Win-Win-Win Rental Relationships
by Galen Wickstrom - National Accounts Manager On Aug 9, 2018, 03:00 AM
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Getting a healthy return on invested capital (ROIC) is a goal for rental companies, end users and manufacturers supplying the industry. When everyone works together, everyone wins. Contractors get reliable and productive equipment exactly when and where they need, and they do not pay for machines that sit idle or the extra expenses associated with owning equipment. Rental companies maximize profits throughout the life cycle of each machine and maintain a high residual value. And given that, manufacturers will receive repeat business from their happy and profitable customers.
Of course, these perfect rental partnerships don’t just happen; it takes the cooperation of everyone involved to make it happen. Contractors need to select rental partners based on more that rental pricing, and rental stores need to maintain a newer, reliable fleet of equipment that gives contractors a reason to potential pay more than another place is charging. Also, manufacturers need to continue to develop quality products that hold value and are versatile for the various needs of end users. At the heart of any healthy partnership is great communications and understanding the needs of one another.
End user needs
The most basic need for contractors is the need to get a job done as efficiently and safely as possible. There are a lot of ways for them to achieve that, and however they approach it, it will affect their overall return-on-investment for any given job. And, many contractors do not take the time to weigh their options — are they are too busy trying to fix older unreliable equipment, which they should they be renting? They don’t get it and need help.
It’s up to rental stores and manufacturers to help them understand there’s a better way to achieve their most basic need while maximizing their ROIC.
Every rental store should be familiar with advantages for contractors to rent instead of purchasing equipment, but do potential customers understand all of the advantages? Many first-time renters do so out of need. Either a machine broke down and they don’t have the time repair it, or a job requires equipment they do not own and they don’t believe they will use it often enough to buy.
And while need is a great reason to start renting, rental stores need to also help them discover how renting helps them in other ways too, including:
- Renting helps them control their expenses and manage their fleet
- Reduces maintenance expenses
- Potentially lowers insurance premiums
- Avoids paying for equipment not being used
- Renting means they’ll always have the right machine for the job
- Renting gives them access to the latest equipment technology
- Renting reduces downtime
- Most reputable rental companies manage newer fleets of equipment and are diligent about maintenance
- In the event of a breakdown, a rented machine is simply swapped out
- Renting allows them to conserve their business’ capital during lean times since they are not paying or machines not being used
- Renting gives them ‘expense’ options on their balance sheet
When rental customers understand all the benefits of rental, they are more likely to look to rental more often.
Rental company needs
Rental companies need a reliable fleet of quality equipment that they can maximize rental revenues from and a loyal customer base. That’s easier said than done. To begin with, a loyal customer base depends on several factors including sales, service, equipment quality and economic conditions. It’s a lot for any manager to balance. And while some of these factors are outside of the control of a manager, he or she can hire knowledgeable, friendly people and control fleet costs.
Balancing equipment costs with rental revenues is the driving force behind a healthy rental return on invested capital (rROIC). It’s important for rental companies to understand that saving a few bucks on by purchasing lower quality equipment is not a good way to achieving a solid return. Instead, it’s a philosophy that leads to higher maintenance and repair expenses, shorter equipment life cycles, unhappy customers and lower residual value when it comes time to sell.
Successful rental companies play the long game and focus on purchasing the highest quality machine from brands their customers know and trust. While that doesn’t feel like it saves money short term, they know the right equipment investment will net them the best return in the long run. Buying quality equipment from reputable manufacturers will reduce maintenance and repair expenses, demand higher rental rates, build customer loyalty, as well as be able to sell those machines for more down the road.
The most important need of manufacturers is recognizing and understanding the needs of rental companies and end users. Equipment can’t be conceptualized, designed and manufactured in a vacuum…product teams need to understand the work being done by end users and the factors that will impact rental companies.
When a manufacturer understands those needs, the result is simple and safe versatile equipment that are built using quality components that will hold up on the job, include the latest innovations that benefit end users and rental companies, help spread out service intervals, as well as retain value for many years to come.
When end users, rental companies and manufacturers work together, everyone wins.