What 2010 Has in Store for the Equipment Rental Industry - Part 2

The second half of 2010 promises to be challenging for equipment rental businesses, but there are some steps that can be taken to help improve the situation.

In our second of a two-part series, we discuss the prospects for the second half of 2010, and steps that should be taken as quickly as possible to insulate your business against what might continue to be a problematical future for the renewed success of our industry.

You find yourself today with more of your assets in an under-performing mode than ever before at this time of year. What steps should you take and when?

As a good manager and a sound businessperson, you now must take decisive action. At best, 2010 will be a year where very little will be accomplished with respect to market growth. Credit is not available to entrepreneurs for speculative investments and rental companies are "over-fleeted" and closing duplicative facilities. With a mid-term election this November, a lack of demand coupled with an over-supply means another tough winter with insufficient cash flows and failing businesses.

The number one thing to keep in mind while dealing with the present is assessing where you want to be five years from now. Financial institutions are taking a harder look at each loan and new lending opportunity, actually grouping entire industries and region specifics as a risk- management strategy, so regardless of your history, going forward you will be judged by lenders by risk potential as much as profit potential.

As an industry, we do a poor job of cultivating our financial relationships and are fiercely proud of our independent financial history. Like many "old practices," this needs to end. Involve your lending institutions and inform them of your current status, whether it be good or bad; allow your lenders to be your partners. You will find that sharing these pivotal decisions gives your lenders the confidence to grow with you when the economy heals.

Informing and sharing will give a perspective to both parties as to why you need a plan for the total package and how much your fleet dollars can be stretched through a measured plan of fleet growth, fleet re-structuring, and profitable sales of non-performing assets.

Comments or questions on this topic or want to make a suggestion for a future column? Contact Mike Farley at [email protected].