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How Much Risk Should You Take to Grow Your Limo Business?

Last updated on May 14, 2012 by Sozo Staff

In the right doses, risk can be a good thing. Without taking a leap of faith, successful entrepreneurs would never have gone into business in the first place. However, taking risks to expand an existing business can be nerve-wracking. Without challenging yourself, you’ll never grow – but if you bet the business, you could lose everything. How do you determine the right amount of risk for the future of your chauffeur business? The answer will be different for every company.

Will the Market Support Growth?

You might have the ability to expand your business, but will there be a market to support it? In the competitive limo industry, it’s a valid question. Perhaps you’ve been successfully serving repeat customers with a small fleet of town cars. Just because you buy a new fleet of stretch SUVs and party buses doesn’t guarantee you will find more clients. Are the needs of your target market already being met by a competing business? Is your market interested in the services you plan to provide? Before making an investment, make sure there’s a possibility of return. One way to reduce risk is by acquiring an existing business limo business for sale. By building on work already performed by the previous owner, you may be able to leverage new assets and a built-in customer base to reduce risk.

Is the Level of Growth Sustainable?

Many business owners dream of owning a rapidly growing company. However, it’s important not to expand so quickly that you lose the ability to manage growth. More isn’t always better. Let’s say that in order to get to the next phase, you need to take out a limo loan. After all, most expansions require an infusion of capital. But will you be able to afford making payments, or will they cut into cash flow? It’s easy to get caught up in the potential for new profit and forget that growth comes with new costs, even after accounting for economies of scale. If operations have grown considerably, will your current management be up to the task or will you need to expand your workforce? If more employees are necessary, you’ll need to determine how their hiring, training, and salary costs will affect limo business profits.

Are You Insulated Against Risk?

Maybe your plan is to expand your limo business in order to become more diversified. But you might want to consider becoming more diversified before you expand. No matter how well you plan for growth, the process can lead to some fallout. If you already offer several services to a wide variety of customers, your business can probably survive losing a few contracts. However, if your success is largely dependent on a service you provide to one or two major clients, making any sudden changes will put the viability of the entire company at risk. Your business might still benefit from growth, but it may be wise to mitigate risk by first decreasing customer concentration or by spreading out your expansion over a longer period of time.

Growth should allow your company to move forward, not hold it back. If the costs of moving into new territory are weighing you down, expanding through acquisition – whether by purchasing equipment or an entire limo company for sale – is one method of managing risk.

Filed Under: Transportation

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