How to open a car rental company?
There's no doubt that starting a car rental company requires a lot of work, but with expert planning, you'll be well on your way to creating a profitable business venture.
This guide will give you a low down on all of the major steps involved, from choosing a legal structure to creating a financial forecast and registering your business.
We will also walk you through the process of checking whether or not your idea can be viable given market conditions.
Let's embark on this exciting journey together!
Learn how a car rental company works
Before you can start a car rental company, you need to have a solid understanding of how the business works and what are its main revenue streams.
This will give you a glimpse into the profitability potential of your venture, whilst allowing you to decide whether or not it is a good fit for your situation (current skill set, savings and capital available to start the business, and family responsibilities).
It may be that creating a car rental company is an excellent idea, but just not the right one for you.
Before starting their own company, successful entrepreneurs typically:
- Consult with and take advice from experienced car rental company owners
- Acquire hands-on experience by working in an operational car rental company
- Take relevant training courses
Let's explore each option in a bit more detail.
Consulting with and taking advice from experienced car rental company owners
Having "seen it all", established business owners can offer valuable insights and hands-on advice drawn from their own experiences.
This is because, through both successes and failures, they've gained a more informed and practical understanding of what it takes to build and sustain a successful car rental company over the long term.
Acquiring hands-on experience by working in an operational car rental company
If you want to open a car rental company, having industry-specific experience is imperative because it equips you with the knowledge, network, and acumen necessary to navigate challenges and make informed decisions critical to the success of your future business.
You'll also be able to judge whether or not this business idea is suitable for you or if there might be conflicts of interest with your personal life (for example, long working hours could be incompatible with raising young children).
This work experience will also help you to make contacts in the industry and familiarise yourself with customers and their expectations, which will prove invaluable when you set up your car rental company.
Take relevant training courses
Taking a training course is another way of familiarising yourself with the business model of your future activity before you decide to make the jump.
You may choose to complete a training course to obtain a certificate or degree, or just take online courses to acquire practical skills.
Before going any further in setting up your venture
Before you go any further with your plans to open a car rental company, make sure you have a clear vision of what it will take in terms of:
- What skills are needed to run the business successfully (do you have some or all of these skills?)
- What a standard working week looks like (does it suit your personal commitments?)
- What sales potential and long-term growth prospects the car rental company has (compare this with your level of ambition)
- What options you'll have once you decide to retire (or move on and inevitably sell the company)
This analysis of the business model and the constraints of the business should help you to check that your idea of launching a car rental company fits your entrepreneurial profile.
If there is a match, it will then be time to look at assembling the founding team of your business.
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Assemble your car rental company's founding team
The next step to start your car rental company is to think about the ideal founding team, or to go in alone (which is always an option).
Setting up a business with several partners is a way of reducing the (high) risk of launching a car rental company since it allows the financial risk of the project to be shared between the co-founders.
This also allows the company to benefit from a greater diversity of profiles in the management team and to spread the burden of decision-making over several shoulders.
But, running a business with multiple co-founders brings its own challenges. Disagreements between co-founders are quite common, and these can pose risks to the business. That's why it's crucial to consider all aspects before starting your business.
To make an informed decision, we suggest asking yourself these questions:
- How many co-founders would increase the project's chances of success?
- Do you and your potential partners share the same aspirations for the project?
- What is your plan B in case of failure?
Let's examine each of these questions in detail.
How many co-founders would increase the project's chances of success?
The answer to this question will depend on a number of factors, including:
- Your savings compared with the amount of initial capital needed to launch the car rental company
- The skills you have compared with those needed to make a success of such a project
- How you want key decisions to be taken in the business (an odd number of partners or a majority partner is generally recommended to avoid deadlock)
Put simply, your partners contribute money and/or skills, and increasing the number of partners is often a good idea when one of these resources is in short supply.
Do you and your potential partners share the same aspirations for the project?
One of the key questions when selecting your potential partners will be their expectations. Do you want to create a small or large business? What are your ambitions for the next 10 or 15 years?
It's better to agree from the outset on what you want to create to avoid disagreements, and to check that you stay on the same wavelength as the project progresses to avoid frustration.
What is your plan B in case of failure?
Of course, we wish you every success, but it's wise to have a plan B when setting up a business.
How you handle the possibility of things not working out can depend a lot on the kind of relationship you have with your co-founders (like being a close friend, spouse, former colleague, etc.) and each person's individual situation.
Take, for instance, launching a business with your spouse. It may seem like a great plan, but if the business doesn't succeed, you could find yourself losing the entire household income at once, and that could be quite a nerve-wracking situation.
Similarly, starting a business partnership with a friend has its challenges. If the business doesn't work out or if tough decisions need to be made, it could strain the friendship.
It's essential to carefully evaluate your options before starting up to ensure you're well-prepared for any potential outcomes.
Is there room for another car rental company on the market?
The next step in starting a car rental company is to undertake market research. Now, let's delve into what this entails.
The objectives of market research
The goal here is straightforward: evaluate the demand for your business and determine if there's an opportunity to be seized.
One of the key points of your market analysis will be to ensure that the market is not saturated by competing offers.
The market research to open your car rental company will also help you to define a concept and market positioning likely to appeal to your target clientele.
Finally, your analysis will provide you with the data you need to assess the revenue potential of your future business.
Let's take a look at how to carry out your market research.
Evaluating key trends in the sector
Market research for a car rental company usually begins with an analysis of the sector in order to develop a solid understanding of the its key players, and recent trends.
Assessing the demand
After the sector analysis comes the demand analysis. Demand for a car rental company refers to customers likely to consume the products and services offered by your company or its competitors.
Looking at the demand will enable you to gain insights into the desires and needs expressed by your future customers and their observed purchasing habits.
To be relevant, your demand analysis must be targeted to the geographic area(s) served by your company.
Your demand analysis should highlight the following points:
- Who buys the type of products and services you sell?
- How many potential customers are there in the geographical area(s) targeted by your company?
- What are their needs and expectations?
- What are their purchasing habits?
- How much do they spend on average?
- What are the main customer segments and their characteristics?
- How to communicate and promote the company's offer to reach each segment?
Analyzing demand helps pinpoint customer segments your car rental company could target and determines the products or services that will meet their expectations.
Assessing the supply
Once you have a clear vision of who your potential customers are and what they want, the next step is to look at your competitors.
Amongst other things, you’ll need to ask yourself:
- What brands are competing directly/indirectly against your car rental company?
- How many competitors are there in the market?
- Where are they located in relation to your company's location?
- What will be the balance of power between you: are your competitors independent players or franchises?
- What types of services and products do they offer? At what price?
- Are they targeting the same customers as you?
- How do they promote themselves?
- Which concepts seem to appeal most to customers?
- Which competitors seem to be doing best?
The aim of your competitive analysis will be to identify who is likely to overshadow you, and to find a way to differentiate yourself (more on this see below).
Regulations
Market research is also an opportunity to look at the regulations and conditions required to do business.
Ask yourself the following questions:
- Do you need a special degree to open a car rental company?
- Are there necessary licences or permits?
- What are the main laws applicable to your future business?
At this stage, your analysis of the regulations should be carried out at a high level, to familiarize yourself with any rules and procedures, and above all to ensure that you meet the necessary conditions for carrying out the activity before going any further.
You will have the opportunity to come back to the regulation afterwards with your lawyer when your project is at a more advanced stage.
Take stock of the lessons learned from your market analysis
Market research should give you a definitive idea of your business idea's chances of commercial success.
Ideally, the conclusion is that there is a market opportunity because one or more customer segments are currently underserved by the competition.
On the other hand, the conclusion may be that the market is already taken. In this case, don't panic: the first piece of good news is that you're not going to spend several years working hard on a project that has no chance of succeeding. The second is that there's no shortage of ideas out there: at The Business Plan Shop, we've identified over 1,300 business start-up ideas, so you're bound to find something that will work.
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How should I position my car rental company on the market?
The next step to start your car rental company is to define precisely the market positioning your company will adopt in order to capitalise on the opportunity identified during your market research.
Market positioning refers to the place your product and service offering occupies in customers' minds and how they differ from the competition. Being perceived as a low-cost solution, for example.
To find a concept and a market positioning that will resonate with your customers, you need to address the following issues:
- How can you differentiate yourself from your competitors?
- Do you have the option of joining a franchise to reduce risk?
- Is it better to start or buy a car rental company already in operation?
- How will you validate your concept and market positioning before investing in the business?
Let's look at these aspects in more detail.
How can you differentiate yourself from your competitors?
Opening a car rental company means starting with a major disadvantage compared with competitors already active on the market.
While you will have to create everything from scratch, your competitors already have everything in place.
Your competitors' teams know the business well, whereas yours has only just been recruited, their customers are loyal and they benefit from word of mouth that you don't yet have.
So you're going to need a solid plan to succeed in taking market share from your competitors and making your mark.
There are a number of aspects to consider in order to try to avoid direct confrontation if possible:
- Can you target a different customer base than your competitors?
- Can you offer products or services that are different from or complementary to what your competitors already sell?
- How will your competitors react to your car rental company entering their market?
- Can you build a sustainable competitive advantage that will enable you to compete with your current and future competitors?
Do you have the option of joining a franchise to reduce risk?
A proven way of reducing the risk of your business venture is to join a franchise.
Joining a car rental company franchise means you don't have to start from scratch. You benefit from the brand recognition of a group and support with operational processes, relations with suppliers, recruitment, etc.
On the flip side, being part of a franchise will restrict your personal freedom, and you'll have to pay an entry fee and an annual royalty (typically a percentage of your sales).
Nevertheless, where possible, starting up as a franchise is generally a good way of reducing risks, especially if you're up against competitors with well-known brands.
Please note, however, that franchising opportunities vary from country to country and region to region, so there is no guarantee that you'll be able to find a franchise.
Is it better to start or buy a car rental company already in operation?
The other alternative to setting up a new independent business is to buy out and take over a car rental company already in operation.
Here too, a takeover is a good way of reducing the risk of your project compared with a pure start-up.
Taking over a business has two enormous advantages over setting up a new one: you start out on an equal footing with your competitors since you take over the team and the customer base, and you don't increase the supply on the market enabling you to maintain the existing balance on the market where the business operates.
However, as with franchising, the capital requirements for a takeover are higher because the business will have to be bought from its previous owners.
How will you validate your concept and market positioning before investing in the business?
However you decide to set up your business, you will need to ensure that there is a good fit between what you sell and what customers are looking to buy.
To do this, you'll need to meet your target customers to present your products or services and check that they meet their expectations.
Deciding where to base your car rental company
The next step to opening a car rental company is deciding where you want to set up your business.
Choosing the right location for your business is like finding the perfect stage for a play. Without it, your business may lack the spotlight it deserves.
Whilst there is no “perfect” location for your car rental company, one that meets as many of the following factors as possible could be ideal:
- Visibility and foot traffic: This is important for a car rental company as it will increase the chances of potential customers seeing the business and potentially renting a car. A location with high foot traffic, such as near a popular tourist destination or airport, would be ideal.
- Parking space, road and public transport accessibility: This is crucial for a car rental company as it needs ample parking space for its fleet of cars and easy access for customers to pick up and drop off their rented vehicles. Proximity to public transport is also important for customers who do not have their own transportation.
- Proximity to target customers: A car rental company should be located near its target customers, such as in a busy city center or near tourist attractions.
- Competitor presence: It is important to consider the presence of other car rental companies in the area. A location with less competition would give the business an advantage.
- Efficient logistics: For an industrial business like a car rental company, efficient logistics are necessary to manage the maintenance and logistics of its fleet of vehicles.
- Storage space: A car rental company requires adequate storage space for its fleet of cars, and a location with ample storage space would be ideal.
- Availability of skilled labor: A car rental company needs skilled labor to maintain and service its vehicles. A location with a pool of skilled workers would be beneficial for the business.
- Easy access to main roads: This is important for a car rental company as it needs easy access to main roads for its vehicles to navigate and reach their destinations.
- Climate and soil quality: This may not seem relevant for a car rental company, but it is important to consider the climate and soil quality in the area as it can affect the maintenance and longevity of the vehicles.
- Adequate infrastructure: A location with adequate infrastructure, such as good roads and communication systems, would be beneficial for a car rental company.
- Premises layout: The layout of the premises is important for a hospitality business like a car rental company. A location with a well-designed layout that allows for easy movement of vehicles and customers would be ideal.
- Space to grow: A car rental company may want to expand its business in the future, so a location with enough space to accommodate growth would be desirable.
- Demographic of local population: The demographic of the local population can also impact the success of a car rental company. A location with a diverse and potential customer base would be beneficial for the business.
This list is obviously not exhaustive and will have to be adapted to the particularities of your project.
Once you’ve considered the factors above, it’s important to think about the budget that your startup has at its disposal. You’ll need to find a location that meets your business requirements but is affordable enough, especially short-term.
If you opt for renting instead of buying your premises, make sure to take into account the terms of the lease, including aspects such as the duration, rent increase, renewal, and so on.
The lease contractual terms vary greatly from country to country, so be sure to check the terms applicable to your situation and have your lease reviewed by your lawyer before signing.
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What legal form should I choose for my car rental company?
The next step to start a car rental company is to choose the legal form of your business.
The legal form of a business simply means the legal structure it operates under. This structure outlines how the business is set up and defines its legal obligations and responsibilities.
Why is your car rental company's legal form important?
Choosing the right legal form for your car rental company is important because this will affect:
- Taxation: your tax obligations depend on the legal structure you choose, and this principle applies to both personal income tax and business taxes.
- Risk exposure: some legal structures have a legal personality (also known as corporate personality) and limited liability, which separates them from the owners running the business. This means that the business would be liable rather than the owners if things were to go wrong (lawsuit, debt owed in case of bankruptcy, etc.).
- Decision-making and governance: how you make key decisions varies based on the legal form of your business. In some cases you might need to have a board of directors and organise general assemblies to enable shareholders to influence major decisions with their voting rights.
- Financing: securing funding from investors requires you to have a company and they will expect limited liability and corporate personality to protect them legally.
- Paperwork and legal formalities: the legal structure you select determines whether certain obligations are necessary, such as producing annual accounts, or getting your books audited.
Popular business legal forms
The specific names of legal structures vary from country to country, but they usually fall within the two main categories below:
- Individual businesses
- Companies
Individual businesses
Individual businesses, like sole traders or sole proprietorships, are made for self-employed entrepreneurs and freelancers rather than businesses which employ staff.
They benefit from straightforward administrative requirements, minimal paperwork to start, simpler tax calculations, and streamlined accounting procedures.
However, the downside is that there's typically no legal distinction between the business and the person responsible for day-to-day operations. This means the owner's personal assets are at risk if the business faces problems or goes bankrupt.
There is also no share capital in such a structure, meaning that individual businesses cannot raise equity from investors which seriously limits funding options.
Companies
Companies are versatile structures suited to projects of all sizes in terms of number of founders, number of employees and amount of capital.
They are a bit more complex to operate than individual businesses with more formalities, stringent accounting requirements, more complex tax implications, etc.
In return, they offer stronger protections to their shareholders. They usually benefit from having their own legal identity and limited liability, meaning co-founders and investors can only ever lose the amount of money they have put into the company.
For instance, if things were to go south (the company files for bankruptcy or there is a legal issue), the company would take the hit, safeguarding the personal assets of the founders and investors.
How should I choose my car rental company's legal structure?
Deciding on a legal form is easy once you've estimated your sales, decided whether or not you need employees and figured out the number of co-founders joining you.
It's essential to remember that a solid business idea will succeed no matter which legal structure you pick. Tax laws change regularly, so you can't rely on specific tax advantages tied to a particular structure when starting a business.
A proven approach is to look at what legal structures your top competitors are using, and go with the most common option as a working assumption. Once your idea is mature enough, and you're getting closer to officially registering your business, you can get advice from a lawyer and an accountant to confirm your choice.
Can I switch my car rental company's legal structure if I get it wrong?
Yes, changing your legal structure later is possible, though it may involve selling the old entity to a new entity in some cases, which adds further expenses. If you want to save on such costs, it makes sense to pick the correct legal form for your business the first time around.
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Calculating the budget to open a car rental company
The next step to opening a car rental company involves thinking about the equipment and staff needed to launch and run your business on a day-to-day basis.
Each project has its own characteristics, which means that it is not possible to estimate the budget for opening a car rental company without building a complete financial forecast.
So be careful when you see estimates circulating on the Internet. As with all figures, ask yourself these questions:
- Is my project similar (location, concept, size, etc.)?
- How recent is the information?
- Is it from a trustworthy source?
Startup costs and investments to open a car rental company
For a car rental company, the initial working capital requirements and investments may include the following elements:
- Fleet vehicles: As a car rental company, your primary asset will be your fleet of vehicles. This includes purchasing new cars, as well as maintaining and upgrading existing ones.
- Facilities: In addition to vehicles, you will also need to consider the cost of your physical locations. This includes leasing or purchasing office and storage space, as well as any necessary renovations or repairs.
- Technology: As technology continues to advance, it is important for car rental companies to keep up with the latest equipment and software. This may include investing in GPS systems, online booking systems, and other tools to improve efficiency and customer experience.
- Maintenance equipment: Keeping your fleet in top condition is crucial for a successful car rental company. This may require purchasing specialized equipment such as car washes, tire changers, and diagnostic tools.
- Security systems: Protecting your vehicles and facilities is essential for the safety of your business and customers. This may involve installing security cameras, alarms, and other measures to prevent theft or damage.
Of course, you will need to adapt this list to your company's specific needs.
Staffing plan to operate a car rental company
To establish an accurate financial forecast for your car rental company, you will also need to assess your staffing requirements.
The extent to which you need to recruit will of course depend on your ambitions for the company's growth, but you might consider recruiting for the following positions:
Once again, this list is only indicative and will need to be adjusted according to the specifics of your car rental company.
Other operating expenses required to run a car rental company
You also need to consider operating expenses to run the business:
- Staff Costs: This includes salaries, wages, and benefits for your employees, such as rental agents, mechanics, and administrative staff.
- Accountancy Fees: You will need to hire an accountant to assist with bookkeeping, tax preparation, and financial reporting.
- Insurance Costs: As a car rental company, you will need to have various insurance policies in place, including liability insurance, property insurance, and vehicle insurance.
- Software Licenses: You will need to purchase licenses for software programs that are essential for your operations, such as a reservation system, accounting software, and customer relationship management (CRM) software.
- Banking Fees: You will incur fees for bank accounts, credit card processing, and other financial services.
- Vehicle Maintenance and Repair: To keep your rental fleet in top condition, you will need to budget for regular maintenance and unexpected repairs.
- Fuel and Oil: This expense will vary depending on the type of vehicles you have and the distance they are driven.
- Vehicle Registration and Licensing: You will need to pay registration and licensing fees for each vehicle in your rental fleet.
- Advertising and Marketing: To attract customers, you will need to invest in advertising and marketing efforts, such as online ads, brochures, and social media campaigns.
- Rent and Utilities: You will need a physical location to operate your business, which will come with rent and utility expenses.
- Office Supplies: You will need to purchase office supplies, such as paper, ink, and pens, to keep your business running smoothly.
- Taxes and Permits: As a business owner, you will be responsible for paying various taxes, such as income tax and sales tax, as well as obtaining necessary permits.
- Training and Development: To ensure your employees are knowledgeable and skilled, you may need to invest in training and development programs.
- Customer Service: Providing excellent customer service is essential for a car rental company, so you may need to allocate funds for a customer service team or training for your employees.
- Office Equipment: You will need to purchase and maintain necessary office equipment, such as computers, printers, and phones, for your business operations.
This list will need to be adapted to the specifics of your car rental company but should be a good starting point for your budget.
Creating a sales & marketing plan for your car rental company
The next step to start a car rental company is to think about how you are going to attract and retain customers.
You need to ask yourself the following questions:
- What actions can be leveraged to attract as many customers as possible?
- How will you then retain customers?
- What resources do you need to allocate for each initiative (human and financial)?
- How many sales and what turnover can you expect to generate in return?
How you will attract and retain customers depends on your ambition, the size of your startup and the nature of your exact concept, but you could consider the following initiatives.
Your sales forecast may also be influenced by seasonality related to your business type, such as fluctuations during busy holiday periods, and your competitive environment.
Can your business idea be profitable?
Just enter your data and let The Business Plan Shop crunch the numbers. We will tell if your business idea can generate profits and cash flows, and how much you need to get started.
How do I build my car rental company financial forecast?
Let's now look at the financial projections you will need to prepare in order to open a car rental company.
What is a car rental company's financial projection?
Your financial forecast will help you budget your project so that you can evaluate:
- Its expected sales and growth potential
- Its expected profitability, to ensure that the business will be viable
- Its cash generation and financing requirements
Making your financial forecast is the only way to determine the amount of initial financing required to create your car rental company.
There are lots of business ideas out there, but very few of them are viable, and making a financial forecast is the only way to ensure that your project makes economic and financial sense.
Creating a car rental company financial projection is an iterative process, as you'll need to refine your figures as your business idea matures.
You'll start with a first high-level version to decide whether or not to continue working on the project.
Then, as your project takes shape, your forecasts will become increasingly accurate. You'll also need to test different assumptions to ensure that your idea of starting a car rental company holds up even if your trading environment deteriorates (lower sales than expected, difficulties in recruiting, sudden cost increases or equipment failure problems, for example).
Your financial forecast will be part of your overall business plan, which we'll look at in more detail later. Your financial partners will use your business plan to decide if they want to finance you.
Once you've launched your business, you can compare your actual accounting figures with your forecasts, to analyze where the discrepancies come from, and then update your forecasts to maintain visibility over your future cash flows.
Financial forecasts are, therefore, a financial management tool that will be with you throughout the life of your company.
What does a financial forecast look like?
Once ready, your car rental company forecast will be presented using the financial tables below.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
The projected balance sheet
Your car rental company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
The projected cash flow statement
A projected cash flow statement to start a car rental company is used to show how much cash the business is expected to generate or consume over the first three years.
Which solution should you use to make a financial projection for your car rental company?
Using an online financial forecasting tool, such as the one we offer at The Business Plan Shop, is the simplest and safest solution for forecasting your car rental company.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- The software helps you identify and correct any inconsistencies in your figures
- You can create scenarios to stress-test your forecast's main assumptions to stress-test the robustness of your business model
- After you start trading, you can easily track your actual financial performance against your financial forecast, and recalibrate your forecast to maintain visibility on your future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Choose a name and register your car rental company
The next phase in launching your car rental company involves selecting a name for your company.
This stage is trickier than it seems. Finding the name itself is quite fun; the difficulty lies in finding one that is available and being the first to reserve it.
You cannot take a name that is similar to a name already used by a competitor or protected by a registered trademark without inevitably risking legal action.
So you need to find a name that is available, and be able to register it before someone else can.
In addition, you will probably want to use the same name for:
- Your company’s legal name - Example LTD
- Your business trading name - Example
- The trademark - Example ®
- Your company’s domain name - Example.com
The problem is that the procedures for registering these different names are carried out in different places, each with their own deadlines:
- Registering a domain name takes only a few minutes
- Registering a new trademark takes at least 12 weeks (if your application is accepted)
- The time taken to register a new business depends on the country, but it's generally fast
You will therefore be faced with the choice of: either registering everything at once and hoping that your name will be accepted everywhere, or proceeding step by step in order to minimise costs, but taking the risk that someone else will register one of the names you wanted in the meantime.
Our advice is to discuss strategy with your legal counsel (see further down in this guide) and prioritise your domain names and registered trademarks. You'll always have the option of using a trade name that's different from your company's legal name, and that's not a big deal.
To check that the name you want is not already in use, you should consult:
- Your country's business register
- The relevant trademark registers depending on which countries you want to register your trade mark in
- A domain name reservation company such as GoDaddy
- An Internet search engine
In this area too, your legal counsel will be able to help with the research and formalities.
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What corporate identity do I want for my car rental company?
The following step to start a car rental company is to define your company's visual identity.
Visual identity is part of the DNA of your car rental company: it makes you recognizable and recognized by your customers, and helps you stand out from the competition. It also helps convey your values, notably through the choice of colors that identify the company.
Creating your business's visual identity yourself is entirely possible: there are several online tools that let you generate color palettes, choose typography and even generate logos.
However, we advise you to delegate this task to a designer or a communications agency for a professional result.
Your corporate identity will include the following elements:
- Your business logo
- Your brand guidelines
- Your business cards
- Design and theme of your website
Logo
Your car rental company's logo serves as a quick identifier for your company. It will be featured on all your communication platforms (website, social networks, business cards, etc.) and official documents (invoices, contracts, etc.).
Beyond its appearance, your logo should be easy to use on any type of support and background (white, black, gray, colored, etc.). Ideally, it should be easy to use in a variety of colors.
Brand guidelines
One of the challenges when starting a car rental company is to ensure a consistent brand image wherever your company is visible.
This is the role of your company's brand guidelines, which defines the typography and colors used by your brand and thus acts as the protector of your brand image.
Typography refers to the fonts used (family and size). For example, Trebuchet in size 22 for your titles and Times New Roman in size 13 for your texts.
The colors chosen to represent your brand should typically be limited to five (or fewer):
- The main colour,
- A secondary colour (the accent),
- A dark background colour (blue or black),
- A grey background colour (to vary from white),
- Possibly another secondary colour.
Business cards
Classic but a must-have, your business cards will be at your side to help you easily communicate your contact details to your founders, customers, suppliers, recruitment candidates, etc.
In essence, they should feature your logo and adhere to the brand guidelines mentioned earlier.
Website theme
Likewise, the theme of your car rental company website will integrate your logo and follow the brand guidelines we talked about earlier.
This will also define the look and feel of all your site's graphic elements:
- Buttons
- Menus
- Forms
- Banners
- Etc.
What legal steps are needed to start a car rental company?
The next step in opening a car rental company is to look in detail at the legal and regulatory formalities.
Although it is possible to do the formalities yourself and draft some of the documents detailed here, The Business Plan Shop recommends that you seek advice on these aspects from a law firm.
Registering a trademark and protecting the intellectual property of your car rental company
One of the first things you need to do here is to protect your company's current and future intellectual property.
One way of doing this is to register a trade mark, as mentioned earlier in this guide. Your lawyer will be in a position to do the formalities for you and to help you select the classes (economic activities) and jurisdictions in which you have an interest in obtaining protection.
Your law firm can also advise you on other ways of protecting your company's intellectual property.
Preparing the legal documents for your car rental company
Your car rental company will need a set of legal and contractual documents to operate on a daily basis.
Your exact needs in this respect will depend on the country in which you are launching your car rental company and the size and legal form envisaged for the company. Once again, we highly recommend having these documents prepared by your lawyer.
As a minimum, we recommend that you have the following documents prepared:
- Employment contracts
- General terms and conditions of sale
- General terms and conditions of use for your website
- Privacy Policy for your website
- Cookie Policy for your website
- Invoices
- Etc.
Applying for licences and permits and registering for various taxes
Here too, the list of licences and business permits required for your business to operate legally will depend on the country in which you have decided to start your car rental company.
Your law firm will be able to advise you on all the regulations applicable to your business.
Likewise, your accountant will be able to assist you and take care of the formalities involved in complying with the tax authorities.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
Writing a business plan for your car rental company
The next step in opening a car rental company is to draw up your business plan.
What is a car rental company's business plan?
A business plan serves as a comprehensive roadmap outlining the objectives, strategies, and key components of your venture.
There are two essential parts to a business plan:
- A numerical part, the financial forecast we mentioned earlier in this guide, which highlights the amount of initial financing needed to launch the business and its potential profitability over the next 3 to 5 years,
- A written part, which presents in detail the project of creating a car rental company and provides the necessary context to enable the reader of the business plan to judge the relevance and coherence of the figures included in the forecast.
Your business plan helps guide decision-making by showcasing your vision and financial potential in a coherent manner.
Your business plan will also be essential when you're looking for financing, as your financial partners will ask you for it when deciding whether or not to finance your project to open a car rental company. So it's best to produce a professional, reliable, and error-free business plan.
In essence, your business plan is the blueprint to turn your idea into a successful reality.
What tool should you use to create your car rental company business plan?
If you want to write a convincing business plan quickly and efficiently, a good solution is to use an online business plan software for business start-ups like the one we offer at The Business Plan Shop.
Using The Business Plan Shop to create a business plan for a car rental company has several advantages :
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can access a library of dozens of complete startup business plan samples and templates for inspiration
- You get a professional business plan, formatted and ready to be sent to your bank or investors
- You can create scenarios to stress test your forecast's main assumptions
- You can easily track your actual financial performance against your financial forecast by importing accounting data
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
If you're interested in using our solution, you can try The Business Plan Shop for free by signing up here.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast and write a business plan to help convince investors that your business idea can be profitable.
Raise the financing needed to launch your car rental company
With your business plan in hand, you can tackle one of the final steps to open a car rental company business: the search for financing.
Raising the capital needed to launch your business will probably require a combination of equity and debt, which are the two types of financing available to companies.
Equity funding
Equity is the sum of money invested in a car rental company by both founders and investors.
Equity is a key factor in business start-ups. Should the project fail, the sums invested in equity are likely to be lost; these sums therefore enable the founders to send a strong signal to their commercial and financial partners as to their conviction in the project's chances of success.
In terms of return on investment, equity investors can either receive dividends from the company (provided it is profitable) or realize capital gains by selling their shares (provided a buyer is interested in the company).
Equity providers are therefore in a very risky position. They can lose everything in the event of bankruptcy, and will only see a return on their investment if the company is profitable or resold. On the other hand, they can generate a very high return if the project is a success.
Given their position, equity investors look for start-up projects with sufficient growth and profitability potential to offset their risk.
From a technical standpoint, equity includes:
- Share capital and premiums: which represent the amount invested by the shareholders. This capital is considered permanent as it is non-refundable. In return for their investment, shareholders receive shares that entitle them to information, decision-making power (voting in general assembly), and the potential to receive a portion of any dividends distributed by the company.
- Director loans: these are examples of non-permanent capital advanced to the company by the shareholders. This is a more flexible way of injecting some liquidity into your company as you can repay director loans at any time.
- Reserves: these represent the share of profits set aside to strengthen the company's equity. Allocating a percentage of your profits to the reserves can be mandatory in certain cases (legal or statutory requirement depending on the legal form of your company). Once allocated in reserves, these profits can no longer be distributed as dividends.
- Investment grants: which represent any non-refundable amounts received by the company to help it invest in long-term assets.
- Other equity: which includes the equity items which don't fit in the other categories. Mostly convertible or derivative instruments. For a small business, it is likely that you won't have any other equity items.
The main sources of equity are as follows:
- Contributions made by the owners.
- Private investors: business angels, friends and family.
- Crowdfunding: raising funds by involving a group of people through campaigns where they contribute money or make donations, often getting something in return for their support.
- Start-up aid, e.g. government loans to help founders build up their start-up capital.
Debt financing
Debt is the other way of financing companies. Unlike equity, debt offers lenders a limited, contractually guaranteed return on their investment.
Your car rental company undertakes to pay lenders' interest and repay the capital borrowed according to a pre-agreed schedule. Lenders are therefore making money whether or not your company makes a profit.
As a result, the only risk lenders take is that of your car rental company going bankrupt, so they're extremely conservative and will want to see prudent, hands-on management of the company's finances.
From the point of view of the company and all its stakeholders (workforce, customers, suppliers, etc.), the company's contractual obligation to repay lenders increases the risk for all. As a result, there is a certain caution towards companies which are too heavily indebted.
Businesses can borrow debt in two main ways:
- Against assets: this is the most common way of borrowing. The bank funds a percentage of the price of an asset (a vehicle or a building, for example) and takes the asset as collateral. If the business cannot repay the loan, the bank takes the asset and sells it to reduce losses.
- Against cash flows: the bank looks at how much profit and cash flow the business expects to make in the future. Based on these projections, it assigns a credit risk to the business and decides how much the business can borrow and under what terms (amount, interest rate, and duration of the loan).
It's difficult to borrow against future cash flows when you're starting a car rental company, because the business doesn't yet have historical data to reassure about the credibility of cash flow forecast.
Borrowing to finance a portion of equipment purchases is therefore often the only option available to founders. The assets that can be financed with this option must also be easy to resell, in the unfortunate event that the bank is forced to seize them, which could limit your options even further.
As far as possible sources of borrowing are concerned, the main ones here are banks and credit institutions. Bear in mind, however, that each institution is different, in terms of the risk it is prepared to accept, what it is willing to finance, and how the risk of your project will be perceived.
In some countries, it is also possible to borrow from private investors (directly or via crowdfunding platforms) or other companies, but not everywhere.
Key points about financing your car rental company
Multiple solutions are available to help you raise the initial financing you need to open your car rental company. A minimum amount of equity will be needed to give the project credibility, and bank financing can be sought to complete the financing.
Track your actuals against your forecast
You've reached the end of the road and are ready to launch your car rental company.
Congratulations and welcome to the fantastic world of entrepreneurship! Celebrate the work you've done so far, and get back to work quickly, because this is where the real work begins.
Your first priority will be to do everything you can to make your business sustainable (and thus avoid being one of the 50% of start-ups that fail within five years of launching).
Your business plan will be your best ally to ensure that you're on track to achieve your objectives, or to help rectify the situation if necessary.
The key to financial management is to regularly compare your actual accounting data with your car rental company forecasts, in order to be able to :
- Quantify the gaps between what you planned and what you achieved
- Adjust your financial forecasts as the year progresses to maintain visibility over your future cash flow
No one can predict the future with certainty, but by closely monitoring the variances between actuals and forecasts, regularly adjusting your forecasts and simulating several scenarios, you can prepare your car rental company for the worst while hoping for the best.
It's the only way to keep an eye on your cash flow and actively manage the development of your car rental company, ultimately reducing the risk to your company.
There's nothing worse than waiting for your company's annual accounts to close, which can be many months after the end of your financial year (up to nine months in the UK for example), only to realize that you've fallen far short of your forecasts for the past year, and that your car rental company urgently needs a cash injection to keep going.
That's why it's strongly recommended to use a financial planning and analysis solution that integrates forecasting, scenario analysis, and actuals vs. forecast tracking, like we do at The Business Plan Shop with our financial dashboards.
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Key takeaways
- To open a car rental company you need to go through each of the 15 steps we have outlined in this guide.
- The financial forecast is the tool that will enable you to check that your project can be profitable and to estimate the investment and initial financing requirements.
- The business plan is the document that your financial partners will ask you to produce when seeking finance.
- Once you have started trading, it will be essential to keep your financial forecasts up to date in order to maintain visibility of the future cash flow of your car rental company.
- Leveraging a financial planning and analysis platform that seamlessly integrates forecasts, business plans, and real-time performance monitoring — like The Business Plan Shop — simplifies the process and mitigates risks associated with launching a business.
We hope this practical guide has given you a better understanding of how to open a car rental company. Please do not hesitate to contact our team if you have any questions or if you would like to share your experience of setting up your own business.
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Founder & CEO at The Business Plan Shop Ltd
