Starting a rental car business shouldn't be taken lightly, just like any other type of business. There are certain steps you must take, such as choosing the type of car rental business, registering your business, developing a business plan, plus other important factors. Following the steps will allow you to set your business up for success.
Choose a Type of Car Rental Business
Before you jump into the car rental business, it's important to understand the industry model. Be aware of car rental business models, such as the contract hire and daily hire. For the daily hire, your customers will get to rent a car for a specific number of hours. Daily hire customers are usually business people, executives, travelers or individuals whose cars have broken down and who need a replacement immediately. Contract hire customers may be involved with a wedding company or another large-event business. The business model you choose will determine your target customers and what type of cars you should purchase.
Register Your Business
Just like any other business, you will need to register your car rental business. The procedure to register a business changes from location to location. You have three options when registering your business:
Sole Proprietorship. This option is usually the easiest and more cost-efficient. You may be able to go through this process without an attorney, depending on your location. The downside of this option is that you may find it difficult if you ever need to obtain funds from investors. If you begin to have financial issues, you may be held personally responsible for the liability of your business.
Partnership. This is a legal structure similar to a sole proprietorship. Although the liability is still unlimited, other individuals can join and contribute to the funding of your car rental business. If you plan to register your car rental business as a partnership, prepare a partnership deed. The deed will explain the rights, responsibilities and duties of each member, along with how to settle disputes.
Limited Liability Company. A limited liability company is a separate and distinct legal entity. An LLC can obtain a tax identification number, do business and open a bank account under the same name. The members of an LLC can't be held personally liable for company liabilities or debts.
Create a Business Plan
It's important to develop a business plan. Not only does it help with planning, but it also helps with raising funds. If you're unsure how to create a business plan, search free business plan examples on the internet. Your business plan should include the key factors of your car rental business along with an executive summary. Be sure to include marketing, sales, operations and financial factors in your plan.
Buying and Insuring Cars
Don't think you have to start out with several cars. You can start out small with just two vehicles. Even if you have to start out small, you have the potential to grow into a large car rental enterprise. If you have your business plan in place, you can get a loan from a bank more easily to purchase additional cars.
It's risky to run a car rental business without obtaining proper insurance. If an accident occurs with one of your cars without insurance, it could lead to you having to sell off your property and even losing your business. Insurance may seem like a hassle of an additional cost, but it's important to get fully comprehensive insurance for your cars for protection.