always expenses when you start a business. And a limo business is not the cheapest one to start. Two main expenses are insurance and inventory.
It can take you many months to find good commercial insurance. A good idea is to find an insurance broker who writes insurance policies. Brokers contact major insurance companies which might not talk to you without an agent. Know about insurance requirements in your area, too: there are usually at least minimum insurance requirements.
Then, of course, you must have inventory for your limo rental business. You need to buy limousines unless you plan to partner with people who own them already. According to Truic, one limo can cost you $50,000 to $100,00. Insurance of one vehicle can be between $600 and $1200. So the costs add up quickly. If you have cash, it will make things easier and maybe much cheaper. Loans are quite hard to come by now. You can consider buying used vehicles, which cost less. However, they have more wear and tear, no warranties, etc.
Other costs include storing vehicles, maintenance, paying drivers. So if you have your own place to store limos, you can save quite a chunk of money. Auto skills let you do basic maintenance yourself and also save. Drivers will usually be paid by the hours they have been working.
Overall, according to Starting Your Business, you need $150,000 to start a small limo business with a few vehicles and drivers. However, a large business with a whole fleet can cost $500,000 to start.
One thing you cannot do without: marketing
Marketing is super important. The internet is the best place to market your business. So, you need to have a good website. We recommend building one with WordPress. Here are the best car rental plugins and car rental themes if you decide to go with WordPress. Make sure your website looks good and is SEO-friendly because it will probably be your best form of advertising.
But you have to advertise as much as you can. Facebook is a good place to do that. For example, you can post on various groups. Try to list your business wherever you can. It will not only let others find you but will also help your website rank higher.
Steps to starting a limo business
We discussed what you should consider before starting a limo business. If you decided you want to do it, here is a list of the steps you have to take.
- Have a business plan. You need one both to get a loan and to increase your chances of success as it really helps.
- Form a legal entity. The main business entities are sole proprietorship, partnership, corporation, and LLC. Find out which one works best for you.
- Name your business. A good name will help you a lot. Read more about finding a good business name here.
- Find financing. If you do not have lots of cash yourself, you need financing. You need to have good credit and invest at least 15% yourself for a loan.
- Register your business for taxes. You need to apply for EIN (Employer Identification Number) to register your business.
- Open a business account. A business account will help you protect your personal assets.
- Get the permits and the licenses. If you do not get the necessary permits, you will get a big fine or might even be shut down. So read up on regulations in your area to avoid it.
- Get insurance. Insurance will protect your business if a covered loss occurs. You can start with General Liability Insurance if you are unsure with which to go.
- Set up accounting. You need to record your expenses and income to track your performance.
- Hire employees. As your business grows, you will need to hire employees. That means not only paying wages but also compensation insurance and other expenses.
- Create your business website. As we mentioned before, a website is critical for marketing.
We hope that now you know more about starting a limo business. Maybe you need help with your website, rental business, or just want a place to post your ad without being ripped off in commissions? Then contact us now!