Take My Advice - Sales and Rental
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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Take My Advice

CED Magazine, April 2009

Article Date: 04-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Website: http://www.detmerconsulting.com
Operating an Efficient, Well-Run (and Profitable) Rental Business

By Dick Detmer

The equipment rental business is very different from other businesses – including the business of selling construction equipment. In advising over 1,000 businesses that were exclusively in the selling-type business that have added a rental business, I have found that the more the rental business is operated like the sales part of the business, the poorer the results. The rental business (rent-to-rent not rent-to-purchase) requires a different way of looking at things.

I have found that most rental operations that have been added to an equipment sales business have real potential but need a very different set of strategies to achieve success.

It is possible that the CEO or other members of the senior management team view the rent-to-rent business as a “necessary evil” in these tough economic times. My recommendation is to have the rental portion of the business analyzed, and if it has sufficient strategic potential to stay in it, make the commitment necessary to help ensure it will be successful.

There are so many ways to unlock the growth and profitability of an equipment rental business. But each rental business (and every location for companies with multiple locations) is different. Each rental business is unique in terms of competitors, demographics, inventory, employees, etc., so each has a different combination of possible strategies to unlock optimum rental potential.

However, almost all are in desperate need of initial and follow-up rental-specific education for the rental manager and employees. This should include a wide range of best practices (specific to that company’s needs) including training dealing with the rental inventory items themselves as well as rental policies and procedures, merchandising rental and much more. Employees are one of the primary keys to rental business success, so consider a variety of strategies to help make them effective.

Much to Evaluate
A critical area that should be analyzed is rental rates. Usually rental businesses do not focus as much time as they should performing this task. In the past, rental rates were not as important as they are now. However, the tough economy has made pricing crucial in the construction market, to say the least.

Having the right rental rates in your community takes more than any formula could ever deliver. It is an art and science. There are so many variables to consider when structuring your rates. You and your staff want to have the confidence your rates are fair and competitive.

Another almost universal opportunity area is the rental inventory itself. Do you have the right inventory mix? Are your offerings broad enough and deep enough? Or, is your fleet too broad or too deep?

If you feel that your rental manager may not be able to assess the inventory objectively, it may be helpful
to seek the advice of a third party rental expert.

Of course, the company’s rental business advertising should also receive an objective analysis. A great deal of time, money and effort can be wasted on unproductive advertising. And just because you have done something in the past doesn’t mean it is the best use of your resources now. On the other hand, cutting advertising purely for the sake of cutting is financially dangerous. I recommend an evaluation of all your advertising options and careful selection of the best value.

Too often, I’ve found that big decisions are made without considering all of the possibilities and the unintended consequences. Making quick decisions without adequate preliminary analysis usually yields unfavorable results.
With all of the changes brought about by the present economic downturn, it is also time to get an objective view of all of your competitors. They may be much stronger or much weaker in certain areas than you think.

The rental business is a dynamic business and just because something didn’t make sense in the past doesn’t mean it shouldn’t be considered now. The sour economy will sweeten in time. But there are opportunities available now, and the wisest business owners will identify, explore and execute them. Good luck, and let me know if I can help you.

Dick Detmer is the president of Detmer Consulting, Inc., a consulting firm that specializes in the development of high-performance equipment rental businesses. For more information, contact Dick Detmer at (309) 781-3451 or dick@detmerconsulting.com


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Article Categories:  Management  »  Rental