By Dave Millhouser

"We lose a little on each ... BUT we make it up on volume," is an old joke that may still have legs.

Many coach operators have looked at long-term transportation contracts as a way of dealing with the boom-and-bust nature of the charter-and-tour business.

The rationale is that even "breaking even" on contract work, performed when equipment would normally be idle, covers some fixed overhead. This makes your regular work more profitable, and keeps valuable people and equipment working, during traditionally slow times.

Its a great idea, wildly successful for some. But, if it was easy, everyone would do it. Like so much of business, with opportunity comes risk.

Contracts come in many sizes and shapes, including casino runs, daily commuter service, school athletic work, corporate shuttles, and a bunch I havent thought of.

Heck, many companies have invented their own contract services, and sold them to customers (construction workers transported from a parking lot to work sites, employee shuttles between locations, and so on).

When youre deciding if you will "make it up on volume" here are a few things to consider:

Know your costs (dont assume everything will go smoothly). Many contracts go to the lowest bidder, and you may hurt yourself if you miscalculate. A lot of folks use "wishful thinking" as a cost basis. There can be valid reasons for working below cost but, if you do that, be honest with yourself. If you want the business too badly (we all do occasionally), with a contract the pain can last a long time.

How does it fit with what youre doing now, and does your company have the skills to squeeze out all the benefits? For example, a daily commute leaves your buses free for weekend and evening charters, as well as daytime transfers or sightseeing. Terrific if your operations and sales folks know how to squish it together.

Does your fleet and workforce fit the job? If not, youre going to have to train people and buy buses. It may be worth it but do the calculation. How hard is the contract service going to work your coaches? Will they be loafing? Or ground into dust?

Who owns the equipment? Its great if you can operate the customers coaches but are you then allowed to use them during times that help you? Contracts with government entities generally spell this out, but youve got to understand the terms.

If youre buying the buses, how long is the contract? What are you going to do with them when the contract ends? (And, how much will they REALLY be worth?)

Who pays for the fuel? What happens when it goes up? nuff said.

What are the startup costs? In addition to the obvious, like equipment, hiring drivers and regulatory details, theres almost always a lag in payment. You do all this "stuff," begin the work and then have to wait for your money. Make sure you know the schedule and can make the cash flow work.

How reliable is the contract, and under what circumstances can it be altered or cancelled? How badly will you be hurt if it does end badly? If a contract is iffy, or cheap, you may benefit by letting a competitor have it. He or she can take the risk and tie up resources, while you "do your thing."

Everyone I asked about contract work was on the same page. If you want this type of work, be active in your community. Youll hear about opportunities, and get advice from the customer, if youre seen as involved.

Convince the customer youre his or her best value, and you may win without being the lowest bidder. ("The other guy is based 100 miles away; you have MY home phone number." Youre already doing it with other customers.)

Know the process, study it thoroughly, so when you offer a bid it fits the customers requirements AND desires.

Its critical that once youve won any contract you continue to treat the customer, well, like a customer. In many cases these arrangements become profitable in the long term, as they are either renewed or re-bid on a favorable basis because the contractor has done a good job.

Youve seen it when youve tried to take the work from someone else, so now that youre in the drivers seat (another pesky bus pun), treat your customer as if they had a choice. In the long term they do.

Bus lines have been stunned when theyve lost contracts theyd had "forever" and took for granted.

And DONT do what a now defunct bus line once did: Not only did the owner break contract rules by using his customers bus on a 1,000-mile charter, his driver got a bunch of parking tickets. Since the bus was registered in his customers name, guess who the parking tickets were mailed to?

Dave Millhouser is a bus industry marketing consultant and freelance writer. Contact him at: dave_millhouser@hotmail.com.