San Francisco Limo
San Francisco Limo is a limousine service serving San Francisco, Burlingame, and San Jose with top quality transportation services using late model limousine sedans. The company has been formed as a California corporation with John Smith and David Jones the sole owners. San Francisco Limo will generate $52,000 in net profit by year three.
The transportation/limousine in San Francisco is quite competitive. Airport transportation as well weddings, prom nights, and “nights on the town” are quite competitive and margins have eroded. San Francisco Limo will serve these niches to eliminate downtime of the vehicles as well as building a loyal customer base. The true niche of the transportation business that San Francisco Limo will concentrate on is private school student transport, sightseeing trips, and elderly transportation. These niches have higher margins and are less price sensitive. There are 10 private schools in the area with 3,502 students. For the sight seeing market, there are 25 B&Bs and 44 hotels/motels and for the elderly transportation market there are 19 retirement and assisted living facilities in the area. These three markets have 5% growth rates and 2,000; 2,700; and 1,816 potential customers respectively. As mentioned earlier, San Francisco Limo will serve the Burlingame and San Jose in addition to the San Francisco market. While it is common knowledge that there is a large amount of money flowing through the city to a large degree from the boom of the Internet age, Burlingame is also quite affluent. There are 14 surrounding communities for Burlingame, with 3,632 household incomes in excess of $150,000, the precise demographic that uses limousines.
The Business Model
San Francisco Limo will launch the business at a conservative rate. It currently has three sedans. To control costs, the office is home-based and the vehicles are stored in a rented garage. Office space is a premium in this area so the home-based approach will be maintained as long as it is feasible without compromising custom service.
Currently, the industry average for revenue per vehicle is $4,614 with San Francisco Limo only generating $2,500. This figure needs to drastically rise in order for San Francisco Limo to grow and remain profitable. This below market revenue average is a function of a small customer base and participation in competitive niches. Over time both the customer base and penetration in less competitive markets will increase and the revenue per car should grow dramatically.
The Management Team
In order for the company to be successful, the business must fully leverage the experience and insight of their management team of John and David. John is an eight year veteran of the transportation industry. For the first three years John was a limo driver. For the next five years he was elevated to manager of a 12 car limo fleet. It was during this five year tenure that John really learned the majority of his industry knowledge and insight. While David is an equally seasoned manager, his background is in logistics for a shipping company. David has spent nine years at Airborne Express in their logistics department. This experience was instrumental in the development of David’s management skills and gave him the necessary confidence to start his own business.
San Francisco Limo will grow at a reasonable pace with both principals working hard doing a little bit of everything. Year one revenue is forecasted to reach $92,000, jumping to $225,000 by year three. Net profits will be $52,000 by year three, 22.94% of sales. Profitability will be reached by month six.
The objective of this business plan is to increase the monthly revenue per vehicle from the present $2,500 to $6,250 by the end of 2001; this number will be 35% better than the statistical national average, $4,614, in the limousine industry for sedans in the Northern California Region.
This will be achieved by:
- Decreasing the company’s reliance on competitive airport transfer type business.
- Increase penetration of more lucrative market segments close to the home base.
- While keeping the most profitable part of the CATA contract, find an even more profitable use for that vehicle.
The mission of San Francisco Limo is to become the premiere hourly hire sedan service within a 10-mile radius of Burlingame. We hope to serve a repeat clientele who demand–and can afford–reliable, secure service from drivers with detailed knowledge of the area.
1.3 Keys to Success
- Fleet vehicles must be replaced often to eliminate downtime as well as to maintain an image consistent with the company’s mission statement.
- Superior telephone skills, stressing quick recognition of the client, are essential in fostering the all important repeat clientele.
- Especially true for limousine companies with small fleets, the most import key to success is finding a repeat clientele willing to hire car and driver for a minimum of two hours. While the airport transfer business is booming and there appears to be enough for everyone, it is important to find segments of the market that complement this business during hours when airport transfers are slow. It will also be beneficial to find market segments that are brand loyal (less price-sensitive) which result in longer fares of a less-hectic nature.