RM Online - As the industry polarizes, the big guys get bigger and the small guys get smarter

Five years ago, none of us could have foreseen the effects of consolidation on the rental industry. Have these developments been good or bad? Well, it depends on who you talk to. On the good side, the general public is more aware of the rent-to-rent industry than ever before, and when the financial community was shown who we really are and what we can do with investors' money, Wall Street saw a good thing. The increasing percentages of rented vs. owned equipment on job sites shows contractors are renting more than ever. But if you are a small independent and you are in direct competition with a newly consolidated branch store with lots of money, you may not agree that things are better.

A side benefit of the buying frenzy is that many rental people have found out what their businesses are worth by going through the motions - preparing to sell, even if the deal was never consummated - or watching others sell. If a good friend tells you how much he was paid for his business, and more importantly how that price was arrived at, you have a good idea of your company's worth.

One thing is certain: after all the dust has settled, maybe a year or two from now, the industry will be polarized. The small contractor/homeowner, single- or multiple-branch business will be forced to offer specialized equipment and niche marketing in order to survive. That small business can survive, by operating under the big guys' radar and by pleasing the customer with better reaction times, smarter moves and superior service. Further polarization will occur as the big companies get bigger and the small get smarter. (Getting smaller is not an option for anyone!) Big companies will continue to win rentals with lower rates or newer equipment, and small companies will have to replace lost revenue with higher volumes of smaller rentals - and at the same time, be much more efficient. They will have to watch and wait, and take note of what they can do better, what the big companies dislike renting and what they are consistently short of. They will have to react immediately to challenges and opportunities. They will have to do what they do well, with consistently high quality, and train the heck out of their employees. A narrowly focused, local orientation can be a real advantage for a small company. Just because something rents well in Pawtucket doesn't mean it'll be a runaway hit in Puyallup. What makes and keeps employees happy is not universal, either. Will the large rental companies be able to retain their people for the long haul in an industry that as yet has no structured, rental-specific certification? (The A.R.A. is currently working on that.) The business model of many of the biggies is designed for standardization, and that can be a weakness. Standardization is a two-edged sword. It works for Burger King - it's dependable. But many independent restaurants still thrive because their business model is to be non-standard, to be variable and to adjust to customers' desires - delivering steak cooked to order is the norm for them, not the exception. Customer satisfaction is an area of competitive opportunity for the small company. Hey, it's OK to exploit your competitor's weaknesses - legally and ethically, of course - whether you're large or small. Whoever sees the opportunity and pursues it aggressively will take the market. Playing that game well is not a matter of size, but of smarts.