Growing your Rental Fleet: How to Maximize Profitability and Ensure the Success of your Rental Business
Equipment rental companies can typically be put into one of three categories:
- Large national rental company with large equipment
- Medium regional rental company with general equipment
- Small local rental company with key pieces of equipment
So, what is it that smaller rental companies need to grow their fleets? Specifically, what does a small company need to know if they want to grow not only their business, but also the size of their equipment fleet? There are some key observations that can help answer that question:
Know your Customers
The best source of business intelligence is your current customers. Or in some cases – lost customers. What machines do your customers rent from you? More importantly, what are they NOT renting from you? What items are they going to your competitor for? Start a lost sales report. How many phone calls come in for a 100-foot lift when the biggest you carry is 50? Use this data to track which items you are missing and what kind of revenue this would bring in.
Know your Competition
Drive around. Call around. Look at what other rental houses have in the yard. Keep an eye out for delivery trucks and see what they are buying. Even more importantly, see what they don’t have available for their customers. Call your competitor and ask their rental rate for a piece of equipment you do not currently have in your fleet.
Know your Suppliers
Your construction equipment sales person is in touch with the market and customers in your area. Ask what they are seeing from manufacturers. What are the new models? What are the advantages of certain technology that you might not be utilizing? Becoming a partner with your equipment supplier will only strengthen your brand.
Know your Total Cost of Ownership
True total cost of ownership (TCO) is determined by factoring in everything that goes into operating a machine over its lifetime: initial purchase price, fuel costs, maintenance costs, utilization, organizational overhead, resale value, etc. If you start extrapolating that over the duration of ownership, all of those costs have to roll up into a profitable rental rate.
When you have all of this information – try not to overdo it right away. Do not buy a large dozer because you saw one and a good customer of your asked for one. That could be a huge investment for possibly very little return, and could wind up being a big paperweight on your lot. The rule of thumb for contractors used to be “if you’re going to use it 70 percent of the time or more; buy it. If less than 70 percent; rent it.” Before making any investment, make sure that it’s going to make you money.
If you find yourself with the wrong type of equipment, there are always options. Selling it to a customer that has rented it in the past is a good way to win loyalty. Trading it in to your local dealer on another piece of equipment that fits your need is another. Finally, many on-line auction sites are easy to navigate and open your equipment to a much larger market.
The key – don’t become complacent. In addition to equipment replacement, part of your business plan needs to be market justification. Following the above steps will help you manage your fleet to meet more customer’s needs.
Staying up to speed on the latest technology is another way to help grow your equipment offering in an intelligent, sustainable way. Machine control is certainly starting to get more and more traction on the rental side of things. As it’s become more accepted in the marketplace, rental companies are starting to make it available to their customers.
Telematics technology is also being more professionally utilized by rental companies. For a rental house, having access to telematics data output and setting notifications if machines start operating outside of normal operational parameters is critical. This informs the renter of possible problems and cues them to contact the rental house and discuss the proper next steps. In the past, before telematics, an operator may just keep operating the machine because they didn’t understand a code and made the problem worse before parking the machine at the end of the day or bringing it back to the renter/owner. Telematics helps prevent that from happening now by providing immediate notification.
As a final note, equipment rental is a very competitive industry, and rental companies of all sizes need an edge. Knowing your customers’ ever-evolving needs, keeping a close eye on your competition, developing good relationships with your suppliers/manufacturers and managing the TCO of your equipment investments are all great ways to ensure your continued growth and success.