I’m continuing the story of my days with my limousine service company. I find there are so many valuable lessons to be picked up from that journey, and it’s my hope that you may find some value in this recount. If you look for the takeaways you can use these successfully in your business too.
When I purchased the limousine service business, I did so with 100% borrowed money. Not only did I borrow 100% of the purchase price, but I even doubled the loan so I could bring in a couple of new vehicles to the fleet, so as to announce the new ownership with a bit of a splash.
Although, I was CEO of the large car rental business, and paid a decent salary. I honestly did not have the means or the extra funds to do much of anything.
I say the salary was decent, because I do not wish to seem ungrateful, but fact of the matter was that the salary was not in line with what it should have been in the market place. I accepted it, because being so young, I was to large degree looking more for opportunities, and learning the ropes.
But as I stated, my salary did not leave me with surplus funds after paying for my expenses and not least my overextension of expenses (mortgage) living on a very nice luxury farm North of Copenhagen.
In other words, I needed to make this work. I needed to get the limousine service business to turn profitable and at a decent rate so I could fulfill my obligations to the bank and the loans from them, and so that I could be pleased with the risks that I took on by purchasing the limousine service business.
As I mentioned in the previous edition of this newsletter, I had to run the limousine service business on my own time. As it happened the business I took over had an operational management team, so it appeared I was in luck.
I had several data points and past historical results in the form of Profit & Loss Statements, and had studied these in depth.
Results had honestly been rather lackluster. While the business had the best reputation in the market space, was the oldest limousine service of the country and the largest of its kind to boot, the net profits were pretty much non-existing.
It was evident that something needed to change. I went to discuss some of these matters with the daily Operational Manager of the limousine service business, and I asked if we could perhaps introduce a price increase of 10%.
The response was a very strong: “No!”
In fact, he said, we would lose all the clients if we did that.
So, I then asked: “Well, what about 5% then?”
But the answer was pretty much the same:
“We will lose all the clients if we were to do so.”
I left our little meeting a bit disappointed.
If memory serves me correctly, within 3 weeks I fired him and the assistant in the office.
Too much was riding on this investment for me, and it was evident that changes need to happen, and for that I definitely needed a team that was willing to see these changes through.
The former Operational Manager had run the business for a number of years leading up to my take over, and it was evident that he wanted things to be run the same way as he had run them up till this point in time.
Nice guy and all, but this just was not going to cut it and I felt it was absolutely necessary to make the harsh call and fire him. I needed someone who could see a vision and get excited about it, and make some of the necessary moves towards making such vision come to fruition.
To me, it seemed obvious, that I was not going to find such in this guy, and that I would be stifled in my pursuit all the way going forward.
Allow me to say, I have never enjoyed firing anyone. I don’t think anyone in their right mind could enjoy firing anyone, regardless of cause. I have had to fire quite a few in my time, and I believe it is inevitable for a CEO or a business owner to go through from time to time. But pleasant it is not.
Here I was with new business, new grand loans and heavy obligations, a business, vehicles, and drivers, and couldn’t personally sit and handle the business myself, as I had to tend to my day job in the car rental company (see last edition of this newsletter), and no management of the business.
I had found via a recommendation, I believe, a guy to man the position. He came from the insurance world and much like me had never run a limousine service business. But both he and I were super eager to get something going and to make a small dent in our little part of the world.
We didn’t know any of the clients of the business, and they didn’t know us. This was mostly a corporate limousine service business, so the business was heavily reliant on repeat business, and relationships.
We didn’t know any of the operational “how tos” of the business, and we didn’t know the limousine service drivers.
But I guess we figured: “How difficult could this be?”
My new guy was excellent.
We would have many calls on the phone, during which he would give me a status quo report and during which I would relay what I felt we needed to do, and how I wished for us to proceed. He would then keep a hold of the daily operations and the troops, and to best of his abilities go and carry out much of my visions and guidance.
I worked intensely on our new prices, and did a huge number of changes.
When all was said and done, my prices didn’t increase by a mere 5% or a mere 10%. In fact some of the rates increased by some 40-60%.
You might think this would get a lot of our clients to sit up in their chairs, however, when all was said and done, we only really lost one client. This was a client with limited amount of revenue for us, and although I was sad to see them go, our changes were necessary and we had to stay the course.
There were a lot of things I did in terms of the prices, and of course, there were a few things I did in order to prevent too many clients from fleeing. I will talk more about this in the next edition next week.
