Own A Charter Bus Company

Combine broad historical knowledge of your locale, an area with sufficient population density, a used bus, and a little business savvy and you could run your own charter bus company. Here's the story of how one man did it in the 1970s.
By Lillian Borgeson
January/February 1980
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Larry Gates in front of his charter bus.
PHOTO: D.J. BASSETT
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Most folks work all year in order to get a couple of weeks off to fish, ski, or just drive around and enjoy the scenery.

Lake Sherwood, California's Larry Gates on the other hand has gotten off the yearly vacation treadmill. As the owner and operator of a home-based charter bus company, Larry spends about 200 days a year "on vacation" . . . but he never travels alone! By hauling children, senior citizens, Elks, Rotarians, and other such groups along with him, the busman has managed to live the life he wants to and earn an impressively high annual income!

"For most anyone who likes to travel, a one bus charter operation makes an ideal home business," says Larry, an easygoing, 37-yearold who lives in the country and loves it. "Once you're established, it's not hard to net $35,000 a year . . . without even pushing yourself."

Cost Versus Income

The dollars-and-cents arithmetic involved in running a small tour company goes something like this:

Larry owns a used 39-passenger Greyhound bus, a model which can currently be bought for approximately $5,700 down and payments of around $440 a month for four years. Whether you get a Greyhound or a smaller rig, the full price of the bus will represent your actual capital investment . . . but the regular payments have to be regarded as a fixed monthly expense until you own the vehicle.

Other monthly bills—including insurance, license, and home office overhead—run, in Larry's case, about $400, $60, and $75 a month respectively. So if you add these figures to the monthly payments required to purchase a big bus, you can expect a total of about $975 per month in fixed expenses.

In addition there'll be things like fuel, tires, and maintenance to pay for. Our bus owner figures that his operating expenses work out to approximately $70 for each day he's on the road. Since Larry drives about 18 days in an average month, it costs him around $1,260 to run his rig. (Of course these figures are, as a result of today's fluctuating fuel prices, subject to frequent change.)

That pretty much covers the cash that goes out. . . here's what comes in:

On a typical one-day tour, Larry has 37 passengers who pay $7.00 each for the trip. That works out to a total of $259 per day . . . or $4,662 for his average 18-day month. If you subtract both the fixed and operating costs, you'll see that our bus driver's average net income is $2,427 per month.

Better yet, although one-day trips are just fine, Larry can earn even more on longer excursions. His overnight-trip passengers pay a flat "package" fee to cover both the ride and their accommodations . . . and the tour operator (Larry) gets back a percentage of the lodging cost from the hotels and resorts that service the tour. From time to time, our expert also arranges trips for other charter companies . . . a task for which he's paid $100 an hour. (But that kind of work, he allows, is a bonus that comes only with experience.)

"Even without occasionally packaging a tour for someone else, it's not hard to make very good money in this business," says Larry, as he relaxes in the big, airy attic room he and his wife (Beth) use as their office. "Especially after you've beaten your brains out to learn what not to do."

Like what, for example?

Sell Service

"First, you have to learn to compete with service. . . not with price."

It's true, the bus operator points out, that in the beginning—to build up a following—you may have to offer the same low rates as do the big tour companies in your area. A small outfit, however, can't compete that way indefinitely. The large firms buy their fuel and tires—and just about everything else—at lower prices than you would be able to get . . . which means they're able to charge lower rates and still come out ahead. In order to stay afloat, you'll eventually have to ask about 15% more than the big tour lines do . . . and still attract customers.

"In order to convince people that your tours are worth the extra cost, you've got to give special service," Larry says. "And in this business, service means the ability to come up with offbeat, unusual, interesting trips. That's what builds up your reputation . . . and makes the clubs and other groups you work with come back for more. You have to be familiar with points of interest that the big tour companies don't even know exist! "

And Larry Gates practices what he preaches. He can tell you more about the West than a whole library full of encyclopedias, and he's convinced that total familiarity with the scenic and historic spots of your own travel area are an absolute must!

"If you've got information about all of the tourist attractions in your locale, or if you can get it," he says, "you've got the secret of a successful tour business."

How to Get Started

It's best to get into your own charter bus business gradually. You could, for example, take a job as a driver with a local tour company for a year or so, learn the ropes, and build up a clientele. Meanwhile, it's a good idea to pick up every regional map, history of the area, and guidebook available and learn all there is to know about the territory. You might also use this time to save money for the down payment on your bus, and maybe you'll want to take a night school course in diesel mechanics.

But that's not how Larry did it.

"There's another good way to learn the ropes," he says, "especially for a person who works in the city, lives in the suburbs, and wants to get out of both. Simply buy a bus and offer a commuting service to your fellow wage slaves. In some cases, the company you work for might even finance the down payment on the vehicle in order to help make such a service available to its employees.

"At any rate, what you earn from your commuters should just about cover the monthly payments on the bus. Then you can do charters on weekends, and make enough extra—maybe $1,500 a month, once you get rollin'—to ease your way out of the job and into your own business . . . which can be run from anywhere you want to live."

But that's not how Larry started out either.

What he did (eight years ago) was jump in cold. You see, Larry was a commercial tuna fisherman at the time . . . and happened, one evening, to be having dinner at California's scenic Morro Bay when a tour bus pulled up and unloaded for a meal stop.

"What a lovely spot!" one of the tourists said to the driver. "Can you tell us a little about it?"

"Lady," the driver answered, "I don't tell stories. That's not my job. I just drive the bus."

That man was merely your average tour driver, Larry explains . . . which is why it's not hard to be better-than-average in the tour business.

"I thought the folks had a right to know a little about Morro Bay . . . and a little was about all I remembered from college history courses! Still, I grabbed the driver's mike and told 'em what I could. And you know what? It was fun! A lot more fun than hagglin' over the price of tuna!"

So the novice tour guide promptly sold his boat and bought a bus, a move he now acknowledges was impulsive . . . if not downright reckless!

"There I was with a fully equipped rig, no preparation, no customers, and no idea whatever how to run a charter business. I barely broke even for the first couple of years."

Look Before You Leap

Of course, Larry eventually made a success of his enterprise, but he definitely doesn't recommend the sink-or-swim approach to anyone else. Even if you don't have the time or patience to ease into the business, he advises, don't buy a bus without first doing some careful advance groundwork.

Specifically: [1] Check out the local competition. Get their advertising literature . . . note what kind of excursions, service, and prices they offer ... and—if you've never been on a chartered tour—take such a trip for your own education. If you find no competition at all, there may be a good reason: A "market area" of about 50,000 people is needed to support a full scale charter operation. Should there be fewer folks than that within a reasonable (hour's drive) radius of your home, it would be best to consider a small bus and/or a part-time service.

[2] Make contacts with the tour directors of the local service clubs, senior groups, employee groups, etc. They'll be your main source of business.

[3] Lay out some appealing tours . . with a special emphasis on one-day trips to sports events and nearby scenic or recreation areas. (Customers usually plan their longer trips way in advance, but you'll want some quick business right about the time you take-on the bus payments and other fixed expenses.)

[4] Put an ad in the local Yellow Pages, and try to time its appearance with the opening of your business. (In most areas, the closing date for an ad comes about three months before the new directory is issued.)

[5] Check local licensing regulations. In some states, you'll only need to license your vehicle. In other areas, however, you may also have to obtain a special permit . . . and sometimes the price for such licenses can be prohibitive. (If that's true where you live, it may be possible to work out a cooperative deal with an existing charter company, but you'd have to know the ropes to do so . . . which is another good argument against starting out cold.)

In any case, to find out what you need to know about license and permit requirements, call your state's general information office.

How to Get Your Bus

The standard vehicle for small charter companies is a used Greyhound bus (the M-C/5 model built in the mid-sixties is about the most popular) which can be bought from and financed by the company itself. The full price of a used M-C/5 is about $23,000, but Greyhound will take a 25% down payment (that's the more-or-less $5,700 mentioned earlier) and finance the rest at $500-plus per month for three years or around $440 a month for four years. 

If you decide to go with a smaller, less expensive rig—perhaps even a little 14 passenger bus—check your local classified ads. You might also want to get a subscription to Bus Ride—a trade magazine put out by Friendship Publications—which always has lots of ads for new and used buses in all sizes.

The Greyhound M-C/5 has reclining seats, air conditioning, and a built-in restroom . . . all of which are essential for a full-sized tour bus. Any used bus, big or small, should also be equipped (usually by you ) with a new paint job, an AM-FM radio, an eight track stereo, and a CB radio. (The CB is indispensable for any on-the-road emergency.)

The cost of such extras may seem prohibitive, but everything you put into the bus, Larry notes, is an investment. "If you take good care of it, your $23,000 bus should still be worth $16,000 to $18,000 on the open market after three or four profitable years."

Keep in mind, too, that while a smaller bus can mean a much lower cash outlay and smaller monthly expenses . . . it will also produce considerably less income.

How to Run The Business

As a charter bus operator you will never sign up individual passengers, but will deal with the travel chairmen or women of clubs and other groups. Such individuals sign up the minimum number of customers required for the tour (36 or 37 for a 39-passenger bus) and collect the money from them. In exchange for doing most of the paperwork, the chairperson and his or her guest get to take the trip free . . . which is why a typical excursion has 37 instead of 39 paying passengers.

Tour chair folks are always on the lookout for new and attractive trips . . . so the more variety you can offer, the better off you'll be. Larry provides any interested parties with photocopied information sheets that describe more than 100 different tours—ranging from his one-day "Cherry Picking Trip" and a "Whale Watching Cruise" to ten-day tours of national parks—all planned to include interesting and offbeat stops along the way.

Of course, it's in choosing your tours that palm-of-the-hand knowledge of your travel area really pays off. "Entertaining trips make satisfied customers," Larry says, "and happy customers give you the word-of-mouth advertising that will build up your business fast."

Additional Tips

Besides that prime piece of advice, our successful tour operator offers the following tips on how to make a home-based bus business pay:

Be sure that the rates you set reflect the distances required for your various trips. A rate of $7.00 per passenger is fine for a nearby tour, but you'll have to charge more for those excursions—even if they're only one-day trips—that involve more fuel, tire wear, etc.

Include the price of accommodations and special-event admissions in the fee you charge (you can almost always get a substantial discount) . . . but not the cost of meals.

Do as much work as you can yourself. Larry takes care of his own regular bus clean-up and maintenance. For bigger jobs, though, he hires moonlighting bus company mechanics: "They have their own tools," he says, "know their business, and usually work for reasonable rates." (Larry's $70-per-day estimate of on-the-road operating costs includes a $400-per-month allowance for repairs . . . but that, he reminds us, is only an average figure. In any given month, the tab can range from zero to several thousand dollars.)

And, because repairs can be expensive, it pays to weed out groups that tend to be bus wreckers. For example, Larry avoids the "swinging singles" organizations ("they're likely to get drunk and rowdy").

Don't forget to arrange for someone to answer the phone when you're on the road. If you don't have a housemate, it's best to simply subscribe to an answering service.

Plan your tour itineraries to allow for rest stops about every two hours. And, wherever you go, take good care of the customers.  

While on a tour, Larry Gates ambles around casually . . . but he's always on top of the situation. He herds his folks about gently but firmly, makes deadpan jokes, counts heads, and answers questions. His work still leaves him plenty of time to do the things he enjoys most when he's traveling: a little fishing, a little sightseeing, and plenty of scenery-watching.

And where does Larry go when he's actually on vacation from his business? Does he take advantage of all his travel connections and fly off to Bangkok or Paris?

No way! What he does is stay home and do some work around his own property. And that, of course, is a real busman's holiday!


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Post a comment below.

 

Marcus
9/4/2011 4:34:56 AM
Wow. This article is from 1980! The gentleman profiled here is close to 70 years old, now. Although the info presented here is still sound (if you adjust for inflation) not everyone who wants to break into this business has the required cash outlay to purchase a bus. There's a much easier, and potentially more profitable way to run this business, that doesn't require the purchase of a bus, nor do you need to take on the daunting task of driving one. Check out www.yourownbusbiz.com. It pretty much tells you how anyone can get into the charter bus trip business without this kind of cash investment.








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