Last Updated on May 14, 2020
The limousine industry appeals to many people. Maybe you appreciate fine luxury vehicles, or maybe you enjoy providing top-quality service. When you take the step to start your own limo business, you’ll enjoy the opportunity to drive your success and grow your business. While there will definitely be some challenges along the way, a well-managed limo company can grow and expand into an exciting business.
Limo businesses provide transportation services to the public, offering convenience and luxury. Customers may include corporate customers using the services for business deals, customers using the limos for events like weddings or proms, and even celebrities who may use limos as a more standard mode of transportation.
Limo businesses can be equipped with a wide range of vehicles, from the impressive stretch limo to more reserved yet equally luxurious towncars, SUVs, and luxury sedans. A limo business owner may be the only chauffeur, or businesses can grow to encompass entire fleets of limos and drivers.
From 2014 to 2019, the taxi and limousine industry, which are frequently lumped together for analysis purposes, have undergone steady growth. According to IBIS World, the industry experienced an 8.3 percent annual growth rate during the period, and the number of businesses increased to 1,229,702. Industry employment also grew to 1,117,925, and by 2019, the taxi and limousine industry is expected to bring in $28 billion in revenue.
The limousine and taxi industry has been largely affected by the development of apps like Uber and Lyft, which have allowed more independent operators to enter the market in the place of traditional taxi services. Additionally, the industry is largely affected by increases in consumer spending and disposable income. With the economy having improved over the last five years, the limousine industry has seen corresponding growth.
A tragic limousine crash which took place in Schoharie, New York in October of 2018 resulted in the deaths of 20 people and has prompted an increased focus on safety and regulations in the limousine industry. The industry is likely to see more rigorous limousine inspections, the possible impounding of vehicles that fail inspections, and potentially even the requirement for all limousines, no matter their age, to be equipped with seat belts. Numerous bills have already been proposed – including a potential ban on stretch limousines altogether – in response to this tragedy.
Who is the target market for your limo business?
A limousine business will often target affluent adults in need of transportation to special events, like concerts, awards ceremonies, and even business meetings. Occasionally, teens may also be a target market for events like proms.
Most customers hire a limo business only on occasion, and while the same customer may use the same service again in the future, limo businesses typically need to develop a wide customer base to stay profitable. Some limo businesses may develop specialized markets, such as by providing transportation for celebrities or targeting private plane owners who need transportation to and from a local airport.
Skills, experience, and education useful in running a limo business
While it’s possible to start a limo business without any formal business education, certain skills and experience can increase a business owner’s chances of success.
Driving skills and experience. Strong driving skills and a clean driving record are a must for anyone who will be driving a limo. Drivers of super-stretch limousines will need a commercial driver’s license. In most states and situations, limousine drivers need a chauffer’s license, which usually involves a review of the applicant’s driving record and a background check.
Interpersonal skills and etiquette. The limo business is a service-based business, and expectations are high from the booking to the actual transportation. Good interpersonal skills and etiquette are essential in building a limo business, and the ability to solve problems and think on your feet is also important.
Navigational skills and knowledge of the area. A knowledge of the local area is important, whether taking reservation calls or driving passengers to their destination. Limo drivers should have the ability to use navigation systems and read road maps to find locations they may be unfamiliar with, especially on long-distance trips.
Attention to detail. A limo business is all about details. Whether cleaning and maintaining a vehicle or ensuring that the driver arrives on time, a business owner needs to have attention to detail to succeed.
Auto knowledge and skills. A business owner who can do basic maintenance on their own vehicles will save money over the cost of sending vehicles out for maintenance at a garage. Auto knowledge is also essential when buying new vehicles and being able to spot a good deal.
Costs to Start a Limo Business
The cost to start a limo business will vary depending on the business size, the limousines used, whether you rent or buy vehicles, and whether you hire a fleet of drivers or keep the business small at first. A small business with a few vehicles and drivers can cost $150,000 and up, while a business with a fleet of five or six vehicles and drivers will cost closer to $500,000 to start.
Common startup costs for a limo business include:
- Vehicle purchase or rental
- Driver uniforms
- Garage or vehicle storage property rental
- Auto detailing supplies
Steps to Starting a Limo business
Step 1. Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
Many limo businesses operate out of the owner’s home or in a rented garage or storage facility. If the vehicle is stored on your property, be sure to review your homeowner’s policy as any damage may not cover business assets.
It’s typically preferable to have a location that is close to the market, which is often corporate executives as the cost to operate and wear & tear can be high.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
Limo businesses must hold several licenses and permits to operate. Besides the business’ licenses and permits, business owners need to ensure that all of their employees have valid driver’s licenses, chauffeur’s licenses, and any other additional licenses or permits required for the type of vehicles being driven.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a limo business is another. Funding to start a limo business can be difficult. In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
Because most customers will only have an occasional need for limo services, limo businesses need to embrace an ongoing, broad marketing push. Marketing costs for limo businesses will vary according to the type and volume of marketing. Many businesses focus on paid advertising and targeted online advertising, while others may sponsor local events, use radio advertising, or even send out direct mailers. Some businesses may develop partnerships or referral arrangements with local complementary businesses, like banquet halls, hotels, or airports.
Step 7. Get Insurance
Limousine businesses will need multiple types of insurance policies for full coverage:
- General liability insurance protects the business in case a customer is ever injured while on a trip or while getting into or out of the limousine
- Commercial property insurance can cover items like the vehicles, the garage, and any office equipment that could be damaged or lost in a fire or other event
- Commercial auto insurance is also a must for a limo business. This insurance offers protection against damage and liability that extends beyond the coverage of a personal auto insurance policy, and may cover vehicle repair costs, medical fees, and legal fees that result from an accident.
- Workers comp insurance is required if a business hires drivers and employees and covers expenses like lost wages or medical bills if an employee is injured while on the job.
Don’t forget to consider additional types of auto insurance, like collision coverage or uninsured driver insurance to ensure that your business vehicles are covered in the event of an accident.
Policy costs will vary according to a business’ location, the value of the limousines, and the value of its property, such as the garage. To get the most accurate idea of insurance costs, request quotes from multiple companies. When reviewing the quotes, compare variables like deductibles, coverage limits, exclusions, and the overall cost of each policy.
Step 8. Hiring Employees
A limo business may hire a handful or a whole fleet of drivers. According to PayScale, limo drivers make an average wage of $11.69 per hour, or a salary of $45,000.
Hiring employees means more expenses than just salaries, though. Be sure to also budget for workers’ comp insurance, unemployment insurance, health insurance contributions, and paid time off for full-time drivers.
Related: Hiring your first employee
Every state has specific requirements and regulations when starting a business. Select your state below to find the guide to starting a business in your state.
How much can you potentially make owning a limo business?
The income of a limo business will depend on the number of vehicles in the fleet, the business’ location, the number of years the business has been in operation, and more. Limo services can command between $90 and $130 per hour per vehicle, and most require rentals be a minimum of three to four hours. A business’ rates, bookings, and expenses will all affect its profitability.
Things to consider before starting a limo business
The limo industry can be a competitive one, and many of the areas with the greatest demand for limo services already have many existing businesses. It’s important to conduct market research to make sure that the local area has enough of a demand for limo services to sustain a new business.
Starting a limo business can be an expensive undertaking, so many business operators start by serving both as the business owner and as the limo driver. This strategy can work to an extent, but be prepared for a busy schedule as your business becomes more popular. Nights and weekends usually have the highest demand for limo services, so your personal schedule will need to change to keep up with the business needs.
Working as your own driver will also only work for so long, and if multiple customers request transportation on the same day at the same time, you might be turning down business until you’re able to expand.