RAC Business from an ROI Perspective

This article should be reaching you just about the time you attend, or at least hear about, the 2006 Car Rental Show in Las Vegas. Visiting this show, if you do it the right way, should prompt you to carve out time to reflect on your business, and put your efforts and results into perspective. Over the past few years, VRCG’s partners have written articles on various aspects of the business such as training, fleet, company culture, sales, remarketing and other subjects. Think of the thoughts we’ve shared with you as components. This article is our effort at tying all of those pieces together so they make sense. This article is bluntly intended for owners of companies, or those individuals who would like to run their own operation. I’m not saying that all of the other folks in the business shouldn’t know these things, but I’m hoping this will be a call to action for owners.

A New Approach
The dictionary defines return on investment as “…A measure of the net income a firm’s management is able to earn with its total assets. Return on investment is calculated by dividing net profits after taxes by total assets.” Put in basic terms, return on assets is mostly a financial measure. However, I’m expanding this definition to include not only money—and the return you get on it—but the return you get on your time and your efforts, as well. I challenge you to make a value judgment about your use of money, time and efforts.

Looking at the various parts of your business, let’s start small and then go macro:

The Results of Your Branch Employees’ Efforts
The foundation of your company is the point where your employees are interfacing with your customer. Call it point of sale, branch, whatever you like. If this group of people isn’t appropriately focused on making your business sing, then you need to do something about it. Some examples of misuse of time might include your middle management hosting too many useless meetings about administrative issues rather than sales or customer service issues, or too much idle time where your counter personnel aren’t busy (maybe between arriving flight rush time or the like). There are always car prep items, office cleanliness issues, phone or face-to-face marketing opportunities, training issues (including phone or one-on-one sessions) or a dozen other productive things that can be done while on duty. Generally, your head count is the second largest expense your company has. If you don’t actively manage this investment in people, at best you earn a poor return on your investment—at worst you lose the battle to stay in business.

The Results of Your Marketing Efforts
Too often I ask owners or senior managers what their marketing strategies are, or about the tactics they’ve put in place to support those strategies, and I get a blank look. Or, even worse, I hear “somebody else in the organization is handling that…our Web guy, or our Sales Manager, or so-and-so is doing that.” Well, I doubt very much that the Sales Manager, Web guy, or so-and-so has their own money in the company, nor have they mortgaged their home to secure the line of credit that supports car purchases and working capital. If you don’t have a solid handle on what your marketing efforts are—and their effectiveness—then you are getting a substandard return on your investment. I’m not saying that someone in the organization shouldn’t be in charge of this, but if you are just winding them up and letting them go without proper understanding of what they’re doing, how they’re doing it, and how they’re measuring effectiveness, you may be earning a poor return on your investment.

The Results of Your Collection Efforts
All of us occasionally have receivables problems, as it is in the nature of our business. An ironic corollary to this is the fact that we had to pay cash to get this money owed to us. Just as we had to pay cash to our employees to do the rental transaction. And we had to pay cash to buy the car that got rented. And we had to pay cash to rent or buy the building from which we sent the car. And we had to pay cash to get the lights to go on, put fuel in the tank, put food on the table, and on and on. So, when I hear that “yeah, we have money outstanding for 60 (or 90 or 120…) days, I wonder how much the owner or manager values the investment they have in their company. Frankly, the argument that accounts receivable are an intractable problem just isn’t valid—just look at what Dell Computer does. When you figure out that they actually collect money for their sales three or four days before they ship any product—even though it’s a different industry and a different business model—it still shows that there is potential improvement to be had.

The Results of Your Loss Control Efforts
Getting cars wrecked while they’re out on rent is a fact of life. Unfortunately, just as the aforementioned examples showed, we’ve got cash tied up in an asset that can’t make any money. In your mind, view that unrentable unit as a chunk of cash, and every day that it sits, the “depreciation mice” come along and nibble at it a bit at a time. If it sits long enough, there’s not much left. The truly sad thing about this situation is that you lose four times: first, you can’t rent it, and need another car in its place...ka-ching. Second, you’ve got to pay to get it fixed, and maybe you collect from an insurance or credit card company, or maybe you don’t...ka-ching. Third, you’ve got “damaged goods,” and when you try to sell it or turn it back after it’s fixed...ka-ching. Fourth, you have administrative time (read: money) tied up in administering the claim...ka-ching, once again.

Now, some of you do loss control internally, some of you subcontract it out, but how often do you measure date of loss to date of funds received? How many of you measure how much less the wrecked-now-fixed unit sells for than one that hasn’t been damaged? How many of you simply assign this task to somebody else, and forget about it? How many of you even keep detailed statistics on this part of your business? If you don’t keep tabs on this part of your business, given the fact that you have a lot of money tied up in it, then you might not be collecting as much return on your investment as you should be.

CONTINUED:  RAC Business from an ROI Perspective
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