After years of double-digit growth, the Great Recession that started in late 2008 made it necessary for many rental store owners and managers to change their mindset and approach their equipment rental businesses with what can be called a “startup mentality.”
Many have revised or written new business plans, evaluated inventory mix, looked for market opportunities, figured out ways to make ends meet without credit and made calculated risks to find new revenue streams as ways to survive, thrive and outsmart the competition.
The hope, several rental business owners say, is that this new attitude will prevail in the future, keeping their companies nimble enough to take advantage of opportunities in good times and bad.
“We were in growth mode for 20 years, always buying equipment and adding people, but preparing for growth is expensive,” says John Crabbe Jr., CERP, president, Vermont Tent Co., South Burlington, Vt.
“As you get bigger, you make mistakes. We were overcrowded in our warehouse. We either had to grow to the next level or cut payroll to ‘right size’ our business. We naturally downsized because of the economy. It made us more efficient and we found we were better off. Our revenues last year were down 20 percent, but our profit was the best we ever had,” he says.
“This was like going back to the beginning when you start a business. You only have the people you really need. You’re not carrying extra weight and you keep your best people at a high rate so that they are happy and not looking for something else. You watch your expenses and capital expenditures. You keep alert,” he says.
Those who are in the business of advising rental companies concur that today’s business environment is unlike any other and calls for new ways of doing business as well as approaching some aspects of managing a company as if it has just launched in the marketplace.
“People need to be thinking like they are in startup mode. That means watching payroll, lining up expenses to the top line, and understanding that your people and employees will do what you do,” says Fred Hageman, a partner with Hageman, Stansberry and Associates, Cameron Park, Calif., an equipment rental consulting company.
“Everybody needs to get back to basics and very much need to put in the sweat equity, roll up the sleeves, put the elbow grease in — name the cliché. That’s how folks are surviving right now and how they are getting back on track to thrive in the future,” he says.
“If you’re working the front lines, working the counter, loading trailers, making deliveries and keeping your nose to the grindstone, that attitude trickles down. It used to be that your money would work for you, but in today’s economy, you need to work not only on your business, but also in your business. You need to roll up your sleeves and show your people you care about the business, their stability and their employment,” Hageman says.
“We all have had to ‘reinvent’ ourselves,” says Buddy Stubbs, president of Busylad Rent All, Tupelo, Miss. “We are looking very hard at the items in our inventory that have been stagnant. We have gotten rid of most of them and we’re making everyone aware of the items that we cannot miss rentals on.”
Stubbs says his shop and counter people now suggest other ways customers can accomplish a task if the equipment they ask for isn’t available. “For example, if we don’t have enough 10-in. crystal plates for an event, we ask the customer if they would like to use a more expensive plate for the same price,” he says.
“Everyone also is aware that our greatest expense is labor. While no one wants their hours cut, having your hours cut is better than having no hours,” he says.
Stubbs also says he hired a consultant for team building. “He made the comment to the employees the first day that our competition doesn’t want Busylad to go away because our competitors want their jobs and want our employees to go home,” he says.
“We also have had to go after business that I thought would be ‘safe,’ but everyone is looking at budgets and asking, ‘What have you done for me lately?’ I’ve heard that over and over lately,” he says.
“Hopefully, after business picks up, we will maintain this gazelle-like intensity. If we do, it may well have all been worth it,” Stubbs says.
Premiere Party Central in Austin, Texas, has been in business for 10 years now, but Delores Crum, CERP, the company’s owner, says she has never abandoned the startup mentality.
“To me, a startup mentality in this or any other business means you are more committed, assertive and focused than the competition. Thinking and behaving like a startup entails a willingness to outwork, outmarket and outsmart others who predate you in the marketplace. After 10 years, Party Central is still the new kid on the block in comparison to our competitors. We had a lot of ground to make up from the start, so we’ve had to be on a fast track just to catch up. I don’t anticipate ever thinking we have ‘made’ it,” she says.
Bledsoe Rentals, which has two locations in Lee’s Summit, Mo., and one in Olathe, Kan., has been in business for more than 50 years, but that doesn’t mean the company hasn’t had to adapt to new realities in the marketplace.
“I wouldn’t say I am using a ‘startup’ mentality, but it is a lean and mean survival mentality,” says Tom Fouts, owner of Bledsoe Rentals.
“We shop literally everything from all available sources now. This includes all expenses, parts purchases, equipment purchases and more. In better times, if you needed something, you would call, order it and move on. Today, you call and get pricing from multiple sources before you order and then you try to beat down the price further,” he says.
“We used to have a window cleaning service, but now we do it ourselves. We had the same trash company for more than 15 years. When we put that service out for bid, we found a lot better rate for the same service. We are starting to put ‘requests for bids’ out when we are buying equipment, much like municipalities do. We are running at a minimum staff level and, if needed, we call someone in if an employee is sick rather than have staff members to cover that possibility,” he says.
“You could say that some of these steps are similar for a startup mentality as well, but it is more than that when you are an established company with established accounts and credit. We are not really taking any huge risks, but we feel we still need to be on the lookout for any new opportunities to broaden our rental inventory or services we may offer, like propane refilling or U-Cart Ready Mix,” Fouts says.
“People are planning more and they are watching their dollars because there are no extra dollars these days, just like when you were a startup,” says Skip Evans, managing director, Evans, Waite Business Solutions, Centennial, Colo.
“Many rental store owners and managers are being very cautious about what they are buying and are testing rather than buying, which is what a startup store would do to create a new market. For example, instead of buying two stump cutters, maybe a company today just buys one to see how it goes first,” he says.
When advising rental store owners, Evans says many are now asking about whether they should try something different by adding a new product line. “I always ask if they know if there is a market for that product. We in the rental industry, as rental operators, are not good at creating a market. We are better off chasing the market, especially in a bad economy. If you’re going to gamble on a new product, it also shouldn’t be a $50,000 gamble if you don’t have the money. You have to make sure you have the money to make that gamble,” Evans says.
“For example, maybe a party store puts in a helium tank and sells balloons. It’s a small investment and there isn’t a tremendous amount of revenue, but with small risk, it can pay off. Today, everything counts when it is incremental. When you have no dollars, any dollars look pretty good,” Evans says.
Crum says Premiere Party Central is more cautious about introducing new inventory these days, but that hasn’t stopped them from trying new things. “We take calculated business risks, train and cross-train staff, shift inventory and watch expenses because it makes good business sense, regardless of the economic environment. We’ve also been more sensitive to the budgetary concerns and constraints expressed by our customers,” she says.
“Bad times don’t mean we should abandon sound business practices that have contributed to our success,” Crum says. “If we always think like a startup, we’ll never become complacent. Complacency kills. Just when you think you’ve ‘made it,’ you haven’t. Just when you think you customers will always love you, they won’t. Just when you think your employees will be loyal for life, they will leave. You can never stop trying just as hard to please the customer to show how much you appreciate them and their business, and to treat your staff members with dignity and respect. Party Central will always be a startup in this sense.”
Another aspect of the startup mentality, Crabbe says, is spending more time with each customer to build relationships. “As we did in the beginning, we want our customers to be 100 percent with us. We want every bit of their business,” he says.
That also had led to Vermont Tent Co. becoming more creative in packaging its products to better compete in the marketplace. “We now have a value package we offer in 25-person increments. As a package, the customer can’t nickel and dime you for each thing and it makes it harder for the customer to compare the specific price of each item,” he says.
“Our sales people have said that 80 percent of the customers who were looking for value looked at the package and then upgraded to better quality items,” he says.
Crabbe also says Vermont Tent Co. is spending more money on marketing now despite being established in the market.
“This is what we did in the early days. We wanted to get our name out there. After more than 30 years, we still need to get our name out there and show people why we are the best and what the difference is. All of our competitors are cutting prices, so we need to show why we’re better and what differentiates us,” he says.