Current statistics reveal that there are 12,000 plus entrepreneurs licensed to provide limo services in different states in the US.
Of these figures, approximately 8,300 are licensed as limo chauffeurs, while the rest operate as charter operators or motor coach drivers.
If you’ve ever wondered how to start a limousine business, you need not look further than the idea of charging fees to chauffeur corporate staff members during events.
A limo rental business is quite versatile, and its demand extends year-round. If you don’t mind working for long hours, starting a limo business may be a good fit for you.
It’s essential to point out that the success of your limo business depends on two main factors, a clear business plan and an effective marketing strategy. Keep reading to learn more about how you can make money with a limo.
How to Choose a Limo Business Structure
The business structure for a small business typically depends on your business’s particular needs. Often, small businesses use sole proprietorship structures and LLP since they are easier to operate and manage.
The most popular business structure for limo business is the sole proprietorship.
Nonetheless, when choosing your limo business structure, you’ll need to put the following in mind:
- Do you need liability protection?
- Do you need to attract investors in the future?
- Do you want to maintain a complex business structure like a corporation in the future?
The Initial Capital Required To Open a Limo Business
The good thing about starting a limo service is that you don’t have to spend sleepless nights figuring out how to build a company from scratch. However, like any other business or side hustle, you need the capital to get things rolling. The initial money you need to start a limo business will go towards buying a car or a fleet.
But wait a minute! Isn’t a limo a high-cost vehicle? Of course, a limo is a high-end car, not forgetting its glamor, glossiness, and fanciness.
The table below shows the money needed to start a limo business.
Cost of a new limo
|$50,000 and $100,000|
|Insurance cost ( depends on the carrier and region)||$600 to $1200 Per year|
|Parking cost||$500 per month|
|Marketing cost||$1000 to $5000 per year|
|Parking cost (depends on the region)||$100 per month|
|Toll and road fees||$500 per month|
|Other Charges ( Fuel surcharge of 10% carpet, service, and repairs)||$500 per month|
If you’re looking to start a side hustle out of renting or leasing a limo, the initial cost of buying a car can be intimidating, as shown in the table. Thankfully, despite the excessive costs mentioned above, starting a small limo business with limited resources is possible.
Did you know you can hit the road with an old SUV? Better still, you can borrow from friends and families and start the business halfway.
Let’s get started on how to begin your limo business with less than $2000 worth of investment.
How to Start a Limousine Business with Limited Resources
If driving is your passion and you can keep a good attitude while waiting, you have your job half done.
The next step should be choosing an ideal first car that fits your budget. An old SUV from the nearest yard might serve the purpose. On the other hand, if you already have a good credit rating, you can get a new vehicle without a down payment.
As you already know, starting a new company is not a walk in the park because there are multiple legal hurdles and regulations.
Luckily, you can join a limo membership association in your county, town, or state to help you navigate several bottlenecks such as;
- Registration of a new business
- Acquiring permits and licenses
- Opening an office to serve new clients
- Hiring staff
Opt To Lease than Buy
As mentioned earlier, with limited resources, you can opt to lease a limo as a start. Based on the demand, you can either opt for a short-term lease that will last between a few hours up to a few days or a long-term lease where you take full responsibility for the vehicle for a couple of years though you won’t own it.
A short-term lease option
Short-term leases require you to carefully read and understand the contract terms to determine when to return the limo. Failing to return the car in time can cost you unnecessary hefty end-deal penalties.
Having a large bill load when starting a business is the last thing you need. According to research, exorbitant expenses cause more than half of new businesses to collapse before their first birthday.
The driver’s availability is another point to consider, but if you prefer to drive the limo yourself, ensure you are permitted to do so by the lease’s terms.
Even though most personal insurance policies cover rental cars, you might also need to get rental insurance.
A Long-term lease option
A long-term lease allows you to shoulder all ownership responsibilities, often for a low monthly payment.
Be careful not to damage the car since this might cost you more than the leasing company. Take care not to damage the vehicle, as the costs could escalate and affect your profits.
Also, read the contract thoroughly to understand the lease terms and avoid surprises.
Worth noting, that the lease document may contain the following clauses;
- Monthly payments
- Your maintenance responsibilities
- The condition in which you must return the car
It’s not uncommon for a lessee to eventually purchase the vehicle! So, if you think you might buy the car, see if the company offers lease-to-own options.
Here are some of the things you need to consider when choosing a long-term car lease;
- Always test-drive the specific limo you’re leasing.
- Check the reputation of the company with which you’re leasing the vehicle with
- Don’t lease a car without a written contract.
- Compare and contrast the cost of leasing a new and an old car. You want a used or new limo.
- New cars are sleek, glamorous, and contemporary, but you’ll pay a higher price than an old car.
Create a Solid And Unique Brand Name
A strong brand is essential for your limo business; it establishes a positive reputation and image. Your brand represents what your company stands for and how the public perceives it.
A good image and high-quality services are essential for a new business because they help you stand out from the pack. Indeed, customers will be willing to pay a premium for high-quality services.
To build a strong brand, you must first establish a positive relationship with your customers.
Create a Business Website
After developing your brand, the next critical step is to design a logo and website for your business.
Due to a lack of website-building expertise, many new business owners struggle to create a website. While this was once a reasonable challenge, it’s no longer so with the advent of web technology.
Digitization has advanced dramatically in recent years, making most entrepreneurs’ lives much easier.
Here are the reasons why building your website should top your priority
- Even though it’s not cast in stone, as a rule of thumb, every legitimate business must have a website. Regarding online marketing, your industry, size, or location are important, as well as the content on your company’s website.
- Websites are fundamental for business exposure because they share your history and future vision.
- Your closest business competitors are already online, what’s holding you back?
- A professional website will attract top talent to your limo business.
- Even if you have social media accounts such as LinkedIn business profiles, Facebook pages, Instagram pages, and Twitter handles, these cannot replace a business website.
Choose Your Target Market
As was already mentioned, a limo is a high-end vehicle, and corporate clients are the right niche market. Fortunately, most corporate clients know what they want and how much it should cost in terms of leasing fees.
As a result, this niche greatly simplifies your marketing strategies. Further, many students are comfortable renting limousines for special occasions like homecoming dances and promotions and serving as commercial clients.
Even though these young and new customers may not be your primary focus, having your doors open to them is crucial since they can give your limo business a significant boost in income, especially on such exceptional occasions.
Nevertheless, finding your first customer can be difficult. Still, you can overcome this difficulty by networking with nearby limo companies and winning over clients.
You can also achieve this by proposing a long-term partnership with the prospective limo company.
You can persuade them to let you be their go-to contact during the busy season. Finally, be keen to offer a customized pricing list with a profit margin that works well for both of you.
Get the Required Business License and Permit
Even though you may not need a license to run a side hustle business, the nature of a limo business requires you to acquire an operating license and permit in your state.
Failure to have the license might result in punitive fines or, in the worst-case scenario, cause your business to shut down.
Every state has different rules when it comes to regulating limo services. Sometimes, the requirements for licensing and permit are based on your business activities, location, and government rules.
Generally, each business must complete an application for a Certificate of Authority from the state the business will operate.
The application forms provide the state with information on whether each limo has successfully passed inspection regulations regarding limo passengers’ capacity.
In addition, all drivers require a chauffeur’s endorsement on their licenses, while limos need commercial license plates.
You can contact your local Secretary of State’s office to obtain more information.
Acquire Business Insurance
Businesses, particularly those in the transportation sector, require insurance to operate safely and legally. Business insurance is essential because it protects your financial well-being in the event of a financial loss.
Many underwriters have developed various business insurance policies to address risk exposures.
New entrepreneurs are frequently unaware of the risks that their businesses may face. For your small limo business, you can take out general liability insurance, which is the most common and ideal for a start-up.
Open a Separate Business Account
Most small business entrepreneurs fail to separate their personal affairs from business activities.
It can be disastrous because you may use your out-of-pocket to settle business expenses. Moreover, you may have challenges accounting for every expense or evaluating your business performance.
It’s vital to have a specialized business bank account and credit accounts for your firm to overcome this difficulty. You’ll not only have an easy time keeping your records but also have accurate financial records.
Better still, learning how to build business credit might help when you need financing in your business from a financial institution, in addition to favorable interest rates and higher credit lines.
How Much Money Can A Limo Business Make?
According to Limousine, Charter, and Tour Magazine, the limo industry’s gross estimated revenue in 2014 was approximately $3.3 billion. An 11.5% climb over the previous year. The trend has been upward ever since.
The limo rental market has expanded significantly in recent years, reaching $11 billion in yearly sales, and is often profitable.
These figures demonstrate that with the right strategies and determination, you can also make a fortune in the limo industry.
Charge your chauffeur clients a fee for a specific amount of time to maximize your revenue. Also, if you have many limo models, you might consider setting different hourly fees for each vehicle.
While your charges will vary greatly depending on your location and the vehicle type, a regular limo should earn between $70 and $100 per hour.
In addition to regulating the minimum amount of hours over specific days or seasons, you may also consider raising the price for exceptional services like VIP wedding packages.
A limo rental business is typically profitable; in recent years, the industry has grown tremendously to hit $11 billion in annual revenue.
Even if the business may be slow initially, an efficient marketing strategy will be a game changer. Ultimately, your business approach will significantly impact your overall profit.
Here is a table to show how much you can make based on the type of limo you drive.
|LIMO Model||Passengers’ capacity||Earnings Per Hour|
|Luxury sedan||3-4||$50-$80 plus tip|
|Small limo||6-8||$70-$120 plus tip|
|Large limo||10-16||$90-$150 plus tip|
|Stretch limo||up to 20||$100-$250 plus tip|
|Stretch Hummer||up to 20||$150-$300 plus tip|
|Vintage Rolls Royce||up to 4||$500-$799 plus tip|
Here is how much you could make if you drove a modest limo for three hours after work, five days a week.
3 hours x 5 days a week x 4 weeks/month x $50/hour = $3000, so when you deduct expenses, you’ll profit $2000 per month.
Without a doubt, $2,000 a month is a decent amount that you may use to pay off your car or mortgage installments.
Your monthly income could increase to the five figures if you are hired for weddings and weekend parties. Of course, don’t overlook the tips!
How Can You Make Your Limo Business More Profitable?
Here are tips to make your limo business more profitable.
First, be flexible when choosing pick-up and drop-off hours. For instance, clients who arrive by plane in the wee hours might request a limo pick-up; as a result, you must be prepared to pick them up on time.
Secondly, ensure your car’s interior is tidy and spotless because nobody loves to drive around in a dirty car. A limo company takes great pride in its glitzy, opulent, and stylish exterior, which is a prerequisite.
Last but not least, use consumer feedback to enhance your services and regular reviews of business performance. This enables you to figure out how to make the next month more lucrative and work on areas that require improvement.
How to Market Your Limo Business Effectively
It might be challenging for new business owners to locate potential clients. Fortunately, customers search for everything using their laptops or smartphones in this digital age.
Digital marketing would be your best option for acquiring your niche market customers, particularly through social media.
Worth noting that you’ll find other players offering services akin to yours. However, you can differentiate your service from the competition by presenting yourself more appealingly and professionally.
Here, we’ll show you how to market your limo company by gaining visibility on the web.
Use of Search Engine Optimization
A website is the first step in digital marketing, where potential customers may learn more about your services. You may DIY or work with a skilled digital marketing agency to launch a website without spending a fortune, provided you obtain the desired outcomes.
Typically, SEO is used by experts to lay out your service website, and this approach has been successful in building a powerful online presence.
Use of Social Media Ads and Promotions
Social media is the only platform where you’re certain that your limo business will have an audience. With various social media channels, you can directly contact your customers to learn about their expectations, needs, and challenges.
Because most clients rely solely on online reviews and social media ratings to gain confidence in purchasing a product or using a service, a professionally managed social media platform can flood your limo business with new clients.
The main value of social media platforms is that they are simple and free to use. To drive traffic to your limo business website, you can use one or more social platforms such as Pinterest, Facebook, TikTok, Twitter, or Instagram.
Create a Robust Digital Presence
Promoting your limo business service online is the most brilliant way to gain clients. Like Gett Taxi or Uber, you can use apps to promote your limo service, so customers can connect with you easily using their smartphones or other personal devices.
Therefore, by making your limo company accessible online, you’ll increase consumer visibility and set yourself apart from the competition.
Use of A LinkedIn Platform
LinkedIn is a social media site whose potential as a tool for marketing is mostly untapped. Indeed, it can help you connect with professionals in the limo industry and customers.
Many business owners are unaware of the great benefits LinkedIn may offer businesses. As such, you may use your LinkedIn account to share material that promotes your business, spread the word about your services, grow your network, and connect with possible corporate clients or investors.
Things to Avoid When Looking at How to Start a Limousine Business
Starting a new business side hustle can be daunting, and a limo service business is not exceptional. As you know, all business requires a strong foundation to succeed. Otherwise, you may end up closing doors, which can have huge financial implications.
Here are some mistakes you should avoid when starting a new limo service business.
1. Wrong Marketing Strategy
Marketing should always come first in any new business. Leasing or buying a limo fleet is just one factor in your business success.
As the saying goes, “customer is king,” and without them, who would rent your fleet of vehicles? Therefore, customers should be at the heart of your marketing strategy.
Also, start small and gradually grow your new limo services business when the demand warrants it.
2. Avoid Starting Big
Starting small is always a good idea when launching a new business. First off, a used SUV would suffice more than going for pricey vintage rolls. High-end vehicles can easily bankrupt a young business before breaking even. So, hold off on purchasing the binged-out Hummers and party buses until you have established your brand and image.
3. Avoid Reliance on One Revenue Stream
Generally, walkaway scenes are perceived as the big profit areas for the limo service business. At the same time, most people are unaware that airport trips have proved to be the bread and butter of the car rental business.
Diversifying your revenue sources will keep your business afloat during tough economic times.
In addition to corporate events and weddings, successful limo businesses also offer funeral services, airport trips, and road shows as luxury transportation. Also, if you have a fleet of vehicles, think about running it 24/7.
4. Limo Service Is Not A Bed Of Roses
For those just starting in the industry, running a limousine service could seem like a piece of cake. The reality is that establishing a limo service is very different from going to parties, so it’s not all glitz and glam. Yes, it entails dropping off clients at the airport, comforting departed loved ones, or cleaning up after a work party.
If you’ve ever envisioned running your own limo business, keep in mind that it’s a service industry just like any other. In fact, running limo service businesses successfully calls for a high level of professionalism.
5. Avoid Hiring Fresh Graduates
Whereas it’s possible to employ recent graduates to work for you in other businesses, the limousine service sector is a little different.
In contrast to other sectors, you must train your drivers and chauffeurs. As an alternative, you can scout talent from various service sectors or work with reputable HR organizations to find qualified personnel that is confident and have a positive attitude.
In the services industry, human resources is a major factor in your business’s success.
Challenges Faced By Limo Service Companies
The business of providing limo services is a high-end one that provides a touch of sophistication and is popular with the affluent.
According to research, the transportation sector of the economy is seeing fast growth. However, despite how idyllic it may sound, there are some drawbacks to starting a limo service.
1. Wastage Of Time By Employees
When arriving at the pre-arranged pick-up location, drivers frequently waste time looking for passengers or waiting for traffic.
When this happens, the client and the business owner may suffer from unnecessary delays that irritate the client. Ultimately, wasted time hurts the business.
2. Tedious Reservations
One of the major challenges facing limo service clients is difficulty in finding and booking a limo ride. Additionally, you can only make changes to the reservation by calling or through websites that can disgruntle premium customers.
Limo service companies urgently need a solution that allows clients to find a chauffeur in no time and make reservations now or in the future to allow smooth and efficient service.
3. Difficult To Reach The Target Audience
Marketing is not a weekend affair, and limo companies must embrace technological advancement. In addition, service players need to adopt positive marketing strategies like offering promo codes for discounted trips. Without a doubt, they’ll start seeing passengers flocking toward them to book a limo for rent.
Some of these marketing offers must reach the target market at the right time to stay on the top of the customer’s mind.
4. Poor connectivity
Usually, the clients specify their needs and request the limo service by calling. Subsequently, limo service providers dispatch the ride request to a nearby chauffeur to complete the ride.
During this process, passengers cannot choose the chauffeur based on previous passengers’ feedback and ratings.
Worse still, passengers cannot communicate with the chauffeur directly, nor can they track the chauffeur’s location or get the ride’s status update immediately.
The horrible communication breakdown normally deters passengers from using the limo hire services.
Because of this, there’s a dire need for a technology solution to solve the dilemma. Therefore, it makes perfect sense to have an app that lets passengers know the chauffeur’s location before booking the limo. At the same time, they can get connected once the booking is confirmed.
What Skills And Experiences Are Needed To Build A Successful Limo Business?
Like any other business, previous experience in the limo rental industry may be helpful. Additional skills like academic and work experience as a mechanic come in handy in maintaining and repairing your limo cars.
Similarly, business management and basic accounting knowledge will help keep an eye on business profitability. In contrast, social media marketing will help develop advertising techniques relevant to a younger demographic and maintain them as clients.
Quality mentorship is one of the most important resources a new entrepreneur must have. As you start creating your business plan, you need to connect with a trusted mentor who can offer free business resources.
A business mentor or a support network is a significant success factor for new business owners since it’s the person and place you turn to during tough business times.
When to Build Your Team
Unless you want to DIY or have a single limo car, you may have to build a team from the onset. Your limo cars need a driver or chauffeur since they can’t drive themselves!
Additionally, when your company expands, and you buy more limos, limo rental services will rise sharply.
Otherwise, it would be best if you also kept a relatively small team, probably yourself and the driver, to maximize profit at the end of the day.
Though there has been much debate on how to make money using a limo business, statistics reveal that it’s the best and most profitable business in the car rental industry. Customers also prefer renting limos because they portray a classy image, particularly when attending events or business meetings.
Lastly, limo car rentals offer general public transportation options that combine elegance and convenience.
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