RM Online - In party, 'you're as big as your inventory'

In the party business, you're as big as your inventory," says Steve Kohn, president of Mil-ler's Rentals and Sales in Edison, N.J. "In the tool business, you're as big as your location. The more locations you have, the better. That's not true in the party business. The biggest party operations are big, single-store operations."

And not just inventory, but the right inventory for the market, the right numbers and the right items. In the New YorkNew Jersey metro market where Kohn operates, serving mostly corporate clients and hotels, that means big numbers, a narrow range of styles to choose from and total concentration on customer satisfaction through superior service.

Quantity and speed are the squares on which the game is played, not choice of pattern or style.

"It's fast-paced," says Kohn. "They need it now. They don't care if the chairs are chartreuse or black - they just want 500 chairs and they want them now."

So Kohn, who started out like so many others in the rental business, washing dishes at age 12, has developed his own way of sizing up a store:

"When I walk into a rental store, the first thing I look for is how many delivery trucks they have. I can tell from the number of delivery trucks, the kind of volume and business they're doing."

Kohn has five. You want to stay alert when you're near the loading bays - these five trucks are usually moving. The warehouse is 133 feet by 75 - about 10,000 square feet - and Kohn is about to add another 1,200 square feet. This is all aimed at customer service.

"If you own 100 chairs, you're not going to make as much money as the guy who owns 5,000 Page 82 From Page 78 chairs - proportionately - because you will have very few opportunities to rent just 100 chairs," Kohn explains. "You want the opportunity to rent 5,000 chairs. If you want the opportunity to rent 5,000 chairs, you've got to have the inventory for it."

But these are big-bucks decisions. So how do you pick what to carry?

"Communicate with your customers," answers Kohn. "Learn what they really want and be able to provide those services the best that you can. We counsel customers. We ask a lot of questions. If the customer wants it at 6:30 in the morning and out at 10 at night you've got to be able to do that. It's not a 9 to 5 operation.

"What sets us apart - I am providing services when the customer needs them. Whatever the customer needs, whenever the customer needs it, we're not going to say no."

Take Lost in Space for example - one of many movies Miller's has been involved in.

"They wanted a black tent," says Kohn. "I tried to find one and finally had Nationwide Tarps make one - a custom black tent. It was ready the day before we had to put it up but it worked out really well. If we're going to buy something like that we're going to buy with the thought that we're going to promote it and use it.

"It's great for photographers because a light tent is very hard to shoot. You do a party at night with a black tent and it's great for pictures. If you're the only company with a black tent, you can charge anything you want - but sometimes you win, sometimes you lose."

When you set your sights on a niche market, how do you test the idea? Kohn uses the example of red carpet: "I went to a carpet store and had tons of it cut. Now every hotel in the area knows to come to us for red carpet. Nobody had it.

"But you need space to store it, you need to know how to market it, who to rent it to, what to charge - you've got to do your homework. In developing a niche, you have to learn all this stuff. You have to test the idea and find out as much information as you can. Ask a lot of questions, learn the market before you go into it. Then go into it big. Volume makes money."

Promotion helps - but not the old traditional ways, like Yellow Pages and print ads. No, use the Web, says Kohn, a computer zealot and a frequent contributor to Rental Management's Managing by Computer column. It's more like a conversation with the customer than hard-sell.

"Word of mouth is most important," says Kohn. "We cut our Yellow Pages advertising way back. Now we just have a regular listing. Big ads with color pictures are not the way to go. The best way for us to make money is do our job right Page 84 From Page 82 and do a good job. The word gets around. I firmly believe that the Web is making us a ton of money. No question about it. Everyday I'll get six to 12 e-mails from people who have seen our Web site. We direct them to our site so they can see pictures of our work.

"Plus, it has opened a whole market for us in selling used equipment."

A big niche for Miller's is Skytracker lights. Kohn has eight light trucks. If anybody in rental has more of these lights than he does, Kohn doesn't know who it might be. He's even gone to London with his lights. He's known for his Skytracker lights.

But this niche does illustrate the point about making it big or going bust in a jiffy. You do all the homework you can and then you go for it - and you keep your fingers crossed.

"We had no idea when we bought that first Skytracker in 1982 that it was going to turn into a business like this, but we took a shot," Kohn says.

The Skytrackers are a case study in rental economics. "I can't make money with one unit," he says. "Just look at this mathematically. You spend $40,000 for the unit. You spend $20,000 for a generator, another $20,000 for a truck to drive it around. That's an $80,000 investment for one unit. How long is it going to take to get back your investment on that one unit - not counting payroll, waiver, fuel, maintenance or service? Say 200 nights just to break even - a lot of money. I figure it would take you a year, renting every night, and that will never happen.

"You can do two jobs a night with eight units, the way we work it. But you've got to have a metropolitan market to do this. You can't do it in Iowa. You have Philadelphia on one side and New York on the other, so we can do it."

The punch fountain offers another case study in rental economics. Kohn says they look good and you've got to have them - they symbolize a party and they promote the business. "Have you ever walked into a party rental store and not seen a punch fountain?" he challenges.

But he says if you look at them only in terms of the revenue they produce relative to cost, you'll be making a mistake. A punch fountain is a symbol that says, "We have everything you need for a party."

Tents are another thing whose real value may be transparent to the amateur observer, Kohn says - it might take eight rentals to pay for a 20 by 20, for example, and the tent probably won't last more than three years.

"But you make your money on what's underneath the tent - the tables, the chairs, the dance floors, the dishes," says Kohn. Then you sell the tent on the Web site - churches, car dealers, landscapers, homeowners.

"When we get the tent back, we ask the customer, 'Do you know that you can buy that tent at the end of the season? We have a waiting list. Would you like to be put on it?'"

A tent is really a vehicle for producing revenue.

Kohn, who served as Region Two director (1995-97), has seen a lot of party stores in his career and has come to some conclusions:

"When a party store opens, at first the growth rate is pretty terrific, but then it [settles down] because your prices start to level off. But volume increases. The more you learn, the more jobs you can do.

"There are only two ways to make more money in this business - raise your prices or do more work. And you can only go so far with pricing."