BY SUSAN ROSE
Affiliate business is everywhere in our industry, and thank goodness for it. We’ve always had a collaborative industry, most often working with local partners when in need of a last-minute extra vehicle or two. Then suddenly there was a sea of change where almost every operator was looking to at least farm in some work from the big networks and other operators to boost their bottom line. When companies started rebranding with “worldwide” or “global” or “international” in their moniker, it was a sure sign that farm-out work was equally as important.
If you have nurtured your own network, you already understand that more than just your company name changed. Some of you, perhaps, weren’t ready for the impact it would have on your operation’s infrastructure. There was a learning curve before you were confident you could manage another’s client—or that they could handle yours with the same amount of care and concern. That doesn’t take into account the complex matrix of fees and discounts, confirmation procedures, different reservation software, training and preparing staff and chauffeurs, crafting a training manual (if you desire one), proper etiquette, and when you are getting paid by the affiliate.
“In this industry, there are no classes or training to prepare you on how to handle affiliate work. You learn with experience and by talking to other operators,” says Vinny Joseph, owner of Black Diamond Transportation in Newtown, Pa. “Some of the affiliates pay monthly. This means you can go a whole month without getting paid, and you have to be prepared for that.” For smaller operators, that delay in cash flow could be troublesome if you didn’t plan for it. We talked to a bunch of operators who are at various levels in their journey to build a network and asked for their advice on what they wished they knew when they were first starting out. If nothing else, expect that something will change.
• Build your plan
More often than not, affiliate work with a new company comes on the fly, whether it’s them sending you work because their usual partners can’t handle the job or it’s you who is vetting a company at the last minute due to a customer’s request. If you haven’t yet begun to expand your reach beyond local affiliates, making a business plan is a good first step.
“In our case, North Point was established and set up to handle affiliate work from the beginning,” says Tony Mehdiof of North Point Transportation Group in Atlanta, Ga. “I knew that it would be a good portion of our business due to the worldwide connections I had, and the companies I had worked with when I owned my previous company. We made sure our office staff and chauffeurs were trained to deal with affiliates, and understood how we needed to work with them as a team, represent them with the same service level and standards that their clients were getting from them in their own local market, and were ready to meet their demands and requirements.”
Other companies, like Arrow Limousine Worldwide in Red Bank, N.J., approached it slowly after doing a ton of research. “Actually, we took our time stepping into affiliate work,” says Sales and Client Relations Manager Kevin Callinan. “Many of the trials and tribulations were experienced by other companies that jumped in early with both feet. Our primary concern was retaining the quality of service we provide and, in turn, maintaining or enhancing the value of our brand.”
• You’ll have to be a 24/7 operation
For most larger operators, having a human answer the phones 24 hours a day became a necessity years ago, especially for those that have a lot of corporate business and manage many early-morning flights for traveling executives. But our industry isn’t just the big guys; there are still plenty of smaller operations—even those with just a handful of cars—that don’t have the luxury of being able to hire someone just yet to answer late-night calls. The owner and/or a few staff members may take turns. Either way, if you are looking to increase your affiliate work, your affiliate partners are going to expect that their calls will be answered regardless of whether it’s 3 a.m. or Christmas Day.
The good news is, if you’re getting enough business right out of the gate, it shouldn’t be too long until you are able to have someone else handling the phones during the wee hours of the morning. That person might likely be an overnight dispatcher or some other position that will be useful to your overall operation moving forward.
• You may have to add to your fleet
Your lineup of two-year-old Chrysler 300s may be perfect for your clients but an affiliate sending you work may demand that their customers only be chauffeured in a luxury SUV, which you don’t own. Does that mean that the partnership is dead? It depends. Some of the larger networks may be inflexible in their requests because of brand continuity, and if you wish to be considered as an affiliate, you may need to make the purchase and then market the heck out of that vehicle in your area so it’s not costing more than it brings in. Some other operators may be willing to work with what you have, especially if your overall operation is attractive to them.
“Some of the larger affiliates have requests for vehicles that I probably wouldn’t choose to have in my fleet otherwise,” says Paul Thompson, CEO of Accent Chauffeured Transportation in Santa Fe, N.M. “However, they are our clients, so we will, of course, accommodate their needs and requests. I recently added both a Mercedes-Benz S550 and a Cadillac XTS to my fleet to have greater diversity that will appeal to the companies I work with.”
Other companies added to their fleets before shopping around for affiliates through careful financial planning. “We put together a fleet that would accommodate our affiliates,” says Mehdiof. “We purchased certain vehicles that they would ask for even though we did not have a huge local market for it. I had a Mercedes-Benz S-Class from day one, and that vehicle would not move for weeks at a time, but would be available to as many affiliates who would ask for it.”
• Technology is your friend
For some smaller companies, this may be the biggest and most expensive stumbling block, besides fleet, when it comes to working with affiliates. It’s still a reality for some mom-and-pop shops that they are not using the commercially available software packages that are specific to our industry. Purchasing software is practically imperative to growth, but it could be tough for a newer operator to swing. “The biggest change we made to accommodate affiliate work was to add a reliable reservation system,” says Joseph. “We decided to add Limo Anywhere as our reservation software because it is cloud based and is most popular for small and midsize operators. When we receive work, we are able to make the reservation, send a copy to our affiliate, charge the balance, and keep affiliates updated on the status of their clients and our chauffeurs.”
• Affiliate manager or not?
There is a lot involved in building a network, and the natural next step is adding a person to the position to manage all of the vetting, paperwork, networking, and training that goes with it. Jeanne Caputo, affiliate manager for MTC Limousine & Corporate Coach in Bedford Hills, N.Y., augments her full affiliate team with a college intern each summer, thanks to a large demand for inbound group business. Thompson was also able to add a brand-new affiliate position to his staff after doubling growth for four straight years. Alex Malek, president of Worldwide Transportation in Miami, Fla., recently hired a director of global sales to handle the growth of his affiliate network, a position that took months to fill due to the knowledge and connections he felt were needed. “It is not a part-time position. Managing inbound and outbound work takes just as much effort and time as building our local market. I believed hiring a person without experience would take him at least a year to completely understand relationships, the industry, and operations.”
Some other companies are able to absorb the new responsibilities without too much trouble. “I feel that it’s best for an owner to be the primary affiliate contact but once the relationships have been forged, it’s okay for others to assist in making the relationships last,” says Shawn Glasgow, president of Peak Chauffeured Service of Charlotte, N.C. He says that he receives support from his reservations manager.
“Arrow has always looked to empower our employees to handle requests as they come up,” says Callinan. “Our affiliate network has grown markedly in the past few years.”
• Networking is key
There are infinite resources in which to meet fellow operators, whether it’s through industry shows and events, association meetings, online and printed affiliate directories (such as our own Affiliate Central section or an association directory), or through referrals of trusted friends.
“We try to farm out our business to companies that best resemble our services,” says Jim MacGilvray Jr., president of Partners Executive Transportation in Whitestone, N.Y. “Sometimes it doesn’t work but after a point you come to learn who you like to use for certain jobs. We would not expect to tell an affiliate how to run their business but we let them know what our customers expect. There have been times when we’ve gotten complaints from affiliate service, but they are few and far between. I wish we had always done affiliate work because the people you meet are great. Networking with and through them is an integral part of the industry.”
Be realistic in what your company can handle because you don’t want to overpromise and under deliver. If you’re sending them business as well, take stock in your company and realistically estimate the volume they could receive based on your own clients’ travel habits. Expect the same candidness from the affiliate and ask lots of questions. There are plenty of articles out there that explain how to position your company to make it attractive to an affiliate partner, so there’s no need to beat that dead horse. One thing they don’t prepare you for, however, is...
• Be prepared to hear “no”
Shopping for affiliates isn’t much different than dating: You’re trying companies on to see how they fit with yours. You could be turned down for any number of reasons, such as your company culture being incompatible with the other or the affiliate already works with another company or two in your area and isn’t interested in changing at the moment. With any hope, the affiliate manager will tell you why they can’t add your company to the roster so that you can make the appropriate changes or heed their advice. It could be as simple as the affiliate manager doesn’t have time to vet your company and wants you to call back in three months—so make sure you follow up with him when he asks. You may have to be patient when courting the larger networks, and the process could take years. Don’t be discouraged by an initial rejection, especially if they leave a window of opportunity open for the future. Keeping yourself open to last-minute overflow work could help you get your foot in the door when their other affiliates either aren’t available or let them down. You never know when you’ll get your chance.
On the flip side, if you don’t see the relationship as a viable one or you have reservations about the company in any way, don’t be scared to say no. This should go without saying but friendship with another operator can often cloud judgment. If you can’t come to terms on payment or service, then you’re only hurting your own company in the process. You know it best. Make sure that the person you send to do the negotiating can handle both hearing and saying no.
“We lost a couple of good clients due to the poor service they received from the affiliates we sent the work to. I learned to do more research on the potential companies we wanted to establish relationships with and to ask other operators about them before we send any work to them,” says Mehdiof.
• On-site vetting and training are not a reality for most operators
When you only have a handful of affiliates in your network, it might be easy to hop on a plane or jump in the car to have a look-see at the operation to which you are sending your extremely valuable clients. But it’s no surprise that the process can be expensive and time consuming, especially if you are looking to expand into multiple cities at the same time. For the vast majority of companies, this won’t be an option but there are ways around it.
For Caputo, she has been able to meet—and site visit—some of her affiliates through her education and networking group. “Because our group met several times a year and often included a site visit of the host company, I got a chance to visit the operations of our affiliates,” she says. She also visits local affiliates whenever she goes to industry trade shows. “We try to visit as many as possible.” When not able, she has a thorough vetting process that includes an affiliate agreement and one-on-one instructions of their expectations.
“Now that we have an affiliate manager in place, we are implementing a much more formal approach to both the communication of expectations, as well as our overall vetting process,” Thompson. “We are developing an updated affiliate agreement that simply explains each very reasonable expectation for service, safety, and quality. As we introduce our more thorough vetting process, we are educating our potential partners throughout the process as well. We had one affiliate laugh when we asked for references, but we are proud that we are providing the highest level of screening and due diligence when we provide destination city service to our local clients.” You can read more about site visits on page 134, which is our Benchmark & Best Practices question of the month.
• Tackling the rate conversation
It’s the inevitable part of any affiliate discussion: Should you discount your rate or not, and what are the payment terms? What about invoicing or securing a credit card? These are all questions that have to be addressed during the negotiation. Too many times, a smaller company that is desperate for work will overlook just how long a net 60 days payment can be, which can seriously damage your cash flow and ability to stay current on your own financial obligations.
Overall, most of the operators we talked to were willing to offer a discount for service based on the volume of business that would reciprocate between the two companies. “Working with affiliates is no different than working with our local clients: You have a set affiliate rate deck,” says Malek. “What happens next is based on volume or relationships. Some clients provide credit cards while others request billing.”
“You never want to turn down affiliate work,” says Joseph. “We give a discounted rate and let them know upfront that the price reflects that. A majority of the time, we negotiate a rate that is suitable for both parties. We try to work with affiliates and make every effort to ensure that we are the first company they call. We do prefer a credit card on file; this makes the process much smoother and we don’t have to worry about trying to collect or making phone calls about payment.”
Not everyone agrees, however, that slashing prices is the way to go. “We do not reduce our rates,” says Callinan. “We offer affiliates value and the comfort of knowing that their client will be well taken care of. We could look to increase our volume by entering the ‘rate wars’ but now with Uber it makes even less sense than it did before. We have focused on quality over quantity in every decision we have made over the years.”
• Marketing to your clients
Now that you offer worldwide service, you need to inform your clients. Besides the usual method of your reservations staff always asking if a client needs transportation at their destination, there are a few additional ways to get the word out. If you produce a newsletter, include an update of new cities you’ve vetted. If you have a dedicated sales or affiliate manager, he could contact your larger clients via phone, email, or even e-blasts. Chauffeurs are another powerful way to spread the word.
“A main way to market your nationwide and international services is to add it your email signature and put it on all confirmations, invoices, and receipts sent to clients,” says Glasgow. “Social media interaction is another great way to monetize farm-out work.”
Jumping into affiliate work or expanding your network is almost always a recipe for strong company growth and sustained profitability. That growth, however, doesn’t come without a cost. By having a business plan in place and doing your research before taking on the task, you can spare yourself any unwanted and negative surprises. [CD0515]