Obviously, If you are planning to start a car rental business, this article will you in a great deal. Starting a car renting business in North America is very challenging; Because the market is very saturated. But if you are able to break the entry barrier of this domain, You can make some good money. This article will take you from different points to explain the process of how to start a car rental business. I am sure after reading this article, You’ll have a complete idea about creating a rental business startup on your own.
You Should Know About How To Start A Car Rental Business?
Here are the topics that I’ll be covering;
Types of Car Rental Business
Your Target Customer Base
Creating a Business Plan
Legal & Licensing
Manging Car Rental Finance
Location & Contract
Online Presence
1) Types of Car Rental Business
The very first step in the process of starting a car rental business, Is to identify the type of business you want to have. You may want to start a Franchise or Dealership. Or you might be interested in Existing Business. It is also possible that you want to start your own independent Small Business. Whatever your needs are, You first need to identify the type of business you need to take forward.
Franchise
A franchise is a business model where you acquire the rights to use the business plan and brand of another established car rental company. There are different advantages and disadvantages to starting a business with a franchise. The biggest advantage is the simplicity of getting into the business, You automatically build goodwill for the business and have a solid understanding of the rental business. The disadvantage is that you have to pay thousands of dollars in royalty and franchise fees.
Dealership
Another method to start a car rental business is to tie up with dealerships. You can come to an agreement with the owner of the car dealer, That whenever someone comes to them with a car repair, The dealer will direct them to you for car rentals. Here, You don’t need to have a lot of cars to be started in this business.
Existing Business
Starting a business from scratch is really tough, And if you don’t want to get into all procedures. You can opt to buy someone else car rental business. This has its own advantage and disadvantage. When you buy you inherit their business plan, supply chain, and loyal customers. But you may also inherit their bad reputation if they were not a good rental business. About the profitability, you need to spend long hours to analyze and make decisions according to the financial books.
Small Business
If you don’t want a franchise or acquire another business. You can start your own independent small business and start everything from scratch. Here, You’ll have all the freedom to manage your business as you wish.
2) Your Target Customer Base
Identifying your target customer is crucial; Because this will help you to create a solid business plan and marketing strategy.
Types of car rental customer base
– Tourists
– Dealership Cars
– Long Term Rentals
– Short Term Rentals
If you have chosen a tourist base, And you live in South Dakota. You might need to reconsider the business opportunities that you will have.
3) Creating a Business Plan
A business plan is one of the most important aspects of starting a car rental company. You need a business plan well in advance if you want to bring in partners or investors. If you are opting for a franchise even then it’s a good idea to create your own business plan to compare resemblance to the franchise business plan. A business plan lays out a map of different income and expenses, Your business plan also predicts the future of your business. You need a business plan to estimates the cost-to-earnings ratio, And also run on a budget to be profitable.
4) Legal & Licensing
If you choose a franchise for your car rental business type then they’ll manage all legal documents. But if you are planning to start your own company, You need to register your business with the government. Specific laws are subject to the state that you currently live. But roughly, There are three types of business that you can register your company with:
Sole proprietorship:
This type of registration is not good for a car rental company, You don’t want your personal assets to get jeopardized in case of liability.
LLC:
This is one of the best resorts for car rental companies, LLC or Limited Liable Company is best for starting your business.
Corporations:
This type of registration could be overkill for a car rental company, But if you wish to expand your services in a different domain or state, Registering your company as corporate can make sense.
5) Manging Car Rental Finance
The most crucial element of making a business successful is managing finance. If you succeed in this aspect, Your business is already 80% successful. Now, You need to manage finance to purchase a fleet of cars, rent a shop, buying a computer, employ people, and other expenses. You can either fund everything on your own or apply for a business loan.
i) Business Account and Credit Card
Create a business account with your bank, And apply for a credit card. Even if you decide that you’ll fund the business from your own personal resources, It’s a good idea to keep your business cash flow aside.
ii) Business Loan
Once, You have created a bank account. Now, You can apply for a business loan. Bank will check your credit history, business plan, and other aspect and will grant you a loan.
iii) Investment
Another option to raise funds would be to bring in outside investment. If your relative or friend wants to invest you can offer a partnership in your business.
5) Location & Contract
Location is one of the most important aspects of the car rental business. Even if you have to purchase office 2 hours from your home, Go for it. Because location plays a quint-essential role in getting customers. Rent property at a very commercial place. Saving rent avoiding commercial places, Will only bring losses in the long term.
Once, You have established your office. You can create a rental agreement or contract. This is a legally binding document, for this reason, It is good to get your contract reviewed by an auto industry lawyer. This will make your contract much more robust and proofreading the contract will remove all the possible ways that you may get into trouble.
6) Online Presence
Online Presence is a must when everyone is looking on the internet for the best option. You can create your own website and also tie-up with third-party travel websites like Expedia to get new clients. Build a robust social media handle and fill your listings with good reviews. It is something that will differentiate you.
See Also…
To Learn How To Get A Dealer’s License In Texas(Opens in a new browser tab)