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You never seem to hear enough about utilization. At this point in the cycle many of you could probably care less because the demand for your products is high and you are getting better rates. And, to top it off, there is probably a line waiting outside for the next unit that comes off rent. Right now, things are good.

But no matter how good things are, it's best to keep your eye on the ball, on the budget and on the cash flow. No big secret there. Thinking ahead, it might even be a good idea to review your budget and cash flow three years out to see what kind of potential results you're looking at. You might even want to apply some sensitivity analysis, say a 20-percent swing either way of budget, to see what effect these swings have on earnings and cash flow.

But no matter what you do, the key to earning and keeping cash flow where it needs to be depends on your utilization factors (time and dollar) and expense control. For this discussion we will concentrate on utilization.

Utilization can be calculated a million ways, and that is a potential problem. On the other hand, time utilization, no matter how you calculate it, is probably the more important of the two utilization factors because without adequate rental hours you cannot possibly generate adequate dollar utilization, gross profits, pre-tax profits and cash flow to fund the business.

Dollar utilization is the easiest to measure because it is merely a percentage of rents billed against the cost of the unit. When you think about it, cost is cost and there are not many ways to play with “cost.” Dollars billed against cost is pretty straightforward.