Value Added: Limo service owner found way to profit from repairs


Robert M. Alexander — who owns a limousine, taxi and shuttle service — in front of his new gas station in Rockville. (Bill O'Leary/The Washington Post)
Thomas Heath
Reporter September 22, 2013

It was the brake jobs that did it.

Like most of us, Robert Alexander hated paying for car repairs.

Thomas Heath is a local business reporter and columnist, writing about entrepreneurs and various companies big and small in the Washington Metropolitan area. Previously, he wrote about the business of sports for The Post’s sports section for most of a decade. View Archive

And he has lots of cars. The owner of a Rockville-based limousine company, he was piling up hundreds of thousands of dollars in maintenance bills annually when he decided to take action:

“I said this is crazy. I decided to buy my own station.”

So in 2001, Alexander plopped down nearly $500,000 for a BP gas station on Rockville Pike in Montgomery County that has three service bays, two mechanics and a helper.

Now, the $1.3 million he spends on maintenance and fuel mostly goes into his own pocket, instead of someone else’s. The move is an example of vertical integration, right out of a Management 101 playbook in which you own the businesses above and below you on the supply and service chain. It allows you to better control your costs as well as the quality of the work.

“I run [the BP station] like a separate business, but I give myself a discount,” Alexander said. “I know the quality of the work and know it’s going to be done quickly.”

Alexander, 47, has a sprawling $25 million transportation empire in Montgomery County that includes RMA Worldwide Chauffeured Transportation, Orange Taxi and his BP station. He has a fleet of 120 cars, buses and shuttles, and employs 225 people. The company takes in an annual gross revenue of $25 million, and the only debt he has is about $550,000 on his fleet.

Suffice it to say, the Potomac resident does very well. But in business, nothing is forever.

After more than 20 years spent building his enterprise, Alexander finds himself fending off Uber, the Web-based disrupter that allows customers to summon a ride at a moment’s notice from a mobile app.

“They’ve invented a great mousetrap and are hiring very bright people,” he said of the San Francisco-based upstart, which is funded in part by billionaire Amazon.com founder and soon-to-be Washington Post owner Jeffrey P. Bezos. Google has also invested in Uber.

Alexander doesn’t mind a fight. The Bethesda native, the youngest of five children of a tax lawyer, has been scrapping since his student days at Washington College in Chestertown, Md., in the late 1980s. The summer before his senior year, an elderly woman who lived across the street from his family asked Alexander to take her and her mixed terrier to the veterinarian.

“I said sure,” he recalled. “I started driving errands for her in my parents’ Oldsmobile station wagon.”

Word spread, and he used the new Saab his parents gave him for graduation to expand the errands business. He shopped at grocery stores. He ran people to the doctor. He drove their cars to emissions tests. He charged $15 an hour and worked seven days a week. He even drove a kid to and from private school. He drew the line when a man asked Alexander to represent him in court for a speeding ticket.

After a couple of years, he had an epiphany.

An executive at Studley, the real estate management firm, asked Alexander to drive him to Union Station. Then the executive kept calling for rides and errands. Alexander realized that the businessman, who was expensing many of the charges, was a better client than the everyday customers who were paying out of their pocket.

“I saw very, very quickly that the corporate market is where the dollars are,” he said.

He expanded. He bought a 1985 Chrysler limousine for less than $5,000. He ran an advertisement for chauffeur services in The Post. People began calling. Living at home with his parents, he saved like mad and used the profits to buy more vehicles.

His next big break came when he put on a suit, drove to the new Marriott near Montgomery Mall and secured a lucrative account for the hotel’s business travel to and from the airports.

“I learned from Marriott how to run a service business and keep customers happy,” he said.

Expenses had grown so much that Alexander bought the BP station in August 2001. Then he got hit with a double whammy. The Korean clientele who had patronized the BP station left after he became the owner. Then came the Sept. 11 terrorist attacks, bringing air travel — and the limousine services that went with it — to a crawl.

“By January 2002, I am the proud owner of two businesses that were sucking wind,” he recalled. “It was very tough. We burned though $500,000 in cash.”

He quickly learned that the service-station business was not a slam dunk.

“We thought you buy gas, you sell gas, that was the extent of it,” he said. “We have since learned how to manage temperamental mechanics, flaky cashiers, a retail store and how to price repairs.”

He learned that the profits lie in the car maintenance and the convenience-store side of the business. A gas station owner makes more from selling a quart of bottled water than on a gallon of gas.

Understanding the limousine business was easier. RMA Limousine, which services hundreds of local companies, including law firms and technology businesses, brings in $18 million of his enterprise’s $25 million in revenue. The BP station grosses about $3 million to $4 million.

He has diversified. He operates three buses for the Bethesda Circulator. He is preparing to buy a building in Montgomery County to serve as a headquarters and a place to store his vehicles. He has partnerships with other limousine services around the world, allowing RMA to guarantee service to — and collect a fee from — customers who land at hundreds of airports across the globe.

In 2011, he started Orange Taxi from scratch when Montgomery County expanded the number of taxi licenses.

“The taxi business is a rent collector. We pay for maintenance, the vehicle and insurance, and the drivers each give us $100 a day,” he said. “After the 12th day of the month, it is cash-flow positive.”

Alexander is very active in his industry, where he has been speaking about the challenges that Uber presents.

As a defensive measure, Alexander has invested $100,000 in his own online app and support software. The app is slowly gaining traction, but it is an uphill battle because most of his customers are corporate executives who book online and by telephone. What they are not doing is standing on a street corner, punching in a mobile app. Not yet, anyway.

“Uber is easy because you hit a button and the car is there and off you go. They are chic, they are cool, and that is how they are perceived. Today, they may not be the threat, but these 20-somethings using Uber are tech-savvy. When they move up the corporate ladder, they are going to take Uber with them.”

Now, that is a case of vertical integration he could do without.

For previous columns, go to washingtonpost.com/business.

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