Achieving Goals beyond “Mere Survival” During an Economic Crisis

As the ground transportation industry anticipates the impact of the current financial crisis and a potential government bail out, many business owners are preparing for the worst.

Survival is priority number one during this historic economic challenge.  But as many business owners learned from 9/11, limiting performance expectations to “mere survival” can greatly increase the total costs of surviving a crisis.

What is “mere survival” defined?  Mere survival can be defined as a business owner doing whatever possible “in his or her personal judgment and power” to live to fight another day.

CTA has tremendous respect for the dedication and sacrifice we see business owners demonstrate daily for “mere survival.”  Unfortunately, because of the private nature of our industry, many business owners have very limited (if any) access to chauffeured transportation best practices, work flows, & processes to help guide them through day to day business; much less a “historic” financial crisis. As a result, many owners, because they have no way of knowing otherwise, establish extremely low expectations for being able to achieve much beyond survival during a crisis.

Limiting performance expectations to “mere survival” during an economic crisis can dramatically increase the costs of surviving and prolong the recovery period once the financial storm has passed.

Some of the “costs of surviving” and examples of prolonged recovery from 9/11 included:
- Owner forced to postpone retirement 7-10 years to fully recover lost business and lost business value.
- Owner takes on 51% majority partner to infuse much needed operating cash and in process loses control of his/her 20 year old company.
- Owner drains retirement fund to keep doors open. Forced to cancel plans to travel around the country with his wife. Postponed industry exit indefinitely.
- The stress associated with managing post-crisis debt forces owner to sell the business for much less than it is worth to save struggling marriage/family.

All the scenarios above share a common denominator.  Each owner based their expectation of surviving 9/11 solely on what their personal experience told them was possible to achieve during an economic crisis.  The costs of surviving and recovering from an economic crisis do not have to be so great.  And many cases, business owners are capable of achieving far more during an economic crisis than what they realize.

Case Study:  A client borrowed about $600,000 dollars on property they owned free and clear to support the losses from their limousine business (2007-2008). When the client asked Charles Tenney & Associates for help, it was too late to recoup the $600,000.  The problems that were causing the losses were corrected, but the bad news was the client lost the $600,000 forever.  This could have been almost entirely avoided with early attention to the core problems.  The money did not fix any problems, it just supported the problems.  Another possible solution would have been to have sold the business, take the proceeds and kept the $600,000 property free and clear. The client survived, but it will take about six years for the business to pay off the loans on the property if all goes well. 

Point 1:  This case study took place prior to the current economic crisis.  The consequences associated with a similar mistake in today’s economic climate would likely be even greater.
Point 2:  Just because you have money to subsidize your business during this economic crisis does not mean you should!  You could win the battle but lose the war.

Significant challenges can also present enormous opportunities for transportation business owners.  As consultants to this industry through every economic season over the past 35 years, Charles Tenney & Associates believes that if operators truly knew what was possible to achieve during an economic crisis, it would not only reduce their costs of surviving/recovering but also afford them the ability to maintain and even increase the value of their businesses.

The question to business owners facing today’s financial crisis is this:  What will you do to marginalize the cost of surviving/recovering and to raise your expectations for success during this historic economic challenge?

Speaking to an experienced industry professional affords you the ability to discover how the best operators in the country have found success in the most likely and unlikely circumstances.  If others have done it, why can’t you apply the same practices and find similar success? 

A few areas of your business that could present opportunities during this crisis include but are not limited to:

Fleet Utilization:  Can you justify the vehicles you have?  Can you cause them to produce more revenue per period?  Do your sedans produce $8,000, $9,000, 10,000 or $14,000 per month?  Is this sufficient to justify them in the fleet?  Do you know what the industry utilization standards are?  Do you know how to move your company performance to the standard and beyond?

Human Resource Utilization: Can you justify the people you employ?  Can you cause your employees to produce more revenue per period? How much do the employees you pay produce relative to the industry standards?

Cost per Reservation:  Many operators are paying $8.00 to $14.00 per reservation.  The best pay, about $3.00 per reservation.  Divide your reservation payroll by the number of reservations in a month to calculate your labor cost per reservation? 

Cost per Dispatch:  Many operators lose all significant portion of their potential profitability in this area.  What is your cost to dispatch each trip? Can you afford this?

In the 35 years of consulting, CTA notes the greatest common denominator of companies who thrive despite economic crisis share the two following traits:  1) They respond early to the challenge. 2) They recognize how small the margin for error is; and they seek outside help to avoid unnecessary and costly mistakes.

The largest companies in the world are seeking out experts left and right to help make the best financial decisions possible during this economic crisis. With stakes so high, no business owner, no matter how large or small, can afford to make mistakes that increase the cost of surviving or prolong the recovery from this economic crisis.

Charles Tenney & Associates is here for you.  CTA has a track record of helping transportation companies through times of financial crisis. And remember, contacting CTA to talk it over…costs you nothing. 

If Charles Tenney & Associates can be of any assistance please submit the contact form below to discuss options through a free initial consultation.