To begin with, I believe that the equipment rental industry is poised for another phenomenal year of growth. You can read more about some of the reasons for this belief in my recent columns. Some of those include construction activity remaining strong, and in some market areas, is poised for even further strengthening; the infrastructure law being enacted; and forced closures and other pandemic-related restrictions starting to finally ease.
I feel that some rental equipment companies are going to capitalize on this potential much more than other companies. It isn’t simply a matter of geography and what part of the country your company is in (although this is a factor, of course). In my opinion, maximizing one’s potential gain in this upcoming year will be largely influenced by your company’s level of complacency.
Some companies are going to invest more into researching, planning, and implementing a broad range of strategies designed to make optimal use of their resources. Other companies may opt to “ride the wave” instead of pushing forward. There is nothing wrong with either approach as it’s under the umbrella of the “owner’s prerogative.”
However, I feel that there have certainly been some relatively lean years for many rental companies in the more than 40 years I have been tracking the results. So, in my opinion, when the opportunity of potentially prosperous times comes along, it’s wise to do more to set your rental company up to reap bigger returns.
Either way, here are just a few things that all rental business owners should consider (in the later part of this year or in the earliest part of 2022) to set yourself up for a good, successful year ahead:
- Instead of just filing your taxes right before the deadline, consider setting up one or two tax planning meetings with your accountant. These meetings should take place long before the typical sit down to go over the whole, “This is the amount you owe Uncle Sam,” type of meeting. There are multiple options, for example, that may help you reduce your company’s tax exposure including when would be the best time to take certain deductions. Deferring some deductions may make more sense for your company instead of being overly focused on taking every deduction in the current tax year. Your individual company circumstances need to be evaluated in detail before making such important decisions, so don’t just go by what you read in the news or what you hear from other rental business owners and operators.
- Consider getting additional expert tax advice from a qualified local tax attorney. Tax regulations (and all things related) seem to be changing faster than ever, which means you need to get the very latest information on your local, state, and national levels so you can plan accordingly. Again, it is very important for equipment rental companies to take more than just a once-a-year review of something this important. You will be able to recalibrate your tax strategies on a more frequent basis as needed.
- When considering the purchase of equipment, remember the importance of making your best business decision based on need and have the tax consequence of your purchase be of secondary importance. For example, it’s not wise to purchase rental equipment exclusively for the benefits of depreciation. In other words, have the depreciation be an additional benefit of the purchase, not the primary reason for it.
- Likewise, try not to hold on to equipment too long because of taxes. As you know, having a reputation for having a “fresh fleet” is critically important to success. Sometimes, huge opportunities are lost as a result of being overly focused on the tax bill. Again, get expert advice from your local accountant on the tax consequences, but be sure to use what you know to make the ultimate decisions of what is best for the future viability, growth, and profitability of your rental company.
- Remember to be efficiency focused in all of your year-end and early new year planning. Even though things are changing rapidly, it’s still very important to have a formal, comprehensive strategic plan with specific steps to take. Too much “winging it” can cause enormous inefficiencies and make your business only marginally profitable. Certain portions of your plan may need to be modified somewhat along the way, but the core of your strategic plan will likely stay intact. It’s so important to remember that in order to achieve the high level of success that you want from your substantial time and financial investments, it is necessary to prepare accordingly. You should always be striving to be more efficient in all aspects of your rental business.
We will continue to see uncertainty and wild gyration in the financial markets, inflation, and the economy in general. But with uncertainty and market overreaction to daily events come opportunities for those who have solid systems in place in their businesses.
One of the best objectives is to never become complacent. Another key is to avoid procrastination. There are many ways to make your company even better, so use the coming weeks (and the next month or so) to set yourself up for an excellent year ahead.
