In this case, I’m not thinking about the upcoming Holidays (or that fantastic Staples commercial celebrating the start of another school year). Rather – it’s time to plan your 2013 business strategy and forecast the new year. Whether you’re in the middle of the project, or just getting started, analyzing the performance and profitability of each business line is a great place to focus. What was your mix of Rental, Sales, Parts and Service? Where was the growth and profitability year over year?
During a recent conversation with a customer, we talked about how their business has evolved. Five year ago, their business mix weighed heavily towards Service and Parts sales. Today’s business mix includes a larger percentage of rentals than in years past, and they’ve experienced a growth in overall business and profitability as a result. It’s safe to say that their experience is not unique.
As a fan of Rental Equipment Register magazine, I read it cover to cover each month. It just so happens that the October edition included a great article by Larry Kaye titled Rental is the Cornerstone. His experience is much like many of our customers. Rentals shouldn’t be an afterthought; this line of business is an important pillar in a healthy mix to allow the business to thrive in all economic conditions.
Think about the evolution of your customers and your marketplace. Are Rentals no longer the “exception” to fill a short-term need? More companies are making equipment rental a natural part of their business because, in the long run, it makes a lot of sense economically. The “renter” doesn’t incur a large capital expense (possibly taking on new debt) and avoids paying for repairs and long-term equipment maintenance. The flip side of the cost savings are also in favor of the renter. They gain the use of equipment when they need it, they have access to the latest and greatest model that is more efficient that an older unit and they experience increased up-time since the rental company must keep their equipment well maintained otherwise they don’t make any money. These benefits all translate to a job well done, meaning the ‘renter” has happier customers too.
From your perspective, a rental line of business also reflects positively on your other business lines. Good quality used equipment is always in demand and turning over your rental fleet leads to increased Parts and Service business. Everyone wins.
If you haven’t already, check out Mr. Kaye’s article; especially the charts outlining how a rental strategy contributes to the bottom line of the business.
What’s your business mix? Is your experience similar? I’d love to hear from you on this topic.