Van Hire Company startup

[NorthernSoles]

First of all hello everyone this is my first post.

Im looking to gather a little information on the startup of a van hire company, any information on this subject would be greatly appreciated.

As you can probably tell this is very early stage but this is certainly something i would like to push forward with. I currently work in logistics for a company who outsource their van hire, i feel that there is potential to start up a support business to run along side my current employers.

i would be looking to supply around 200 vans to my company leased out on a permanent bases aswell as supply privately etc but i feel the hire to my current company which is growing would be a great backbone for a company.

for starters these are some of the questions i have;

Rough idea of Start up costs?
How would i gain Funding for this?
how do you acquire the vehicles for rent?

i would love to hear your feedback

Regards

DM

 

[dmckellar]

has your current employer given you even a hint of allowing you to do this?

would be excellent if you went out and leased 200 vans on the basis of "it sounds like an easy start"

going from 0 to 200 would theoretically wipe you out as you clearly don't have the experience or contacts

 

[Chris Ashdown]

Look at the whole picture from the mind of any investor or bank or leasing company

You have no experience of running a company that size, obviously no money to buy 200 vans or insure them, No staff to look after the 200plus drivers, No firm contract for the life of the van leases, no premises and on top of that how do you think you will beet the professionals already in the business

Maybe think a bit smaller say start with one and build it up from there

 

[alasdair1982]

Excuse my bluntness

So you have no idea on the costs, start up costs, maintenance costs, basically any of the costs associated and you expect to from day 1 be leasing out 200 vehicles.

In a previous business i used to carry out maintenance for a company called Dawson Rentals in Milton Keynes ( google them) They had a fleet of approx 400 bus and coaches they used to lease out alongside there hgv side which was far bigger. Now to manage the 400 vehicles they had an office with in excess of 25 staff.

I would suggest you will never be able to compete with these type of companies as they have far superior buying power, credit facilities, cash, contacts, staff ... i could go on and on

Do you have the money to pay the lease deposits on these vehicles??

Don't wish to appear negative on your idea, however with no experience, contacts or money for deposits without borrowing your doomed to be a statistic

 

[Mark T Jones]

Reflecting the above - have you started any cashflow projections?

 

[NorthernSoles]

this was literally first port of call to get any idea on the business, as for leasing agreements i could get a contract in place for around 150-200 vans out on lease in a significantly growing market.

i was just digging for info as to what this would require on a running cost scale etc i have started up a completely none related business before however this was done on a much smaller scale simply re investing profits back into the business to continue growth.

i totally understand the task ahead of what it would take to get this business off the ground and Its certainly not the case of me just getting an idea in my head and thinking i can waltz into the bank and ask for funds to get my hands on 200 vans then away i go I'm in business.

however what i do think i have that is abit of upper hand on other competitors is a nationwide customer and one other smaller customer that would be guaranteed approx 200 vans going through the books.

realistically how much revenue would this generate? would this be enough to maintain the backbone of the company? where do you even acquire vans form for leasing purposes? what sort of insurances do i need in place? like i say this is literally the first step and i just want to try gather as much information as possible.

i hugely appreciate every bit of feedback i receive, Thanks

 

[Mark T Jones]

What you are looking at seems to be contract hire as opposed to spot hire. The challenges are slightly different basically the risks you will be taking revolve mostly around the underlying credit, maintenance/running costs and residual values.

This is an intensely competitive rate- driven market. Unfortunately as a start up you are unlikely to get prime lenders to fund any of the vehicles (at best you might slip 2 or 3 through the dealers incumbent company). In sub prime you would be paying larger deposits (say 20%) and higher rates - which would eat into both profits and cashflow

Spot hire is less competitive on rate, but then you would be needing premises to house the vans and taking the risk on off- hire times.

That is in addition to the other costs in starting/running a business

 

[JEREMY HAWKE]

All of the above from my right honorable friends !
If you dont have the funds you wont get the funding for 200 vans ...You wont get 200 vans maybe 3 or even 5 (thats five vans not five hundred ) !
Your start up costs would of a quick calculator job £4.3 million. If you have that money in the bank then what the hell are you doing working for somebody ..
Apart from the large companies all the other hire companies run their business along side other business ie garage/workshop ,vehicle dealership ,petrol station , The one near me does all this and also has a restaurant
So its no goer

 

[Chris Ashdown]

Jeremy is in the business so should know the in's and out's

Take the simplest task Payroll you have 200 drivers who need to be paid every month say for interest 200 X £1000 = £200,000 four weeks after you start Plus Diesel say 200 x £200 = £40,000 that's £240,000 you need to pay out the first month without deposits, Office, Office staff and lease payment, or insurance.

You work for a great company who you invoice at the end of the month and they pay 30 days later thats 480,000 you need to pay out before you get your first check

You are talking megga bucks here

 

[Paul Norman]

I reckon Jeremy is in the right area with this costs - unsurprisingly. It is big bucks. Plus, you must be prepared for big losses in the early months.

 

[john1989]

Ask yourself, "if I can obtain 200 vans on a shoestring budget, why haven't people far more knowledge than me already done it?"

The simple answer is because it cannot be done.

 

[NorthernSoles]

Jeremy is in the business so should know the in's and out's

Take the simplest task Payroll you have 200 drivers who need to be paid every month say for interest 200 X £1000 = £200,000 four weeks after you start Plus Diesel say 200 x £200 = £40,000 that's £240,000 you need to pay out the first month without deposits, Office, Office staff and lease payment, or insurance.

You work for a great company who you invoice at the end of the month and they pay 30 days later thats 480,000 you need to pay out before you get your first check

You are talking megga bucks here

Thanks Chris, i will not be employing the drivers using the vans, the vans will be hired to my current employers based on steady levels a pool of 200 vans will be on constant hire.

 

[NorthernSoles]

All of the above from my right honorable friends !
If you dont have the funds you wont get the funding for 200 vans ...You wont get 200 vans maybe 3 or even 5 (thats five vans not five hundred ) !
Your start up costs would of a quick calculator job £4.3 million. If you have that money in the bank then what the hell are you doing working for somebody ..
Apart from the large companies all the other hire companies run their business along side other business ie garage/workshop ,vehicle dealership ,petrol station , The one near me does all this and also has a restaurant
So its no goer

Thanks Jeremy,

as you are in the business how does lease/ hire work? do lease/hire companies purchase a full new fleet each year or are there schemes by dealerships that finance their new vehicles out in order to get them into the used market?

i read a little on van sales and from the information i managed to obtain, manufactures (Vw, Ford) have a percentage of their fleet that must be introduced to the used market each year. This is done through short term lease 12/24 month lease hire that dealerships run (internal), however i read that larger numbers are sent out to vehicle hire companies is this true?

 

[NorthernSoles]

Ask yourself, "if I can obtain 200 vans on a shoestring budget, why haven't people far more knowledge than me already done it?"

The simple answer is because it cannot be done.

thanks John,

i understand it wouldn't be an easy thing to do, but what i'm also looking at is if i can hire 200 vans out annually to one company and i had a conversation yesterday with a MD of another company that hires around 30 vans and he also agreed that he would use my services if i managed to get the idea off the ground.

 

[john1989]

How could they possibly agree to using your services at this stage?
If you don't know your costs, how could you have given them an accurate quotation?

I find in business, it's best to take what people say with a pinch of salt until they have signed on the dotted line.

 

[Mark T Jones]

Thanks Chris, i will not be employing the drivers using the vans, the vans will be hired to my current employers based on steady levels a pool of 200 vans will be on constant hire.

But the idea is already established. Why are these people going to choose you over one of the many large operators? For fleets of this size, price competition is ferocious (unless the credit is poor, in which case you will be shouldering a huge risk)

The big operators have:

- Dealer status, which means they benefit from volume bonuses (manufacturer kick-backs)
- Buying power to establish big discounts with service centres, type suppliers etc.
- Their own outlets to dispose of used/recovered vehicles.
- Well written, watertight contracts.
- Bottom rate, flexible finance packages.

And they still operate on wafer-thin margins.

If people are 'agreeing' to deal with you, you are either asking the wrong questions or making unrealistic promises - no one will place an order for 30 vans on the back of a conversation with a pre-start business. Which is fortunate for you, as you won't be able to deliver.

I won't comment further unless you start thinking sensibly about the business.

 

[NorthernSoles]

Thank John/Mark,

i understand this is not something that can simply be set up in the space of a few weeks. Like i previously stated this is literally my first port of call i was just hunting around for information on what it would take to get this off the ground.

Im not one who wants to start a business for starting a business sake.

 

[Chris Ashdown]

Well then lets look at the basics

How much money do you have available to use to set up this company

What are the aims of this company

What experience do you have in this chosen field

What are you going to offer your clients as a start up that the more experienced companies do not do and why do you think they don't do it

Have you contacts with investors of any sort to raise a few million pound

Why would the company you work for not do it all in-house if it was practical

 

[dmckellar]

simply put. you won't get the finance as you are a new company.

when i first started citroen were humming and hawing over giving me 3 vans on lease as it was a new start company.

Eventually got it on a 3+23 deal but it was tight.

 

[roydmoorian]

Is your potential customer for these 200 vans already using The Major Player in the business (Car derived van no more than £12 per day, LWB Transit sized van no more than £24.00 per day). If not, why not ?

 

[NorthernSoles]

Well then lets look at the basics

How much money do you have available to use to set up this company

What are the aims of this company

What experience do you have in this chosen field

What are you going to offer your clients as a start up that the more experienced companies do not do and why do you think they don't do it

Have you contacts with investors of any sort to raise a few million pound

Why would the company you work for not do it all in-house if it was practical

Hi Chris,

somewhere in the region of 70k upon sale of stock (nowhere near the figure needed i understand this)

aim of the company; to provide tailored van hire for delivery service providers of multi drop delivery with self employed non owner drivers.

background in running a multi drop logistics company and around 5 year ecommerce, with a
rough turnover of 15k per calendar month with profit margins of around 30/35% stock dependant

tailored van hire specifically for multi drop delivery companies

no i do not

almost all companies outsource van hire in my line of business, why? I'm not 100% sure (i understand i do need to find out the answers to this).

 

[NorthernSoles]

simply put. you won't get the finance as you are a new company.

when i first started citroen were humming and hawing over giving me 3 vans on lease as it was a new start company.

Eventually got it on a 3+23 deal but it was tight.

thanks dmckellar,

did you start up your van hire company? how many vans do you now have starting with 3 what was you growth? and rough profit margins?

 

[NorthernSoles]

Is your potential customer for these 200 vans already using The Major Player in the business (Car derived van no more than £12 per day, LWB Transit sized van no more than £24.00 per day). If not, why not ?

most van hire companies base their prices on annual mileage of 10k per year, realistically drivers will cover 20-25k per year.

company quotes for this are extremely high and very few even fall into the competitive price range.
(Something i will need to look at i understand, why are prices not competitive up over the 10 threshold?)

but if some companies can do it why can't others? is this due to vehicle depreciation? are the vehicles contracted to a certain number of miles if they are intact new vehicles introduced into leasing in order to make them available for sale in the used van market?

all questions i need to find the answers to...

 

[Mark T Jones]

Hi

almost all companies outsource van hire in my line of business, why? I'm not 100% sure (i understand i do need to find out the answers to this).

OK; I can't stop myself.

The reason they outsource is that it is possibly cheaper and it saves a whole load of hassle - that is hassle that will become you and your team's (and yes, you will need a team).

Look at it this way, on contract hire what you are effectively funding is depreciation, running costs and interest (plus a profit margin, obviously). With high mileage multi-drop at least 2 of those costs will be significantly hire than 'standard' use. Multi droppers are under a lot of pressure and the vans take the brunt. And bad debt, of course.

If your aim is just to compete on price, you will very soon come a cropper.

Do I know what I'm talking about? In my time I have provided block funding for 6 contract hire companies (cars rather than vans). In the main they were set up as subsidiaries of well-established motor dealerships. So they had great supply sources, real insight to running costs and a route to dispose of stock.

They were also able to borrow on very competitive terms in blocks of £500K.

Every one of them failed - mostly quietly closing and absorbing the losses, but in one case it brought down the whole group. They simply couldn't compete.

 

[Mark T Jones]

Take a look at reality.

Just say, for the sake of argument *sprinkles fairy dust* that you win the 200 van contract at a profitable price and that you get funding at a sensible cost.

Now for reality.

After 12 months, you will probably have made a loss due to the costs of getting the whole thing set up. More importantly, you will be severely cashflow-negative since you are still effectively funding residuals.

After 18 months, your only customer wobbles a bit & starts missing payments. You still have to cover your overheads and meet finance repayments. What is your process for handling this?

After 22 months your only customer collapses. now you have:

• Business overheads to cover.
• Finance payments
• A fleet of 200 vans scattered throughout the UK, many of them in lay-bys or at the homes of disgruntled drivers who have no intention of giving them back.
• Those you get back have been abused, cannibalised, are well over contracted mileage and have been caned to buggery.

What is your strategy for handling that?

The reason you need to start small and find a niche is so that you can learn about the business as you go - and your mistakes will be relatively small ones. Forget manufacturers dumping vans on the market - that's already priced in