Switch from equipment repairs to bus sales pays off for business partners
Given that revenues quadrupled in the three years through 2012, the decision to drastically reorient RO Bus Sales three years ago seems like an exercise in the obvious.
Far from it, recalled CEO and co-owner Brian Edwards. Although the company already sold and serviced shuttle buses — the models with about 20 seats each — it was heavily invested in repairing construction equipment. As it became painfully clear that the revenue plunge first seen toward the end of 2007 was not a passing fluke, Edwards and co-owner Joe Machin decided to go all in with buses.
That amounted to jumping off the diving board and hoping the pool was filled. To make it work, RO had to sign up a new set of clients.
However, said longtime consultant Bobby Bracken, “It was not any rougher than riding the roller coaster we were on. We knew that was going to crash and burn.”
With construction now comprising less than 10 percent of the business, RO has moved well past recovery and into expansion. Sales hit $10.5 million last year and are on track for $12.4 million this year, bolstered by a centrally located office and shop leased in 2011 plus sales branches in Southern California and Utah.
That performance led to Edwards and Machin winning the U.S. Small Business Administration’s Nevada Small Business Persons of the Year recognition last week.
SBA District Director Edward Cadena said that the panel of judges focused on how RO opted to shifted gears, literally and figuratively, rather than hang onto what had worked in the past.
“These guys were nimble enough to see that the industry was changing,” he said. “They strategically made the right decisions and included everybody. But they never changed their core competence of service.”
On the sales side, Bracken said that RO saw large federal government allocations to bus purchases for entities such as the Regional Transportation Commission of Southern Nevada, which runs a fleet of shuttle buses for its paratransit services.
The private sector, such as hotels, expected to hang onto its existing fleets longer than in the past because of the downturn in tourism. But customers still had to move around, so RO pushed services contracts, aiming to have a foot in the door once purchases resumed.
Today, new and used sales comprise about three-fourths of revenues.
“That’s the sexy side of the business,” Bracken said.
Service, however, comes with profit margins about triple those of sales, making it a cash-flow engine.
To emphasize that, Bracken said that salesmen keep the commission for the first year of a contract then split it with the service department in subsequent years. The idea, Bracken said, is to give everybody a stake in keeping customers satisfied once they walk in the door, the inclusionary aspect that Cadena highlighted.
For corporate customers that come in with repair jobs, RO has loaner buses available.
Edwards, Machin and Bracken have experience with business overhauls. RO started in 1999 with Edwards and Machin driving a truck around Las Vegas to handle basic maintenance on construction equipment, such as oil changes and brake jobs. They grew rapidly, to seven trucks and 38 people within a couple of years, but saw profits plummet even as sales soared.
Rather than continue on this unsustainable path, they cut staff, shed money-losing work and disposed of a custom wrought iron side venture.
The blow dealt by the Sept. 11, 2001, terrorist attacks pushed them into the bus business.
“When I met Brian, he could barely turn on a computer or balance a check book,” Bracken said. “Now he has guided the company to an industry leader with a clear and direct focus.”
Contact reporter Tim O’Reiley at
toreiley@reviewjournal.com or at 702-387-5290.
