Starting an equipment rental business

[chris pochari]

Sunbelt is a tough outfit to compete with. They just arrived in springfield, mo, about a year ago, and have been driving down rates to get market share. I don't see a independent having much luck competing with them, on larger equipment. You drive by their yard and there's 5 million in inventory. No banker is going to loan out to compete with that.

As far as the paperwork on damage, dirty, fuel etc. Sure it sounds great to stick it to the customer for any little thing. Read that again: if you stick it to the customer for every little thing, they aren't your customer any more. There's a reason they rent equipment. They send it back dirty and you try to charge them for washing off mud and they're done with you. Every rental house deals with that, and they all eat the cost of repairs. They aren't going to fix a machine you destroy without charging you, but they don't charge for a bent forklift tooth or a bent handrail on a manlift. If you're a big enough customer, they fix it and go on with life.

What Delmar has to say about the equipment game being more about financing than anything else, is spot on.





Sorry- I just thought those two quotes a couple posts apart were amusing. Carry on!

I said TONS of family money, 50k is nothing! Fred Smith of Fedex inherited 20 million. Now that's a lot
I guess what I was saying is starting up a heavy equip rental biz is much more capital intensive than doing excavating or demolition, so if you have family money it has to be BIG. I don't consider $50,000 to be very much, the average tuition for college is $30,000/year.

 

[crane operator]

I said TONS of family money, 50k is nothing! Fred Smith of Fedex inherited 20 million. Now that's a lot
I guess what I was saying is starting up a heavy equip rental biz is much more capital intensive than doing excavating or demolition, so if you have family money it has to be BIG. I don't consider $50,000 to be very much, the average tuition for college is $30,000/year.

If 50k is nothing, why do you need grandpa? Because no banker is going to loan you that kind of money. The college costs are not a accurate representation of costs/expenses, the only reason students can borrow that for college is that the gov't backs all the loans, and subsidizes the interest. Banker doesn't care if someone walks on their student loans, because uncle sam is paying it.

You aren't going to get a banker to even think about loaning you that amount without equity/ or grandpa's money. In saying 50k is nothing, that's really easy to think, if its not your 50k. Sure there are business models, and in huge scale companies where its not much, but if you take a poll of the guys on here with a construction business, probably not one in a hundred will be thrilled about losing that amount in a year. If you're making 5million a year- sure it's not big bucks, but most of the guys with that kind of business, didn't get there by thinking 50k is nothing.......

If you really think 50 k is nothing, I don't think I'd want to be your banker, and if I was grandpa, I'd think pretty hard before turning you loose with it.

 

[DARO]

Well said crane operater

 

[Brute_200]

Sunbelt is a tough outfit to compete with. They just arrived in springfield, mo, about a year ago, and have been driving down rates to get market share. I don't see a independent having much luck competing with them, on larger equipment. You drive by their yard and there's 5 million in inventory. No banker is going to loan out to compete with that. !

I noticed that they have just recently bought out RG Rents back in May who had a few locations in Missouri, one being here in springfield. But what you're saying is that they'll eat their profits just to turn any competitors belly side up and ultimately even with low overhead cost, its not profitable for independents to hang with their rates?

 

[Delmer]

I think what Chris meant is that $50k is nothing in the business of renting equipment. The $50k was in a different post of his about the rolling up strategy.

Brute, what makes you think a small independent is going to have lower overhead? The big guys can spread their trucker/mechanic/salesman over more sales, and move around equipment to meet demand. The equipment is the expense, unless you're in a really small town renting older stuff.

 

[Brute_200]

If one was to read this forum, they would probably take the assumption that it would be a bad idea to get started in this particular industry. Though, every industry has its own competition. Do the competitors really have such a death grip over the market? I notice job sites that have multiple pieces of rented equipment from different companies and most large jobs you see, have rented equipment on hand most often of the time. It has always sounded like a decent sized market/demand to me but this forum is leading me in the opposite direction.

 

[92U 3406]

Well since the oil crash its been a race to the bottom for us in terms of rates.

 

[Welder Dave]

I'm wondering if Chris has worked in the construction industry or if he is/was taking business classes in college? He's made reference to case studies done at MIT and related info about very big well established companies.

I remember watching an episode of Dragon's Den (like Shark Tank) where a couple business students had a great idea and they got a deal. They went to a meeting with their former professor present and he said their investment was a measly $200,000! Deal done and certified cheque for 200K was torn up on the spot! There was wealth of well over a billion dollars in the room and this idiot asked if any of the Dragons had a business degree. When asked why the prof. didn't invest, he's an academic and it's a conflict of interest.

http://profhanks.blogspot.ca/2012/04/jobloft-blows-done-deal-on-dragons-den.html

 

[chris pochari]

Well said crane operater

I'm not the one starting the equipment rental business it's Brute

 

[chris pochari]

How is this relevant to equipment rental?

 

[chris pochari]

If 50k is nothing, why do you need grandpa? Because no banker is going to loan you that kind of money. The college costs are not a accurate representation of costs/expenses, the only reason students can borrow that for college is that the gov't backs all the loans, and subsidizes the interest. Banker doesn't care if someone walks on their student loans, because uncle sam is paying it.

You aren't going to get a banker to even think about loaning you that amount without equity/ or grandpa's money. In saying 50k is nothing, that's really easy to think, if its not your 50k. Sure there are business models, and in huge scale companies where its not much, but if you take a poll of the guys on here with a construction business, probably not one in a hundred will be thrilled about losing that amount in a year. If you're making 5million a year- sure it's not big bucks, but most of the guys with that kind of business, didn't get there by thinking 50k is nothing.......

If you really think 50 k is nothing, I don't think I'd want to be your banker, and if I was grandpa, I'd think pretty hard before turning you loose with it.

Wayne Huizenga started WM with 5000k in 1967 which is 40k in 2017

 

[chris pochari]

Guys! Listen, 50k can be a big or small sum it's all relative to what you plan on doing, if want to start a landscaping business 50k is plenty, equipment rental it won't even pay the mechanics salary for 1 year. I think there is a misunderstanding here, All I was trying to say before Crane Operator seemed to take what I was saying with concern was that if you want to start an equipment rental biz from the ground up you need a lot more than 50k, probably a minimum of $2 mil if you include land.

 

[92U 3406]

Guys! Listen, 50k can be a big or small sum it's all relative to what you plan on doing, if want to start a landscaping business 50k is plenty, equipment rental it won't even pay the mechanics salary for 1 year. I think there is a misunderstanding here.

I agree with this. Like I said in one of my previous posts, one would need 10x that in equipment just to have enough gear to start with. That's completely ignoring all other aspects of the business.

 

[Welder Dave]

$50,000 is a lot money when you don't have it and are trying to get it. 50K for a landscape company won't buy a new skid steer and trailer to haul it let alone the truck. The link I posted is relevant because some PHD professor is telling multi-millionaires that 200K is measly and they take exception to that. You're saying 50K isn't that much. For some people 1k is a lot of money when you're trying to pay your fuel bill at the end of the month. Not enough capital is one of the biggest reasons new businesses fail.

Chris, the info about Waste Management, Fedex, roll up strategies, MIT case studies, etc. that you're posting looks to be the kind of stuff you'd discuss at a college business class. You said you're fairly young so I'm wondering what your background is? Did you go to business school or work in the construction industry or do you do market research? 4 mil for an equipment rental business or 4 mil for a demo company is still 4 mil. Big fuel bills and maintenance costs in demo work. 51K for a high reach excavator I don't think will get you a great machine to start a demo company. I'd guess for the price it is well used.

 

[chris pochari]

I was saying that 50k is nothing in the equipment rental business. One would need significantly more to start an equipment rental business.
My neighbors brother is a demolition contractor and make a lot of money, he started his business at 21 with $100,000 from his dad and now he has 4+ mil in equipment.
I doubt even 100k would be enough to start an equipment rental operation.
Even demo is capital intensive compared to other industries.
That's all I was saying.

 

[Welder Dave]

No, you were saying it would go further starting up an excavation or demo business. A lot of capital is needed to start a demo business as well depending on how big you want it. An owner operator would take less capital but it would be difficult for 1 person to do it all. You still haven't stated what your background is?

 

[chris pochari]

You still haven't stated what your background is?
Residential building: but interested in working in demolition.
Yours?

 

[Welder Dave]

What do you mean by residential? Where are all these studies you're talking about coming from? I'm a welder by trade but was an owner/operator with a skid steer and tractor for a few years. Did a lot welding for my former neighbor who went in to demolition (from sewer and water that died down)) but had some equipment to start. I also own and operate an MX track and am putting in a flat track. When my former neighbor was getting into demolition he had to do a lot of small jobs at loss to get a foot in the door. I remember him talking about doing the small house or garage demo for $100! He's a big contractor now but used to undercut everybody to get work.

 

[chris pochari]

What do you mean by residential? Where are all these studies you're talking about coming from?

Residential construction (homebuilding) we don't get to use much equipment, biggest machine is a nail gun!!! about the case studies what are you asking? sorry for the confusion

 

[Welder Dave]

They aren't something most people would be aware of? How did you find out about them.