Stake Your Claim

Starting a Rental Car Business

Renting a Dodge Viper in Maui in 1997 wasn't enough for Steve Bandovich. When the 35-year-old Roselle, Illinois, founder and owner of the one-person Cloud 9 Specialty Car Rentals returned from his Hawaiian vacation, he decided Chicago sorely needed its own specialty car rental service.

One perk of starting a car rental business is that you can start from home, as Bandovich did, with just one or two vehicles. Bandovich took out a $50,000 home equity loan to purchase a used 1996 Dodge Viper GTS, which he later replaced with a Dodge Viper SRT-10. He has also added two Hummers and a Porsche 911 to his fleet. With another $12,000 of his own money for attorney and accounting fees, a computer, advertising, and other various startup necessities, getting started in 2001 was relatively smooth for Bandovich-until it came to insurance. He says, "Finding a company that would insure me for liability and collision-that was a major hurdle."

Experts agree, insurance is one of the biggest challenges in this industry. Insurance brokers are looking for "loss experience"-an indication of how much premium you paid during a given year and what your loss ratio was. "It's very difficult to get insurance when you don't have any loss experience," says Rocky Dellapenna, founder and owner of Paoli, Pennsylvania-based Champion Enterprises, which rents both standard and high-line cars via Champion Car & Truck Rental and Champion Exotic Car Rental.

Short of buying into a franchise program, where the insurance and financing are already in place, Dellapenna-an industry veteran of 30 years-advises buying an existing business. "If you were to buy an established [business], then they would turn you right over to their insurance services, broker and so forth," he says. "As long as you had good credit and good backing, you could step right in and go turnkey."

Bandovich didn't need to go that route. He's got full coverage, at about $200 to $500 per car, per month. But operating in Chicago, he does have to plan for the inclement weather that keeps many people off the streets-not an issue for those in warm climates. "Our Hummers help get us through the winter," says Bandovich, who brought in more than $100,000 last year and is shooting for $175,000 in 2004.

Bandovich's secret is operating lean. He spends $150 a month on rent for his office space and less than $200 a month on advertising. Marketing tactics have included driving the Viper to car shows and handing out a few thousand business cards.

Remember, if you decide to operate a standard car rental business, you'll be marketing to a different kind of customer-one who needs to rent a car, not one who wants to drive a nice car just for kicks. "With car and truck [rentals], the first thing people do is go to the Yellow Pages," says Dellapenna-and that kind of advertising can cost upwards of $9,000 annually. "But you have to have an Internet presence for high-line cars. People look for it there."

So what's your best bet-cars and trucks, or Vipers and Hummers? "There are more people renting the high-line cars right now," says Dellapenna. "They figure, [that] instead of going out and buying one of these expensive cars...they'd rather rent one for a weekend or a week."

Opening Bid
In Start Small, Finish Big: Fifteen Key Lessons to Start-and Run-Your Own Successful Business (Warner Books), Subway co-founder Fred DeLuca, with co-author John P. Hayes, shares 15 lessons to start and run your business on a shoestring. Lesson Six-Ready, Fire, Aim!-reminds entrepreneurs that lack of experience shouldn't stop you from opening your business. "In other words, I learned it by doing it and not just thinking about it," writes DeLuca, who started Subway with $1,000. "With clarity about the idea for Subway and at least a glimpse of the vision, I went to work the next day!"

While there's much to be said for plotting your course, you don't want to let the planning process consume your will to get started. At some point, you just have to do it-otherwise, you never will.

That's why it makes sense to start your business on a small scale, leaving yourself some wiggle room. "If you make a mistake," DeLuca says, "if your aim is off, you can fix it and fire again-and adjust again, and again, as needed.

"If you're willing to fire before you aim perfectly, you probably won't hit your target precisely; but you'll have taken that first step in the journey of a thousand miles."

Karen E. Spaeder is a freelance business writer in Southern California.

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This article was originally published in the July 2004 print edition of Entrepreneur with the headline: Stake Your Claim.

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