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How Limos.com Became a Multimillion-Dollar Business

May 26, 2012
URL: http://www.entrepreneur.com/article/223515

In the fall of 2007, T.J. Clark sat down with three former colleagues from Hotwire.com to assess business opportunities in the travel industry. One jumped out at him. "Those last few miles of the trip were way behind the times," he says. "We couldn't figure out why nobody had modernized the experience in the town-car category."

Deep into the internet era, town-car and limo services still worked pretty much the same way they had in the age of Donkey Kong. If you were a regular business customer, you probably had a service to go to the airport and back, and you knew the driver like you did your barber or dentist. But establishing a relationship beyond your home base was an ad hoc process. It involved scoring leads from friends or colleagues, dealing with scraps of paper with phone numbers and scrawled first names, then getting a suspicious voice at the other end of your cold call. It felt more like finding a bookie than planning business logistics.

There were no national or even regional brands in the category--even today, no company has captured as much as 1 percent of the town-car industry, estimated at $1.3 billion in revenue in 2012, according to research firm IBISWorld--and virtually no online booking. Prices tended to be high compared to taxi service. And the quality of the rides fluctuated from surprisingly luxurious to unendurable.

A former intercollegiate swimmer at Notre Dame and then a Chicago trial lawyer, Clark moved to San Francisco to join the Hotwire team led by college friend Karl Peterson, then stayed on when IAC bought the company in 2003. Four years into his corporate career, he was ready for another ride on the startup roller coaster.

In early 2008, he and his team bought the Limos.com URL. They set out to build a network of providers who would agree to the company's strict standards in return for inclusion on its website. They traveled extensively, attending conventions, visiting with proprietors and taking hundreds of rides to validate the quality of car companies.

Their technology team created software that would instantly aggregate prices from every provider in their database who was willing to make the trip requested by a consumer. A feedback feature ensured that unacceptable performance had instant ramifications. Since launching in early 2008, Limos.com has grown from four employees to 55; revenue rose to more than $6 million in the first two years of business.

There are now more than 2.5 million registered users. Many are booking leisure trips--anything from wine tours to prom night--and the average fare in that category is about $500, making it a sizeable chunk of income. Meanwhile, half of the Fortune 500 companies have at least 50 registered users.

"We're making three big bets," Clark says. "We're betting on accessing both leisure travel and business travel in the existing town-car market, and we're betting on moving people from taxis to town cars. All we need to have is one of them pay off. So far, they all are."

That doesn't even include a larger potential market of business travelers who are using Limos.com to replace rental cars. In most cities, the cost of booking Limos.com cars ends up comparable to renting one--without having to pay for parking and gas. "There's also something nice about showing up at a meeting in a town car, as opposed to figuring out where to park," Clark says. "Less stress."

The number of potential customers who will be exposed to Limos.com will grow exponentially this month, when more airlines and hotel chains add a link to the site from their booking confirmation pages. "We think 2012 will be the year of the private car," Clark says. "It'll be the fastest-growing segment of the travel industry. And we'll be the brand that reaps the benefits."