I bought a 3-ounce bag of M&Ms in a North Carolina airport recently. The cost was $1.99. Each M & M cost 5 cents! Certainly, life is more expensive today than it was six months or a year ago, and far more expensive than it was two years ago. But, it's difficult to understand how the daily rent on a $20,000 construction rental item rents for the equivalent price of a bag of M&Ms.
The cost of fuel for your delivery vehicles has increased over 25 percent in the last 12 months alone. The other costs of doing business have risen as well. So, it's time to take a fresh look at your rental rates.
Pricing strategy is important to the growth and future viability of your business. Don't just tinker with your rates. And don't do an across-the-board increase or decrease. These are among the surest ways of either charging too much or leaving too much money on the table.
I recommend a comprehensive plan to adjust your rates. This is more than just "reviewing your rates" because active changing might be necessary - depending on all the factors that relate to your company's rates. Your rental rates need to be fair and reasonable for your community.
I also suggest an item-by-item adjustment as part of the comprehensive plan to increase profitability. What you should be charging is local-market specific. There are many factors to consider. Don't rely upon employees, friends or other rental business operators for this type of business advice. Get an industry expert's opinion as to what should be done and how and when it should be done.
At one time it was possible for a rental business operator to make up some rental rates and be profitable. The fact is that the rental industry is still not as price sensitive as some other industries. But increasingly, some factors have made rental customers focus on price far more now than in the past. The economy, the Internet, competitors and other factors have made price more important to customers - and more critical to get them right.
Rental rates are an emotional issue. Some rental business operators get angry because "competitors are not charging enough." Being emotional about the frustration that competitors are undercutting your prices doesn't help you in your quest to grow your business and to become more profitable.
Although not as common as raising rates, sometimes it makes sense to decrease rates for certain rental items.
Also, your rates may need to be (and deserve to be) higher than a competitor for a variety of reasons. When adjusting rental rates it's important to be objective about your own company and your competition - which is almost impossible to do without expert help.
Each time I've assisted a rental business operator analyze and adjust rental rates, we have always identified tens of thousands of dollars in additional rental rate related income adjustments. Finding tens of thousands of additional rental rate related income is well worth the effort and expense.
Just remember that you are providing a valuable service. Rental isn't a commodity. Employees can be trained to keep potential customers as viewing your offerings as such. What is the real and fair value of your service to customers? It's not only what you are charging but how you are charging it.