Inventory Selection

Today we look at some of the factors to consider in building and developing your fleet offering.

What is your company profile - Some companies make the mistake of only evaluating their fleet offering yearly or at times of financial stress within the business. Whenever you make a purchase, you should be evaluating all of your fleet and what effect each purchase has on your overall offering and subsequent profitability. The biggest mistake in the rental industry is that of managers and owners not realizing or identifying which assets bring the highest return AND not identifying the customer base that allows the highest return on the assets owned.

Starting point - Fleet evaluation should begin each day. Today you have a fleet that, as a snapshot in time, reflects what you are as a vendor. Take a look at your offering. Is it what you want it to be? Figure each piece on a full-rate monthly revenue basis and a maximum of six months of rental per year. Does this figure double all business costs? If it does not, then ask yourself why you have the asset if it cannot meet a 50% yearly dollar utilization.

Usage and maintenance - Sometimes, while enjoying great revenue, assets require too much expense to maintain maximum rental utilization. Be sure to never lose sight of this as you build, maintain and maximize your fleet dollars. Revenue is precious, but losing profit dollars in maintenance costs is one of those hidden thieves to true rental success.

Exit strategy - Buying new equipment perfectly matched to the market (and enjoying the niche served and the subsequent profitability) is a very satisfying part of the business, but it is when the end of economic useful life has arrived that the real management takes over. Go over your last 20 assets sold. What is the aggregate percentage of "first cost" that you sold these assets for? Could it have been more? Did you finance them? Could you have financed them through your lender? Spend some time analyzing how and when it is best to sell your spent assets before they cost you in maintenance dollars and lost value.

Summation - Only your employees are more important than your rental assets, so your profitable inventory management of all three stages - acquisition, utilization and exit - is the fundamental essence of your operational success.

Questions or comments? Contact Mike Farley at mfarley@equipone.net.

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