Match Headcount to Current Revenue

Mike Farley of EquipOne explains why it's vitally important to match headcount to current revenue at your equipment rental business.

One of the toughest problems rental business operators face today is the proper assessment of personnel requirements. In years past, you based your personnel request on the value of your fleet or the number of rental assets.

The pre-economic downturn KPIs (Key Performance Indicators) were wages/rental revenue at 20% or wages/total revenue at a little over 14%. In today's environment, our current clients, when we first get to them, have been averaging wages/rental revenue at about 43% and wages/total revenue at an average of 29%.

In these difficult economic times the rental revenue does not support the number of employees normally hired to support your fleet. While each operation is unique, here are some items to consider before hiring:

  • In the first year, one single hire costs your business a minimum of $50,000 between wages, benefits and training costs. You cannot afford to make a mistake.
  • Making the wrong hire, or failing to train new employees properly, can cause you to lose a good customer.
  • One positive aspect of the downturn is a wealth of potential candidates. Never hire anyone on the spot without checking references.
  • Workflow varies both daily and seasonally, so learn to run your business from a "part-time" perspective. You can pay a higher wage and not be saddled with additional benefit costs.
  • Before you rush to make a hire, step back and see if there is a better process, procedure or discipline that might be missing in your operation.
  • Most operators hire quantity over quality, thinking more people to answer the phone or work the counter is better. Your customers don't pay you for more bodies, they pay you for better service.
  • Better service comes from well-trained and well-compensated people, following efficient, repeatable procedures.
  • If you make a bad hire, admit it quickly and make the proper changes.

If you have questions or comments on this subject or have an idea for a future topic for Financial Forum With Mike Farley, you can reach him at mfarley@equipone.