The global COVID-19 pandemic is forcing businesses into difficult financial decisions with many coming at the same time.
From labor to loan payments, equipment, necessities, and all the components of a transportation business, operators in this distressed environment need a plan to proceed.
At A. Goff Limousine and Bus Company in Charlottesville, Va., co-owner and general manager Dan Goff already is repurposing staff and looking for new ways to replace revenue at his 72-employee company that runs all types of vehicles, from sedans to motorcoaches. He also owns SuperMax Motors, a bus and chauffeured vehicle dealership that is an authorized reseller of Prevost buses.
First up, while cutting the regular hours of mechanical and office staff, Goff has opened the doors of his shop for local repair work. “We’ve repurposed our cleaning staff to give them work we find for them instead of just tossing them out to fend for themselves,” he said.
Managers, meanwhile, get first dibs on driving while the best performing, capable, and available drivers are given first consideration for runs.
“You have to decide who gets fed and who gets none,” he said. “If everybody just gets a little, your best people leave.”
It’s all a matter of controlling attrition, Goff said. You give work to the best people, and the non-shiners will have to be replaced later.
Goff advises dividing expenses into tiers or categories of what you cut first, second, and last. As you reduce expenses, such as labor and fuel, you need to run on less revenue (see list of examples below).
Goff reports as of March 18, his company revenue is down 88% and he is in Tier 2 and Tier 3 expense cutting. He has mothballed 19 of his 26 fleet vehicles, taking them off insurance and parking them in a building. "They are down until we come back." His seven remaining vehicles are five motorcoaches and two SUVs. Remaining clients include hospitals, ports, the military, and the occasional affiliate. He also is down to about 15 employees.
"We intend to be here so we can give people their jobs back," Goff said.
For medium to larger operations, about 20% of core expenses can't be cut. If the bottom floor is 20% of overall expenses, those should be covered by either drawing on reserves, deferring payments, and/or arranging a loan.
"Only the smallest fleet operators can cut to zero," Goff said. "Some are closing up for a few weeks."
The goal is to reduce losses and increase cash flow, but an owner still has to earn a minimal profit to live. The key is to find other revenue streams or sources of income, Goff said.
In addition to opening for local vehicle repairs, Goff recently bought six buses that he plans to sell at a profit in the next few months. “There are equipment deals coming, and it will rebound.”
Goff emphasized a plan can provide strong leadership that lays out situations and solutions accurately to employees. “Once people think those in charge actually are and have a plan and will move in that direction, the staff can decide whether to follow the plan or look for something else.”
To help operators with P&L tracking, Goff has created a cash flow calculator here.
Originally posted on LCT Magazine