RM Online - You can have a better bottom line

I just finished reading Bill Veneris' article: Inventory is time, not just equipment, which appeared in the June-July Rental Management. He talks about airline officials thinking of their planes as fixed assets and the planes' seats as inventory, which is a perishable product. And rental stores, like airlines, need to get their equipment rented as much as possible or lose that day of rental forever. If you can get equipment out more often, according to Bill, you should be able to improve your bottom line since the rental business is a high-fixed-cost one and only variable costs should be incurred. He then suggests that we all need to be examining and analyzing the utilization of our equipment.

I think we all would agree with Bill's premise and believe that improving equipment utilization will enhance our bottom lines. He gives some general clues, but also mentions that his study raises more questions than it answers. Right on, Bill!

In this Trade Tip, I will address one aspect of his article: increasing equipment utilization by the number of times or days that items are rented - not by dollars. First, for what rental items can you really expect increased utilization? How can you make that happen? The following answers are somewhat limited to space and time.

Obviously, there are many items that are truly date-sensitive or emergency-related that cannot be moved to another time slot to improve the number of rentals over a period of time. With that said, here are a few possibilities (if you have any others, please drop me a line). "Yard and garden," "cleaning and painting," etc. types of equipment utilization can be improved by offering special rates before the real busy season begins. This moves some rentals to a less crowded time, thus opening some availability in the busy times that otherwise may have been taken. Also consider periodic rentals at a special fee during the season, sort of a "cafeteria" plan or equivalent arrangement, which may provide additional repeat rentals. Or "slot" requests into available times when customers want to reserve items - give them a choice of times available, i.e., tell them what is available, not what is unavailable.

Provide "new homeowner" gift certificates or frequent renter programs to get the home in shape. Offer other items in addition to the primary one (a combination rate), or remind the customer about a second rental item ("add-on") that normally should follow the first item rented to make the project or event pass easier, faster and with better results. I have worked in both general and party rental, and suggest general-tool counter personnel take a page out of the party side.

In party rentals, customers tell all about the event or project so that the full extent of his needs is understood by the employee. This can improve equipment utilization because additional rental items can be recommended. And the employee becomes not just an order taker providing only the specific item requested (a common tool-rental practice).

This is not a simple one-shot process. It takes time to educate and train employees, as well as customers. In some cases you need to establish in your customers' minds what you have to rent, how easy it is to rent, how inexpensive it can be and how rewarding it will be. A familiar statement I have heard is: "Look at this XXXXX. I bought for a great price." The person bought it because he assumed he would use it again. If it was an item available for rent, it could mean that he did not know it could be rented, or it was too much hassle to pick up and return, or the rental fee was not right, etc. One service I see happening more often is pickup and delivery of rental items, which may answer one of the above criticisms.

Something we must continue to pursue is training - not just training for training's sake, but to find those ways to improve the utilization of the equipment we currently stock and the equipment we plan to purchase in the future. If you don't run the numbers to check out your equipment utilization, as Veneris has said, you may be purchasing more than you should. And your employees need to understand the equipment and the customers' needs, and then bring the two together by being helpful consultants providing solutions for the customers.

One of the best ways to improve equipment utilization is through word-of-mouth advertising. This tells potential rental customers that your particular rental store has the equipment they need and knowledge to help them get the job done right!

These are only a few specific tips, but here is one last tip - the results of which may surprise you. Sit down in a small group of employees (half a dozen or so) and brainstorm: "How can we rent certain pieces of equipment more frequently than we do now?" There are no wrong answers, criticisms or ridiculous thoughts, just a list of ideas to be reviewed after all is said on this particular scenario. How about this for a store meeting; split your group into teams, if needed.

Book tip for readers

The Fifth Discipline - The Art & Practice of The Learning Organization, by Peter M. Senge; First (Doubleday) Currency Paperback Edition: October 1994; $18.50 ($25.95 Canada).

People are the only long-term competitive advantage and lifelong learning is the way to fully develop them. The only sustainable source of competitive advantage is your organization's ability to learn faster than its competition. This is an in-depth analysis of the ways we can be better than our competition - which may be the only way we can compete.