You’ve been renting your gear for years, and you’re starting to get sick of it. One day you might finally be able to buy a new set of tools or equipment, but that doesn’t mean you should give up rentals just yet. Rental gear can be an excellent way to keep your business running while you wait for the big moment, and it can also give you a competitive edge in the market. Here are three scenarios where rental gear could come in handy:
Is the Equipment Rental Profitable? Is Equipment Rental a Good Business?
Owning and running a business that rents out equipment can be extremely satisfying and lucrative. Many owners of equipment rental businesses began with a single used machine and gradually expanded their operations through tenacity, excellent client relations, and the maintenance of a fleet of new and in good condition machines.
It’s not as expensive or difficult to start a business renting out equipment as you might imagine. You can launch your own equipment rental business in a matter of weeks if you do some careful planning, have some startup money, and have a passion for the business.
Over the past few decades, the equipment rental market has expanded at a rate of about 5% annually. The industry has a very promising future, with many industry insiders predicting 4-5% annual growth over the next few years. The equipment rental industry is expanding faster than the overall construction industry as a result of contractors’ long-term decision to rent more equipment.
Market share for the equipment rental industry
Due to the industry’s extreme fragmentation, small and medium-sized rental businesses account for the vast majority of industry sales. The top 10 companies that rent out equipment have a market share of about 35%, and the top three companies have a market share of about 25%, according to the American Rental Association (ARA).
United Rentals, Sunbelt Rentals, Herc Rentals, Home Depot Rentals, and Ahern Rentals are some of the biggest equipment rental businesses in North America. Over $50 billion in annual sales are generated by the industry as a whole, and the growth rate over the long term is roughly 5%.
Rental of Equipment Involves More Than Just Construction Equipment
Many companies that rent out equipment expand their fleets by adding equipment for events (such as parties, weddings, concerts, etc.), HVAC, and power generation.
The ARA divides the rental market into three main groups:
- Construction and Industrial Equipment: Construction companies and contractors are the main customers of this category. Earthmoving tools like excavators, loaders, backhoes, compaction machinery, light towers, and aerial work platforms are typical examples of equipment. This category can also include things like energy projects, malls, commercial buildings, and road infrastructure.
- DIY General Tool Equipment: This category includes tools that DIY homeowners and professional contractors frequently rent. Equipment includes hand tools, air compressors, aerators, lawn tractors, compact tractors, skid-steer loaders, small excavators, and other small and light construction equipment.
- Equipment for Parties, Weddings, and Events: This category includes items that people, homeowners, and businesses rent for parties and events. Items may include inflatables (moonwalks), portable restrooms, concession equipment, tents, tables, chairs, lights, dance floors, decorations, linens, plates, and glassware. Projects can be anything from big business events to intimate family get-togethers.
You can decide to cater to one or more categories when you first launch your rental business. An all-in-one rental offering is provided by many reputable rental companies. To determine which category best fits your local market, research the demand in your area.
For businesses that rent out equipment, aerial lifts and earthmoving machinery are frequently requested categories. You should research local rental rates, seasonality (demand varies throughout the year based on weather and construction patterns), and competition before deciding on your categories.
Customers renting equipment
Customers have the option to benefit from using goods (from excavators and aerial lifts to party tents) for a predetermined period of time thanks to the equipment and event rental industry. For a variety of reasons, customers prefer renting equipment to buying it, including:
- manage costs and inventory
- Numerous options for equipment
- expert client care and service
- There’s no need for downtime or maintenance
- Reduce storage and warehousing costs
- Object tracking
- Save money and control risk
How to Start an Equipment Rental Company
1. Business Plan
Today’s great businesses all began with a straightforward concept. You should create a business plan that details your strategy and ideas in order to turn that concept from an abstract idea into a reality. One of the best ways to force yourself to consider your business from various perspectives is to write a business plan. It is also a useful document to show prospective lenders and investors.
- Wait until the end to write this. This is a brief summary of your entire business plan from a 30,000-foot perspective. This makes the business plan easier to understand for those who haven’t read the whole thing.
- Business Description Write about the actions your business will take, including who will be involved (you and any others), where it will be located, the equipment your fleet will purchase, the hours you plan to work, etc.
- Market research: Recognize the rental market in your neighborhood. Learn about the local rental rates. Consult
- industry professionals to determine who your primary clients would be.
a study of competitors List the competitors, their activities, size, and how you propose to compete with them.
- Determine the equipment categories you will rent out as part of your product or service offering. Make a road map of your expansion plans as your company expands as well. Will you also provide parts and service?
- Determine your marketing strategy for informing the public about your new business. Make social media accounts and place ads in regional publications. Make sure to add your company to online directories so that people can find it, such as Google Maps and the Equipment Radar Directory.
- Financial Strategy Think carefully about the capital resources you have available and how you intend to use them. Most companies that rent out equipment take out bank loans to buy both new and used machinery. Determine which lenders you can trust.
- Create Your Business
To keep your personal and professional interests separate, you should establish a legal entity like a corporation or LLC. Your business must be registered with the IRS, your state, and pay a registration fee. Once your business has been established, you should open a bank account and deposit your startup funds there.
- Invest in New or Used Fleet Equipment
Many newly established rental businesses begin with just one used machine, later upgrading and growing their fleets. To purchase your first piece of equipment, you can shop online for both new and used items.
- Develop safety and risk management strategies
Purchase appropriate insurance to protect your company from mishaps and injuries. Consult your business insurance provider to learn what is and is not covered.
Establish safety policies for your business and train staff on how to use the equipment safely. Make sure to secure any hazardous areas in your storage or warehouse.
- Coordinate Business Activities
Pick a shop location. You will require enough room to store your equipment, as well as an office for you and other employees to work in, a service area, a check-in/check-out counter to deal with customers, and a showroom for equipment, accessories, and other items.
A nice showroom may be a significant selling point for your company. It gives potential customers a chance to browse your store and discover what you have to offer. Your showroom should be viewed as a marketing platform.
- Create a maintenance and fleet renewal plan.
The state of your fleet needs to be closely monitored. After each rental, inspect it, and carry out any necessary routine maintenance as well as emergency repairs. When equipment is returned from a job site, the best rental companies typically follow a systematic process to inspect, clean, and renew it.
To keep your entire rental fleet relatively new as your equipment ages, you should think about selling your older equipment and purchasing newer equipment. The average fleet age for large rental companies is usually around 50 months (4 years), which means that they sell equipment when it is around 7-8 years old. Customers frequently favor more modern, attractive equipment.
Rental rates are frequently influenced by the availability and demand of equipment locally. Rates fluctuate according to the season, the equipment’s type, and its state.
It’s crucial to keep an eye on changes to rental rates. The bottom line will increase or decrease by $1 for every $1 change in the rental rate. Your other expenses do not change significantly when your rental rate changes.
The majority of businesses typically offer daily, weekly, and monthly rental rates. The average daily rate tends to decrease as the rental period gets longer. Even though their average daily rental rates are lower, weekly and monthly rentals can frequently be more profitable for equipment rental businesses because there are fewer inefficiencies involved in them (transportation to and from the location, downtime for inspection and servicing, etc).
Utilization is a crucial metric that you need to pay close attention to. Usually, higher utilization translates into greater profitability. Equipment, building lease, and employee costs all remain largely constant whether you are renting out your equipment or not in the equipment rental industry.
Utilization has two negative sides. Customers might be compelled to choose a rival if your utilization is too high and you do not have any equipment available for rental. If utilization rises too high, it’s best to expand your fleet; if it falls too low, it’s best to shrink it.
Depending on where you live, construction can be very cyclical. To understand business trends during the busy summertime and slower wintertime, you should conduct research on seasonality swings.
Economic cycles can affect equipment rental. The demand for rental equipment slows along with the general economy’s and the construction industry’s contraction. During a downturn, rental rates typically mellow out or decline.
Why Equipment Rental is a popular Option for Businesses.
Renting equipment can be a great way to save money on costs associated with traveling. Not only do you not have to buy the equipment, but you also don’t have to worry about its quality or whether it will meet your needs. In fact, many businesses find renting equipment to be an extremely cost-effective option.
How to Choose the Right Equipment for Your Business
When making the decision to rent equipment, it is important to consider your business’s specific needs and goals. For example, if you are a small business that wants to increase efficiency in your office, renting space for a printer may be the best option for you. Conversely, if your business is primarily in sales and marketing, renting a fax machine may be more appropriate than purchasing one.
How to Rent Equipment
When choosing an equipment rental company, make sure you research their services and rates before booking. Be sure to factor in how much time you plan on spending using the rental unit and what kind of technology (e.g., printer) you need. Additionally, be sure to bargain and find a deal that is more affordable than the store-bought option. By choosing equipment rental from a reputable company, you can ensure that you are getting the best deal possible on your travels.
The Different Types of Equipment Rental.
Self-operating equipment is the most common type of equipment rental. This includes items like computers, printers, and scanners. Many self-operating equipment rental companies offer affordable rates and often have convenient pick-up times.
Office equipment can include everything from furniture to software to create a professional work space. This includes everything from desks and chairs to fax machines and scanners. Many companies offer discounts on office equipment rentals when hired by a company or organization.
Warehouse and Storage Equipment
Warehouse and storage equipment are often used for storage or production purposes, but can also be used for rent for offices or businesses. Many warehouse and storage companies offer prices that are lower than self-operating equipment rental companies, as well as delivery services that make it easy to get your gear back quickly if you need it again soon.
Tips for Securing Equipment Rental.
When renting equipment, be sure to clarify your obligations to the company and understand what services you will be using. You should also get a warrantee on any equipment you rent in order to protect yourself from any legal problems that might arise.
Get a Warrantee
When renting equipment, many companies provide a warranty against damage or defects. This warranty can protect you from any lawsuits that may come down the road.
Get a Deposit
Be sure to put down a deposit before rental so that you have enough money to cover your costs and return the equipment once it is delivered. This will ensure that you are fully protected when renting equipment and that there is no chance of any problems down the line.
Get a Quotation
Make sure to get a quotation from an experienced equipment rental company before making any decisions about rentals. By doing this, you’ll be able to find out exactly what type of unit (caravan, camper, van, etc.) you need, how much money you’ll need for it, and what kind of return policy you’ll be comfortable with.
Most Profitable Rental Business
- A party rental company
Most families only host a few parties annually, so it is frequently unnecessary to purchase supplies that will only be used a few times. As more guests are invited and more tables, chairs, and tents are required, the costs can quickly mount. It is one of the most well-liked rental business ideas because of this, and starting one doesn’t require much.
Given how crowded the market is, you might feel a little hesitant to enter it, but you must find the right niche. With the right marketing and an idea that sets you apart from the other party rental companies in your neighborhood, you can quickly grow your clientele.
- Event and wedding rentals
You might assume that this would be covered by the party rental industry, but it is a thriving industry all on its own. Though you might only have one family wedding per year, why bother buying decorations that you will only use once? This is the same justification for wedding and event rental businesses.
Renting for weddings and events also enables you to express your creativity. To create the ideal environment, you can offer your clients a wide variety of items and customize them to their preferences. Being able to start small to test the waters and grow your inventory as your business develops makes getting started relatively simple.
- Camera & lens rentals
From our experience working in the field, we can say that camera rental businesses are some of the most lucrative you can operate. It’s one of the few industries where everyone, from full-fledged multinational corporations to college students, needs it. If you stock the appropriate equipment, this gives your camera business a very broad scope.
It’s possible that you already own camera equipment that is sitting around gathering dust because you no longer use it but can make some extra cash renting it out. The ability to operate and maintain cameras, however, is the most important factor in a successful camera rental company.
Customers will come to you for information and may even seek your counsel on best practices for filming and taking pictures. You won’t have any trouble expanding your own camera rental business if you cultivate strong customer relationships.
- Bike rental business
One of the most well-liked business categories in the sector, bike rental shops have a relatively low barrier to entry. Starting your own bike rental company is typically less expensive than, say, starting a camera or event rental company. Additionally, they essentially market themselves due to the high demand.
If you live in a remote area, mountain bikes and expensive road bikes are your best option. City bikes are the easiest entry point into this industry. Living somewhere where many people travel by bicycle or where many locals do so puts you in a winning situation. Keep in mind that the majority of bike rental businesses are seasonal, so plan accordingly.
- Renting e-bikes
E-bike rentals are popular and the market has grown significantly as they have gained popularity, just like with bike rentals. People prefer e-bikes because they are simpler to ride and enable you to go further without exerting as much effort as traditional bikes do.
Compared to regular bikes, the entry fee is much higher, but the rewards could be much greater. We’ve discovered that they are most common in big cities, places with more dispersed shops and amenities, and tourist hotspots for long country drives.
E-bike rentals have the potential to be among the most profitable, despite not yet being seen as a conventional concept for a rental business. Additionally, as more people switch from inexpensive city cars to e-bikes, which are less expensive to operate and can perform nearly the same tasks, their popularity will only increase. Undoubtedly a sector to consider.
- Rentals for skis and snowboards
Ski and snowboard rentals are located on the other side of the year and are very similar to bike rentals. Of course, one of the biggest is the fact that since renting skis and snowboards is typically a winter activity, location is crucial.
However, given this fact, it may not come as a surprise to learn that many rental companies provide both bike and ski/snowboard rentals in order to maintain their operations throughout the year. They are also very popular because they are a family-friendly activity that is frequently reserved for several days.
Of course, there is a lot of competition in the ski and snowboard rental market because of its nature and location restrictions. With a strong online presence, a user-friendly website, and a positive booking experience, you can stand out from the competition.
Equipment rental is a popular option for businesses because it offers many benefits. One of the most important benefits is the ability to change or add equipment as needed, which can save time and money. Another benefit of renting equipment is that you have full control over the equipment. You can choose from a wide range of brands and types of equipment, which gives you the best chance for success in your business.