Tour Van Business

[chrissatchell]

Hi guys,
After some advice from you all, I'm planning on starting a tour van (for bands) business with two associates and we need help getting our head round things.

We've all got areas of expertise in the field, I personally know hundreds of band members always looking to hire vans, one of my associates is very good with business plans and another is very good with marketing.

Our current plan involves trying to get a small business loan to purchase our first van and everything to go with it (van upgrades to make it suitable for bands, as we all have experience of hiring tour vans and we know whats missing) but we also plan to market it more broadly to people as an option for using at events etc. From there we want to expand the fleet at some point with extended funding.

An area we have no idea about is things such as forming a ltd company, becoming vat registered and general accounting.

Can anyone offer any advice, hopefully that doesn't involve us paying an accountant for a meeting, that might help us with our start-up?

Massive thanks in advance!

p.s. we're also planning to make the share of the company as equal as possible so 33% each and then designating someone else with 1%. Does that make sense?

 

[paulears]

There are quite a few of the bigger firms who now have crew buses in their fleets, and the bands in this part of the country seem to use them - BUT I wonder how the business would be for a specific vehicle for bands? What I mean is that very few bands touring during the week, and for the ones that are that busy, they would tend to find buying one advantageous. What would you do mid week, with crew buses not being that popular?

Practically the biggest issue is the loadspace - I'm having trouble trying to buy compact enough kit to fit the available space. Load capacity is pretty limited. My own experience with bands seems to put them into different categories. The younger bands just don't have enough money to hire vehicles, and drivers old enough for your insurance company to approve. They rarely have enough of a credit rating to provide you with a sizeable deposit. The older, more established and successful bands tend to fill a LWB transit or sprinter. I do know some who have 6 seats in a 7.5t to get enough space. Your vehicle seems to only cater for bands who get a PA hired in at each gig, and only need to take back line - and that limits the market. The other thing is simply that bad debts can easily catch you out because few bands are business minded, they organise money very amateurishly. Insurance companies hate musicians - that's for certain. I love the idea, but just have some concerns about how viable it is?

Back to your question.
You are considering taking out loans and taking on legal responsibilities and dealing with HMRC. You NEED an accountant. Let's be honest, do any of you have skills in dealing with money, contracts, tax - plus as directors you will need to get paid. I'm a sole trader, and think I'm pretty savvy with the financial side, but every year, my accounts package tells me how much money I have earned, yet my accountants figures are always different - and looking at what she puts into the documents, I understand very little.

In your case, an accountant might advise leasing a vehicle, rather than taking business loan. You may well be advised that taking on a 3rd director with just 1% is daft (or sensible). It's better to pay an accountant to meet with you and your colleague so you can talk it through, and be steered towards good ideas and away from disasters. If your customers are all going to be consumers, then VAT registration might not be as good as you think because you will be 20% more expensive. Your outgoing money , where you could reclaim VAT might be quite limited - fuel, repairs etc. So VAT could be an expensive thing for you, and maybe in your first few years you won't go over the threshold. I'd have guessed voluntary registration might be a bad idea - but again, only an accountant will know. Many offer a free first consultation, why not ask?

 

[chrissatchell]

Thanks for you reply paul, lots of good points there. We're all in a band together and we know a LOT (myself literally hundreds) of people in bands a similar size, mainly through putting on gigs myself over many years. We're planning to do some market research by asking a lot of these people to complete a short questionnaire to check viability.

In all honesty we very strongly believe in our business plan, we're offering well spec'd vans at budget rates. Our current idea is to be VAT registered to save a large amount on purchasing a van but I guess buying one privately means we could skip the VAT issue and be able to provide better rates for our consumers. The ideal situation is to provide a vehicle such as a splitter with 9 seats and a good load space which would easily suit bands of varying size as well as extra's not usually included in a budget range such as games console/tv/dvd/microwave/aux enabled stereo/etc which as we know ourselves bands would love to have on those long journeys.

Out of the hundreds of bands members I personally know, none of them have ever needed or took a PA with them as all venues/promoters provide these as standard. We also see the wide berth of marketing under the events option (people that work at festivals, events/etc) as a fantastic way to keep us out of too much of a niche.

I do have a friend that's an accountant and we intend on using his services so no worries on that part, we weren't considering doing the accounts ourselves anyway. We've got plans to meet with a business savvy friend of ours at the weekend for advice and probably our accountant friend soon also.

Essentially we're marketing ourselves as knowing what bands want because we're in one ourselves, have used various companies and know what's missing....while all at a price that beats our competitors. There's only one local company and we plan to easily undercut them and still make a profit as well as providing better spec'd vans with a friendlier and even custom suited service (such as pre-stocked beer fridges and snack baskets for an extra fee, eventually backline hire, more van options, etc).

I know in business they always say its who you know not what you know (to an extent) and with the people we know and the connections we have I can see it being a very viable business opportunity for us.

We're not very clued up on a lot of things like paying ourselves, registering as an ltd (if that's the best option with three of us and the business were potentially doing?) and others, but I suppose these two meets might be the best way of discovering these...

I dont suppose you have anymore advice based on what I've said here?

 

[paulears]

Only that the idea is pretty novel - and I do know what you mean about the types of bands. There does seem an increase in the number of bands who rely on the promoter supplied kit, and probably an equal number of those who are unhappy with the variability - sometimes messing up the gigs. I'm currently sorting a band (A tribute act, who play at home and near-europe) and they are going back to carrying their own monitors - a mix of wedges and in-ears, and their own monitor mixer so they at least can play properly. They tell me the riders rarely get actioned properly. I've also seen the numbers of crew buses going up, so maybe your idea has legs - with all the gizmos on-board. Depends if the bands budgets can stretch to this. I guess it depends on where you are in relation to the bands.

The accountant advice is important - I really believe this. Most of the van rental firms are VAT registered because the vehicle running and purchase costs are so high. So it's doubtful that your prices would be mega different - everyone is in the same boat. After all, a couple of vans, plus fuel is likely to bring you up near the threshold anyway! Reclaiming VAT on all the extras also mounts up.

The only real thing that concerns me is that my dealings with bands, from the PA, recording and lighting perspective always show money (or the lack of it) as a BIG deal for them. I also find the new promoters can be very risky. They start up and take on all the expenses, but are often poorly organised and I'm very aware of taxis, hotels, restaurants, hire companies and self-employed people not getting paid when a gig is less popular than they planned. Young bands, if they have no record deal, finance everything themselves and frequently have rubbish credit ratings - so your business plan needs a solid bad debt protection building in.