Are you thinking of starting a car rental business? Starting any business is difficult, there are many things to think through and plan towards. It is easy to get carried away by the excitement of it all, but before you open up shop there are many things to consider and prepare ahead of time.
Apart from feeling excited you may also be feeling stressed, where do you begin? What does a rental business need to get started? These are common questions everyone needs answers to. Before anything you need a solid plan – a solid foundation – to start from. A car rental business has specific criterion which you need to get in order before you offer your services to the public. In this article, we show you what you need to consider before starting a car rental business.
Decide the type of business you want
When starting a car rental you need to know what type of business you want to own. You can choose to own a franchise, purchase a pre-existing business, have your own company, or even work with a car dealership.
For more information read our article on How to Start a Car Rental Business.
Know your market
Studying the car rental market will give you an idea of the demand and profitability of the business. It will help you decide how to approach the business and what you want to do with your fleet. It will also help you gain information about your competitors and their weak points.
Despite the COVID-19 pandemic, there is a demand for rentals, and air travel is predicted to increase by 2021. Environmentally-friendly vehicles are seeing a rise in sales as younger generations are more focused on a greener future. If you incorporate electric vehicles into your fleet, you present that your company believes in protecting the environment by doing your bit to reduce the use of fossil fuels.
Any business is liable to danger, for rental businesses this means that their fleet is vulnerable to many dangers. This is why you need sound legal advice and have your fleet insured.
Your rentals can meet with an accident, caused by a client or another object. Most damages caused by an accident may be too large to be covered by your insurance. This is why you need an accident attorney on retainer in the event of one, this will also look good for your clients as it reassures them.
Apart from that, other legalities you need to consider is registering your business and obtaining any licenses required for you to run your business. It is best to hire a business attorney who will guide you through this process.
You should also decide what kind of business structure you want to go for, will it be an LLC, a corporation, or a DBA? Ideally, the LLC business structure is the better option as it will keep your personal assets separate from your business assets. This means that if any legal action is taken against your business your personal assets will be safe.
Along with general business insurance, you should also look into getting fleet insurance. Fleet insurance protects your fleet of rental vehicles from any physical damages in the event of an accident. Most insurance providers require a minimum of 5 cars and support both small and big businesses. Read up on fleet insurance providers to find the one that fits your business the best, look at what they offer, and if their coverage is suitable for you.
For more information on fleet insurance read: Best Car Rental Insurance Providers in North America
You cannot start a business without any funds, and starting a rental business is expensive.
You may be lucky enough to have personal funds that can help you get started, but for most people that may not be the case. If you don’t have enough funds to start your business, purchase a fleet of cars, or even purchase the office space, you can opt for a bank loan. This can help give you a head start for your business.
The option is to find investors and business partners who will support your start-up rental business and take a percentage from revenue.
But, before all this, you need to list down everything your business would need and come up with a budget. Once this is done you will have a clear idea of how much money you will need to get things started.
Another point to remember is to open up a business account, do not mix your business revenue with your personal accounts.
Without a fleet of vehicles, you can’t have a rental business. You need to think about how you want your business to be marketed, what is the target audience? If you want to target the business crowd your fleet should have business class vehicles like Mercedes and BMWs, if you are aiming at leisure – then SUVs and RVs are best.
You don’t need a 20 car fleet to start with, you can always start small and build from there. Starting with two vehicles is ideal, and you can add to the fleet the more your business progresses and brings in revenue.
Pen and paper may be cheaper but having the assistance of software will make things easier in the long run and make your business more efficient. Keeping track of reservations and payments physically can leave room for error which can affect your business.
The software helps you manage everything with ease from your smartphone or PC. Having an online reservations system or app will make your business look more professional and accessible. To get a clear idea of what fleet management software is and how it can help you visit the Navotar.
Where your car rental will be located plays an important part in ushering in customers. If it is located at or near an airport, the probability of bookings increases as many people will require a vehicle to get about.
You can opt for your own space or rent a space, this usually is a lot of work as a rented space may require renovations and adjustments. You will also have to pay advanced rent and security deposits which add up to 3 to 6 months of rent.
To run a business you will need staff to handle different departments. For a rental business, you will need reception staff, customer service agents, cleaners, and more. Think about the number of people you require to run your business and the salaries you are willing to pay.
There are other legal and government regulations you will need to consider as well. Do your research on this and be thorough, managing people is difficult and can easily lead to complications if you are not prepared.
Vehicles need maintenance, for this, you need to work with a car repair garage or have your own mechanic. When running a rental business your vehicles must be in perfect working order for your customer’s safety.
Consider having a well-managed maintenance schedule to make sure your vehicles are checked regularly and kept cleaned.
Now that you have planned the building blocks of your business, you need a good marketing strategy to help promote your business and build your customer base. You can hire a marketing firm or consult an expert on how to market your business.
Educate yourself on SEO (Search Engine Optimization) and social media marketing to gain an understanding of how digital marketing can help promote your business to your target audience.
Know the risks of starting a business, take the time to calculate the level of risk your business might face, and be prepared for it. Asses the industry before moving forward with your business plan as it can also pose personal risks that may cost you greatly.
Timing is everything and if you have analyzed the market well and looked at your competition you will know when to enter the market. Keep track of the economy and the rental industry, start your business when the economy is healthy and the rental industry is expanding.
Once you have a solid business plan in place you will be good to go! However, remember that these things take time and a lot of trial and error, so do not get disheartened when things don’t go your way. Understand the pros and cons of the industry, and learn how you manage the cons. Make sure you have done the groundwork and are ready to face any challenges thrown your way.