Garry Bartecki Could the Rental business be an opportunity?
Equipment dealers work in a complex environment. The first topic which encouraged me to get involved with the industry relates to rental activities. The second was the dealer management’s ability to juggle the sales silos to produce a profit. As my industry experience grew it became easier to recognize the dealers that were above average.
The above-average dealers were able to recognize problems before they become critical. Whether the problems were internal or brought about by external issues similar to what we are encountering now, they would take steps to find solutions to mitigate the problem as well as educate management on why the problems occurred and what steps will be taken to reduce any risk to the company. In the end, the entire management team learned a lesson they will put to effective use at some time during their career.
The method described above was a standard operating procedure. Many dealers would have similar problems with employees who have run into the problem in the past. Today, however, we find ourselves without much experience with the economy we find ourselves in. Nor do we have employees on staff with the experience and knowledge to help mitigate the problem. So, to correct today’s problems management must find “current” ways to lead their company to the other side of this mess.
Would I want to dive into this process to find solutions to keep my company solvent and operating at a level to both retain and attract new customers? If I am the company leader, I have no choice but to dive in to prepare a plan satisfactory to our bank, management team, OEMs, and customer base. But after considering my choices I would reverse the action steps and put customer needs first.
But it sure would be nice to have another leader you respect to work through the issues with. And a few more, if available, could also consult on your game plan giving you a comfort level that will provide options to deal with inflation, interest rates, company costs to operate, parts and equipment inventories while at the same time informing employees what you need from them. Since our major goal is to keep customers happy, you should also invite a few to take part in your planning process.
I also spend a lot of time in the rental and construction equipment business. The construction folks are going through the same issues as the lift truck dealers. Rental companies are also in the same boat but at least have rental assets to rent to contractors lacking the equipment they need to complete jobs. What we see in construction is that contractors keeping units longer takes on the maintenance expense to make that happen. In fact, my opinion is that the rental industry is in for dramatic growth because the thrill of equipment ownership is not what it used to be.
A recent article I read expects the rental industry to move from the current $60 billion market to $130 billion by 2027 or thereabouts. Does that tell you anything? Does it spell OPPORTUNITY!
Contractors are driving this change in basic assumptions because the industry is requiring them to become more proficient, and as a result reducing fixed costs in terms of equipment loans or leases is on the table. With interest rates sure to increase and a lack of tech talent, many contractors are pushing off what others can do best, like maintain and store equipment better than the contractor can do or wants to do.
Lift truck dealers are also in the rental business. And today expanding the rental business is where they should be expanding. Daily, weekly, and monthly rentals are where the money is today.
Maintenance is a close second. Dealers need to maintain their rental fleets as well as assist customers by keeping their owned units ready to work when needed. Believe it or not, your customers have similar concerns as the contractors have. The TALK is all about productivity and how to get it. Part of becoming more efficient is by doing what you do best and farming out the rest to parties you are comfortable working with.
In terms of getting your plan on the right track there is no better time to join a performance group to share ideas and solutions, and if possible, create joint ventures to try modern technology opportunities to make all of you more productive.
I would also have conversations with customers to get their opinions about avoiding the fixed costs and leases for internal fleets. The lift truck dealer does a better job of maintaining the fleet which would make the customer more efficient and profitable.
I suggest you monitor Equipment Watch on a monthly basis to track changes in values, rates, and age of equipment being used.
You may also want to check out an article in Forbes (the 36th Annual Billionaires Issue) where they discuss a new public co and a 27-year-old Billionaire running a company called Bolt. Bolt promises an Amazon-style checkout for millions of independent online retailers. I am sure many of your customers may find this story interesting.
About the Columnist:
Garry Bartecki is a CPA MBA with GB Financial Services LLC and a Wholesaler columnist since August 1993. E-mail [email protected] to contact Garry.
