New Limo Business/OWNER IS THE DRIVER/Need Advise

[mrstexas]

We recently partnered with a friend to start a limo business. He's had a limo business before but when the economy crashed back in 2008 the business went into a major slump. Now he wants to start it back up but with a new company name and of course with us in it. I'm assuming he needs the capital to help start up the business.

I have so many questions....

Our partner IS the driver. He is the only one. He mentioned that he would add up his hours of driving so that he can get paid at a later date. How does that work? I'm use to the owners getting a percentage AFTER all bills/expenses are paid as a distribution and transferred into their personal accounts. I'm not understanding how this works.

Can someone help explain this to me? Thank you in advance!

Mel from Texas....

[Limo Insurance King]

To begin with, there was a fatal flaw in the previous business plan. What have you done to correct it and protect your investment? Secondly, you are going to have to pay a chauffeur to chauffeur and it doesn't sound like you and your other partner that makes the "we" is interested in doing the job. By having one of the partners work as a chauffeur, the business will save the cost of employing a person. In addition, it sounds like he wants to delay his pay for the better of the company.

You are right that in many businesses, investors are paid profits, however if you have an active partner, they typically receive draws, salaries, or wages if they are key personnel, which in this case he will be.

[mrstexas]

Thank you for responding. However, it's not that ”we” are not interested in helping. I've never driven a limo nor has my husband. Our partner has been driving his own limo on his own for several years. We are more than willing to put in the work but again this is all new to both my husband and I. Trust me I know he is helping the business by driving but he said that he was going to add up all the hours he drives to get paid for that as well. That's where I got confused. So he is an ”active” partner? What does that exactly mean? My husband is going to learn to drive and I will help manage the finances. So what does that make us?Therefore you're also saying he should submit a draw for his hours worked? How does affect the taxes?Thanks again...Mel from Texas

[mrstexas]

Thank you for responding. However, it's not that ”we” are not interested in helping. I've never driven a limo nor has my husband. Our partner has been driving his own limo on his own for several years. We are more than willing to put in the work but again this is all new to both my husband and I. Trust me I know he is helping the business by driving but he said that he was going to add up all the hours he drives to get paid for that as well. That's where I got confused. So he is an ”active” partner? What does that exactly mean? My husband is going to learn to drive and I will help manage the finances. So what does that make us?Therefore you're also saying he should submit a draw for his hours worked? How does affect the taxes?Thanks again...Mel from Texas

[O5EXECL]

so your active partner wants regular pay and profits ? so what does that leave you with ? definately have to sit down and figure out exactly what your responsibilities are going to be and a fair system that all of you can prosper from. it also depends on how much money your partner is investing . if you and your husband are providing the credit and most of the $ for the fleet then your profit % should be higher. hope you figure it out , goodluck!

[mrstexas]

Thanks for responding O5EXECL. That's what I'm asking. So he wants regular pay and profit? Does that make sense? Is that even right? Also does anyone know a good profit % I can apply? As far as responsibilities our partner will be driving until we find another driver, my husband will also drive, and I will handle calls, bookings, and finances...Thank you so much for your help!

[LGAL]

This is a no brainer. You have to pay someone to drive the car. Doesn't matter if it's the owner or someone else. You have to pay the driver either by the hour or a percentage of the total. You add that amount to the trip expenses, (gas, insurance, etc.), deduct that from the total fare and then divide the remainder among the partners according to your pre arranged agreement. You do have an agreement don't you?

[Billy Bob]

You are about to make very bad decision.

This is what I would recommend.
Spend $2,000.00 to attend a Limo Show in Atlantic City or Las Vegas.
(This should cover two Show Passes, Airfare and Hotel.)

Purchase ten back issues of Limousine Magazines.
Find a company in your area, not your local market to talk to. Do not listen to individuals in your local market.

I can remember one of the local limo companies said to us one day, if you would have asked, we would have told you not to buy a Silver Limousine.
We did not buy just one, we bought two. This was one of the best decisions we made to service the Wedding market and Corporate America. The color decision was made in 2005. We were ahead of our time.

They also would have told us in 2000, when the company started, no one buys a custom shuttle van with captain’s chairs. Again, ahead of out time and now you will see these Executive Custom Vans all over. The greatest thing since sliced bread.

Call Tom Mazza, (215-973-8201) he and Scott Solombrino are some of the great visionaries in the industry today.

Purchase a Limo DVD program, then pay him for phone consulting to answer your questions.

Your program where your partner will just keep track of his time is not going to work. The hours worked will exceed your investment in a matter of months, leaving you possibly with no money and loosing ownership in the company.

Bill

[mrstexas]

Ok I think I'm getting conflicting answers. On one hand it doesn't matter if it's the owner they too need to get paid. On the other I'm getting they should not. I need clarification. As far as agreement goes we are still working out all the details and that's why I am here. That's why I joined this forum so I can get I better idea from all of you who are obviously much more experienced. So can someone clarify?? Again thanks...

[edwinslimo]

If your friend is a equal partner all he is entiteled to is %50 of all profits.He already benifits from doing all the driving because not hiring a driver saves the company money hence making him money.Remind him that you do all or most of the paperwork and if he is still not happy then maybe clean and detail cars.There is no reason to pay him a salary

[Wade Randolph]

I definitely think he should be paid for driving.

[mrstexas]

So three nay three yay....split decision

[mrstexas]

And yes we are equal partners. I'll be doing most if not all the paperwork. My husband will drive and is backing him financially. We are planning to get a driver but again we are working out all the details but as of right now our partner will drive. So should he just get a higher % of profit? I on the other hand am not looking at getting paid hourly or a salary. I figure as part owner that's my job.

[BirmLimo - Michael Birmingham]

keep in mind that your net profit is only going to be around 10 - 12% in this industry. Spiliiting that up 2 - 3 ways, with only one car may not amount to enough to make it worth while. Not sure why 3 people are needed for a 1 car operation. I, like most on this forum did everything until we hit 5 - 8 cars. Anyone on here can validate that claim.

Lets be real optimistic. Lets say that 1 car does $ 10,000 / month in business( which i dont think is possible unless you run at least 5 cars to get enough clients )

Thats $ 120,000 year in sales. Net profit of about $ 12,000.

Is that really the best way for you to make $ 6,000 / year ?

Lots of risk, lots of headaches, lots of BS.

Not trying to talk you out of it, but I think most people suffer from delusion about how much money we in the industry really make. Just because we have nice cars, does not mean we are rich. They are just tools.

[Fairfax Limo]

keep in mind that your net profit is only going to be around 10 - 12% in this industry. Spiliiting that up 2 - 3 ways, with only one car may not amount to enough to make it worth while. Not sure why 3 people are needed for a 1 car operation. I, like most on this forum did everything until we hit 5 - 8 cars. Anyone on here can validate that claim.

Lets be real optimistic. Lets say that 1 car does $ 10,000 / month in business( which i dont think is possible unless you run at least 5 cars to get enough clients )

Thats $ 120,000 year in sales. Net profit of about $ 12,000.

Is that really the best way for you to make $ 6,000 / year ?

Lots of risk, lots of headaches, lots of BS.

Not trying to talk you out of it, but I think most people suffer from delusion about how much money we in the industry really make. Just because we have nice cars, does not mean we are rich. They are just tools.

Where is the LIKE button when you need one. You hit the nail on the head.