Starting an equipment rental business

Kelly Phillips · Jan 12, 2020

guys-

New to the forum, I own a small equipment sales and service business, I have been trying to put a business plan together to see where I stand. A little background, we sell Stihl, husqvarna, Honda, scag, bluebird, Ariens, wallenstein. I want to start small with landscaping equipment, home use, commercial compressors, pumps, generators, demo saws, snow blowers. I have run across some info on how to figure your rental rates, equipment turnover, rental agreements. As a small engine repair establishment it sounds like a no brainer to venture into equipment rentals. As there is one place in town that currently rents equipment and its old and not taken care of. My business has a great reputation in town and i believe there is room for growth. Any help with finding used equipment, pitfalls of the business, general knowledge, school of hard knocks stuff that would help me out would be much appreciated.

Thanks Kelly

Bls repair · Jan 12, 2020

One recommendation I can make is to repair and maintain your equipment. Nobody likes renting a machine that’s broken or doesn’t work right. I’ve had this happen many times.

Kelly Phillips · Jan 12, 2020

I already have an equipment record program, I developed offshore, tracking Maint. records, also business models I have seen is to rotate equipment every three years. I would like to be able to get new equipment but starting out, I may have to use, used good condition equipment. I've got some buddies looking for equipment down on the gulf coast at private auctions mainly 400cfm compressors, trash pumps, gen sets etc. thanks for the input.

Welder Dave · Jan 12, 2020

Keep in mind a lot of renters (probably most) could care less about how much they abuse your equipment. A 400 CFM compressor or a bigger generator is a different beast than small engines and will require specialized maintenance. Renters won't care if they let them warm up or idle for a few minutes before shutting off. If they have a problem with a rental, you'll have to give them priority if it doesn't work right. That could get you in a bind with your regular customers and your mechanics.

KSSS · Jan 12, 2020

I know that several OEM's are pretty good at working with Rental companies. Companies like Wacker Neuson make it pretty easy to run new stuff. Nice thing about Wacker on their compact equipment is the warranty. The SSL and CTL's have a 3-4-5 year warranty and the excavators have a 5 year warranty. BC used to be pretty helpful l to rental houses as well, although I don't know if that is still the case. If you are competing against other rental businesses, running your used equipment while they run new, I have to think is going to make it hard to compete. Your upkeep will be more, and your ability to charge will be less. If your the only game in town, maybe that works. We had one rental company in my area that rented old used equipment, home owners seeking the least expensive option would go there. Construction companies would not, and that is a big portion of business to run off. Speaking from a construction company standpoint, being able to rent current, productive equipment is important. Lastly used equipment is expensive right now, not a great time to find a bargain on quality used equipment. If I were going to start renting dirt moving equipment, I would try hard to offer new equipment.

BigWrench55 · Jan 12, 2020

One thing to consider is. Whether you are renting new equipment or used equipment. Do you have the ability to support the equipment you rent? If you are competitive with your rates customers will be there. But if you can't support the equipment and quickly then you will lose your customers. All things new or used will break down. The ability to quickly get them back online will make the difference. With that being said. Having someone who can ascertain what is normal wear and tear or abuse is vital. You won't make any money if you are repairing damage out of your pocket. Some things to consider is having consumable parts on hand. Like filters,fuses, fluids, and other spare parts for normal maintenance. Again the ability to support the equipment is key. Companies like United rentals have a lot of equipment to swap with so they don't necessarily have to rent reliable equipment they can simply swap it out.
Good luck to you and I pray for your success.

Junkyard · Jan 12, 2020

How much would you have to invest to move into this venture? Additional manpower, space under roof, parts, new equipment etc.....

You know your market better than us so we’re just throwing general ideas out. I’d say pick a handful of things you already have and deal with, then start renting them to see how things go. Start keeping records of what people ask for.

Also, research rental rates and see if you can make the numbers work for your vision. It could turn into a handy way to make a few extra bucks or turn into a rather large and profitable operation.....then again it could be a royal pain and a net loss.

I’ve made enough mistakes I’ve become a numbers guy. If I can’t see a clear profit worth my investment (time or $) I will keep looking until I discover one I’m comfortable with.

MarshallPowerGen · Jan 12, 2020

Be very careful with auctioned equipment like compressors and gensets coming from areas with hurricanes/flooding. The electrical, electronics and generator windings will all be compromised and give you a lot of issues since they were most likely under water before going to auction. There's a lot of stuff from floodzones getting shipped up and going to auction in this area since no one is looking for it.

As stated by others, customers and operators will be extremely hard on your equipment, so be ready for it. Also a lot of callbacks and callouts due to operator error or general ignorance of what they're using.

Kelly Phillips · Jan 13, 2020

Welder Dave said:
Keep in mind a lot of renters (probably most) could care less about how much they abuse your equipment. A 400 CFM compressor or a bigger generator is a different beast than small engines and will require specialized maintenance. Renters won't care if they let them warm up or idle for a few minutes before shutting off. If they have a problem with a rental, you'll have to give them priority if it doesn't work right. That could get you in a bind with your regular customers and your mechanics.

Welder Dave, great point, worked offshore for 25 years so have been on the side of abusing the equipment... ive got two full time mechanics one has been in small engines for 25 years and the other has been working on diesel's his whole life. With the volume at the shop and the employees I currently have is one of the reasons I feel it's a good time to try to increase my revenue generation. I will have times of the year where I can monitize my mechanics and service my rental equipment twice a year and evaluate how viable the piece of equipment still is for the rental fleet. Again looking for input and or shoot holes in my thought process. Thanks Dave

Kelly Phillips · Jan 13, 2020

KSSS said:
I know that several OEM's are pretty good at working with Rental companies. Companies like Wacker Neuson make it pretty easy to run new stuff. Nice thing about Wacker on their compact equipment is the warranty. The SSL and CTL's have a 3-4-5 year warranty and the excavators have a 5 year warranty. BC used to be pretty helpful l to rental houses as well, although I don't know if that is still the case. If you are competing against other rental businesses, running your used equipment while they run new, I have to think is going to make it hard to compete. Your upkeep will be more, and your ability to charge will be less. If your the only game in town, maybe that works. We had one rental company in my area that rented old used equipment, home owners seeking the least expensive option would go there. Construction companies would not, and that is a big portion of business to run off. Speaking from a construction company standpoint, being able to rent current, productive equipment is important. Lastly used equipment is expensive right now, not a great time to find a bargain on quality used equipment. If I were going to start renting dirt moving equipment, I would try hard to offer new equipment.

What other OEM's would you suggest? Keep in mind I am looking to start with smaller equipment. Thanks kelly

Kelly Phillips · Jan 13, 2020

MarshallPowerGen said:
Be very careful with auctioned equipment like compressors and gensets coming from areas with hurricanes/flooding. The electrical, electronics and generator windings will all be compromised and give you a lot of issues since they were most likely under water before going to auction. There's a lot of stuff from floodzones getting shipped up and going to auction in this area since no one is looking for it.

As stated by others, customers and operators will be extremely hard on your equipment, so be ready for it. Also a lot of callbacks and callouts due to operator error or general ignorance of what they're using.

Agreed on the state of the equipment, I do have folks in the area who can inspect the equipment, as far as price point on equipment, these are private auctions that must get an invite. I've been to a couple and equipment is pretty much sold for scrap value. The flood zone issue is pretty easy to identify, I've been seeing that since Katrina... figured it might be a way to break out into some of the larger rentals with out great out lay. But I am leaning toward more initial out lay with specific equipment buying new. One other rental in town who has crap and I known for it.

Kelly Phillips · Jan 13, 2020

Junkyard said:
How much would you have to invest to move into this venture? Additional manpower, space under roof, parts, new equipment etc.....

You know your market better than us so we’re just throwing general ideas out. I’d say pick a handful of things you already have and deal with, then start renting them to see how things go. Start keeping records of what people ask for.

Also, research rental rates and see if you can make the numbers work for your vision. It could turn into a handy way to make a few extra bucks or turn into a rather large and profitable operation.....then again it could be a royal pain and a net loss.

I’ve made enough mistakes I’ve become a numbers guy. If I can’t see a clear profit worth my investment (time or $) I will keep looking until I discover one I’m comfortable with.

Junkyard
Looking to begin this venture with a partner who has a storage facility, so we have room to store equipment rental rates I've seen the formula they suggest and I have been tracking national rental rates. No Home Depot's or big box stores with 140 miles of our little mountain town.

Vetech63 · Jan 13, 2020

Kelly Phillips said:
of our little mountain town

This would concern me. Is there enough demand to support a rental business long term?

Kelly Phillips · Jan 13, 2020

I have been struggling with this as well, that's one of the reasons I want to start with light construction and landscaping equipment work out the bugs. The remodeling and second homes being built here right now is one market, they are going to approve a 700 house subdivision outside of town along with all the infrastructure that goes along with it. So as far as big equipment goes, I was only thinking a token skid steer a couple telehandlers as these pieces of equipment cross over into many different applications. Again guys keep throwning darts at this thing. All is appreciated.

Kelly

KSSS · Jan 13, 2020

Kelly Phillips said:
What other OEM's would you suggest? Keep in mind I am looking to start with smaller equipment. Thanks kelly

Companies like Atlas Copco, Doosan, Magnum light towers are ones I see around here. What makes WN attractive is their business model is very much centered around rental companies. They cover generators, light towers, trash pumps, ground heaters, compaction and compact heavy equipment under the company. You can cover all of these areas using multiple OEMs of course, but having most of your needs meet by one company would seem to be a benefit. Especially when you can send a tech to one OEM to get schooled on maintaining the equipment. I have no idea what they are like to work with or anything like, but if I were starting a rental operation what they bring to the table, appears to be pretty attractive.

MarshallPowerGen · Jan 13, 2020

I'll echo KSSS on all the brands he listed.
Basically our Wacker Ground heaters leave for the winter season and we don't see them until spring (but then they sit the rest of the year). All the Magnum light towers are gone now that we barely see any sun. Spring/Summer is all the Wacker plate compactors, jumping jacks, trench rollers, water trailers and trash pumps. Air compressors are steady year round, but are extremely high demand around the first freeze for all the sprinkler blow outs. Generators are always on rotation.

The majority of small stuff I named off is all Honda or Kubota powered, so that would be an easy transition, and keeps parts easy.

Light towers, generators and plate compactors seem to have the best ratio of being on rent versus down for repairs.

Just rattling off what's popped into my head over lunch.

92U 3406 · Jan 13, 2020

Service sells. The rental shop chain I used to wrench for was more expensive than the huge rental outfits. That said, a lot of companies prefered to rent off us simply because of our response times. If something broke we were there to fix it either before the day was over or first thing the next morning. Many customers told us that they would often wait several days for the mega rental outfits to come and fix their stuff.

92U 3406 · Jan 13, 2020

MarshallPowerGen said:
I'll echo KSSS on all the brands he listed.
Basically our Wacker Ground heaters leave for the winter season and we don't see them until spring (but then they sit the rest of the year). All the Magnum light towers are gone now that we barely see any sun. Spring/Summer is all the Wacker plate compactors, jumping jacks, trench rollers, water trailers and trash pumps. Air compressors are steady year round, but are extremely high demand around the first freeze for all the sprinkler blow outs. Generators are always on rotation.

The majority of small stuff I named off is all Honda or Kubota powered, so that would be an easy transition, and keeps parts easy.

Light towers, generators and plate compactors seem to have the best ratio of being on rent versus down for repairs.

Just rattling off what's popped into my head over lunch.

Kubota is probably the best engine for small gens and light towers. Dead simple and reliable. Seen a couple hit 20k hours with no major repairs.

Ronsii · Jan 13, 2020

Called around and found one of the small local outfits that still charges normal rates for light towers... so we'll see if we start switching them out cause the SB and UR mobe fees are about the same but they have been a bit cryptic on just how exactly they are actually going to figure the OT on these units right now avg. 14-16 hours a day on em'

KSSS · Jan 13, 2020

Light towers can be bought pretty cheap. I seldom need one, but bought one on Iron Planet out of North Dakota when the oil fields cleared out. It was a WN with 4K hours. Got it for a 1K dollars. Pretty handy as bigger generator as well.

Starting an equipment rental business

Member

Senior Member

Member

Senior Member

Senior Member

Senior Member

Senior Member

Senior Member

Member

Member

Member

Member

Senior Member

Member

Senior Member

Senior Member

Senior Member

Senior Member

Senior Member

Senior Member