In the first of a series on growing a business in a sustainable way, one experienced coach operator gives his views on the most important things to consider when seeking expansion
Growing a small coach or bus business into something bigger is often the holy grail for many of the younger business owners within the industry. Undoubtedly, it can be done; evidence is out there in the form of every larger operator. But it’s not easy.
Some cardinal rules should be respected if growth us to come in a responsible and sustainable way. The proof of that lives in Lancashire. Holmeswood Coaches is as an example of a business that started with one vehicle and has grown. It now runs 130 coaches and buses.
Holmeswood was founded in 1947 and has been is owned by the Aspinall family ever since. Most of its growth has come since the mid-1990s. Director Duncan Aspinall says that the operator continues to take a pragmatic approach to expansion.
“Being able to trust the people around you is the most important thing of all,” he explains. “During the 1990s we took over various other operators, including one which nearly doubled our fleet size overnight. At that time, and ever since, being able to trust our staff has been vital to our success.”
Trust yourself, too
Any manager or company owner who aspires to grow their business must also be able to trust themselves not to get carried away, Duncan continues. Things can happen quickly if they are allowed to. Sometimes they need to be reined in.
“If it’s not the right direction, you’ve got to think about it logically. Step back and take another look; whether it’s purchasing a business or taking on extra work. Gaining a tour contracts is not difficult, for example. But if they are only paying for themselves for seven months of the year why bother?”
That is not to say that Duncan, or his brothers and fellow Directors Colin and Mark, believe that worthwhile growth cannot come simply by taking a chance. They did exactly that when purchasing at least one of the companies that now makes up Holmeswood.
Besides trust, something else must be kept in mind for any burgeoning business: Cashflow. Bills must be paid, be they from finance companies, other suppliers or as wages. And they all come in every month, not just during the peak season.
“Controlling cashflow and paying bills when growing, particularly if that growth comes quickly, is the biggest challenge,” says Duncan. When it’s summer, and coaches are busy, it is imperative that money is put aside for when business slows.
While some operators lay drivers off at those times, Holmeswood prides itself on not doing so. It keeps them busy with other work, recognising that their bills keep coming in the quiet period even if work for them is not as plentiful then.
Money also needs to be set aside to cover the inevitable, yet unpredictable, mishaps. As an example, a clutch or an engine could require replacement at the worst possible time. When the costs of recovery and onward travel are factored in, it quickly becomes expensive.
Holmeswood also takes pride in the fact that it does not step away from problems when they occur. It takes responsibility and does what’s necessary to keep passengers moving rather than throwing the issue back to the organiser or tour company.
But that comes at a comes at a cost, both financially and in terms of time. Hirers are understanding of moderate delays due to unavoidable difficulties, but when not dealt with efficiently they are likely to go elsewhere quickly.
Setting a rate
Talk of cashflow and having sufficient funds to cover mechanical problems and quiet periods comes down to one thing: Rates.
Arguments over rates are legion. No two operators have the same view. What works for one will not work for another. Duncan cautions against using anyone else’s means of calculating what a job will cost to carry out.
“You cannot work out someone else’s bills without understanding them first. You only know your own costs. It is imperative that as an operator, you know how to price a job correctly.
“That’s why the Transport Manager CPC qualification has a financial aspect. It’s not there as a test. It’s there to demonstrate that you must be able to pay your bills. And not just this week, when there is lots of work; next week too, when things may be a lot quieter.”
Setting rates should also be done with the future in mind, he adds. Although a coach may be new, the cost of its eventual replacement needs to be considered. Additionally, the difficulty of increasing rates year-on-year is a recurring problem for every operator.
“If you start too low, it is a huge job to then get the rate to where you need it to be. That said, if there is work available that increases vehicle utilisatio,n that should be looked at on its own merits.
“Finding periods when vehicles would otherwise be standing, and filling that time, gives an economy of scale. If the vehicle works more days per year it has an impact.”
One line that should not be crossed is going below cost to entice a new client on the promise of more work in the future. Duncan notes that customers rapidly get used to paying a certain amount for a job. Increasing that by more than an inflationary percentage is almost impossible.
A mixed basket
Duncan adds that caution should be exercised about placing too much work in the same basket. Doing so can leave the operator exposed in the case of another business’ failure. Attention should also be paid to trading names; they may be different, but they could all be of the same organisation.
Besides financial contingency, it is necessary to consider driver and vehicle backup.
At each of its depots Holmeswood starts the day with a minimum of two staff in non-driving roles who hold a category D licence and are ready to go if required.
Additionally, it keeps spare vehicles that are prepared for service. Both of those practices incur costs that could be avoided, but it’s a mantra that the operator adheres to even during the busiest periods.
While Duncan acknowledges that it is easy to have every vehicle out working at times of peak demand, that too generates an element of exposure. Holmeswood covers that by taking a realistic view of rates during those months. Again, it comes back to knowing its overheads.
One of the most unpredictable elements of running a coach or bus business is employing people. Drivers will naturally be the most numerous staff. While there are many good and conscientious drivers, recruiting them is still a tricky process.
“You have got to be prepared for the reality that some drivers will not stay with you. That’s the way it is; sometimes they see an additional 50p per hour elsewhere and they leave.
“Often you can try to explain the wider picture. In our case that means various premiums above the basic rate, but drivers are human, like the rest of us. They will make their own decision.”
Some operators pay better rates because they dispense with drivers at quiet times. As already noted, Holmeswood does not do that. Even so, Duncan cautions that no matter how well drivers are looked after, they may still choose to leave. It’s a fact of life and seldom can it be avoided.
“Being prepared for that is important,” he says. Something else to be ready for is the occasional need to instil discipline. While it is not something to look forward to, it must be done if the actions of an employee are placing the business’ health in jeopardy.
While there is a lot to consider for a new or recent entrant to the industry, Duncan’s view is that they are very welcome. The rewards are there as long as the downside of antisocial hours is accepted, and if the reality of multiple responsibilities is grasped.
“Hugely important is that any new operator sets its standards out early on. And if those standards drop as it grows, the customers that have supported it will go elsewhere.
“That comes back to accepting responsibility. Running a coach or bus operation is a big responsibility.”
Engaging with the wider industry, including trade body the Confederation of Passenger Transport, is worthwhile, Duncan adds, although he acknowledges that for a small business, finding the time to do so will sometimes be difficult. But the resource there is invaluable, he says.
There is no magic formula or recipe that will produce a viable, profitable operator. Much is down to each business’ own circumstances; only it can know what works.
“It’s whatever is right for that particular scenario. A younger operator can listen to other people who have been in the industry for a long time. But no two companies are the same. We all have different criteria for success.”