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Lessons Learned

Limo service rebounds by tackling overhead

Moving to a smaller office, partnering helps cut expenses

By Eric Pope / Special to The Detroit News

WARREN — With the profits of limousine companies squeezed in the past two years by tighter business travel budgets, the economic slowdown and spiraling insurance costs, Sue Jarvis of Aristocat Limousine has found that the key to survival is cutting overhead expenses.

“I’ve learned that I need to have a better handle on the numbers and pay closer attention to monthly expenses and overhead,” she said. “I look at every bill and ask how much I can save on this.”

Jarvis scored a cost-cutting coup earlier this month when she moved her 15-vehicle operation from Troy to the newly renovated facility of Lavdas Limousines off 12 Mile in Warren. She estimates she will save $40,000 a year by renting a small office and using the maintenance facilities of a competitor.

“It’s very unusual for two large limousine companies to come together, but it’s a great idea,” said Rick Greiner, president of the Great Lakes Limousine Association. “I think it’s going to be a trend to offset costs.”

Higher costs — especially for insurance — have put about 5 percent of Michigan limousine operators out of business in the last year, according to Greiner.

Under their agreement, Aristocat and Lavdas will send all business they can’t handle to each other before calling other competitors.

“It’s a win-win situation. We have the vehicles and she has the bookings,” said Nick Lavdas, who has a fleet of 40 vehicles in addition to his jewelry and real estate businesses.

Even though corporations have cut back, business travel still accounts for 51 percent of limousine revenues, according to “Limousine and Chauffeured Transportation” magazine. Weddings and proms account for 22 percent and “nights on the town” for 16 percent.

Aristocat gets a higher percentage of revenues from nights on the town, especially since Michigan tightened its drunken driving laws this year.

Before her agreement with Lavdas, Jarvis was generating 10-15 percent of her revenue by swapping business with competitors. Those arrangements enabled Jarvis to shrink her limousine fleet from a peak of 22 in 2000 to 15.

She also reduces overhead by selling her old limousines when business slows down in January and buying replacements when business picks up in the spring.

There was a time when Jarvis didn’t share business because of several bad experiences with some competitors. But after 17 years in business, she has become part of what she calls a close-knit group of companies. “It took a lot of time to develop these relationships,” she said.

Insurance is one expense Jarvis can’t get under control — her premiums have doubled in the past two years. In the past, she could save money by getting eight or nine quotes, but now there are fewer insurers willing to cover limousines.

Jarvis, who has a marketing degree from Oakland University, devotes 20 percent of her time to drumming up business. She tries to meet potential clients in person and recently began going on joint sales calls with a hotel marketer.

But she also has found investing time and money in a Web site pays off. Now that half her new business leads come from the Internet, she plans to cut back on Yellow Pages advertising next year.

For all the time she spends on reducing overhead costs, Jarvis said the key to success in her business is providing excellent, on-time service in a clean car. “I tell my drivers that if they’re not 10 minutes early, they’re late,” she said.
Eric Pope is a Metro Detroit free-lance writer.