What are you doing to offset your increased costs? Updating rates and other revenue changes are just a couple of crucial ways to make your rental business grow and prosper.
As the operator of a rental business, remember to go through the process of updating your rental rates regularly. At the same time, you should consider a wide range of other strategies including changes to your store hours, minimum rental periods, delivery rates and damage waiver. It can be very difficult to even imagine making some of these changes, but the rewards can be great so it's worth the time and expense.
There are many variables to consider when updating rental rates, so it's understandable that many choose to tackle other pressing issues. Every rental company should make minor rental rate adjustments throughout the year. However, a comprehensive, item-by-item rental rate analysis should be performed at least every two or three years. The process is most effective with the guidance of a rental business consultant.
Issues including return on investment, value and competition factor into selecting the best rate to use for each item. (Never do an across the board increase as it could damage your business.) The goal of updating your rates is to maximize growth and profitability.
Certainly, some rates need to stay as they are, but most probably need to be changed. Of all the times I've assisted clients with this project, I've always recommended many more items be raised than lowered. (But be sure not to price yourself out of the market.) There are times that rental rates are in such great need of updating that it's surprising the rental company was profitable at all before the exercise.
Some companies target the use of the additional revenue to significantly update their fleet. Take an objective look at the age and condition of your inventory. Is your inventory as fresh as it should be and how does it compare to your competitors' fleets?
Speaking of competition, remember that discussions of rental rates can be a legally sensitive area. Never discuss rates with your competitors. For legal reasons, you want to steer clear of any possibility of being accused of price fixing. The law is very strict.
I'm concerned that there could be hundreds of rental companies that have modest percentage increases in rental volume but have not fully factored in the effects of significantly higher fuel, personnel, occupancy and new inventory costs. Instead of experiencing true growth, these companies may be regressing. Some of your costs may have risen more than 25 percent. One can only ride a slippery slope downward for a short time before it can cause severe problems. Try some of the strategies listed here and watch your rental business grow and prosper.
Dick Detmer is a nationally recognized consultant, lecturer and writer and has 35 years of experience in the equipment rental industry. He is the author of "The Guide to Great Customer Service" as well as "A Practical Guide to Working in an Equipment Business." For consulting, on-site employee training or to order books, visit www.detmerconsulting.com. Dick can be contacted at firstname.lastname@example.org or (309) 781-3451.