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SEPTEMBER 2012 issue of
Rental Management

The benefits of benchmarking
08/30/2012

Understanding true market conditions

Benchmarking is a key component of the effective management of any rental business. Adopting the practice of benchmarking, where performance metrics are compared to industry averages, will enable rental company owners and managers to make better-informed decisions about their go-to-market strategy and make tactical decisions about how to set rates and manage their fleets that are based on facts.

Benchmarking also provides a measuring stick against which to evaluate the performance of all rental company employees — such as sales reps and branch managers — and rental company owners can see how they stack up to their peers on the key metrics that drive top- and bottom-line growth and understand where they need to improve and what is expected.

The hospitality, health care and car rental industries have been using benchmarking for decades to improve performance and profitability. The first precondition for benchmarking — tracking and storing all of the data necessary to consistently calculate performance metrics — has only recently been met in the equipment rental industry.

Recent technological advancements, such as the adoption of advanced point-of-sale (POS) software and global positioning system (GPS) tracking of equipment, have positioned the equipment rental industry to begin to use data to drive top- and bottom-line growth as effectively as other industries.

The second precondition for benchmarking is the establishment of a consistent standard for the calculation of metrics. Comparing a rental company that has its metrics calculated one way to a rental company that has its metrics calculated another way will lead to inaccurate conclusions.

However, the American Rental Association (ARA) has developed ARA Rental Market Metrics™ standards, so that rental companies can measure key performance metrics in a consistent way that allows for meaningful comparisons of their performance against their peers.

Now that there is a standard for the consistent calculation of metrics, companies in the rental industry can start making comparisons and driving top- and bottom-line growth with better-informed decisions.

The first step is using market data to ensure that pricing and fleet composition are aligned with go-to-market strategies. Rental companies can go to market as a premium provider (higher rates, premium service) or a value provider (lower rates).

Managers should carefully compare their rental rates, utilization metrics and fleet age to local market benchmarks and make adjustments to ensure they are aligned with the company’s strategy. Benchmarking can then be used tactically to optimize rental rates and physical utilization, the two drivers of revenue, and to monitor business mix and fleet age, which have a significant impact on operating costs.

Getting the most out of benchmarking also requires slicing the data in a way that enables everyone in a company to understand how they stack up against their peers across the industry.

Different areas of the country have different market conditions, so it’s important for large rental companies to evaluate their performance against benchmarks at a regional and local market level.

Even the smallest rental companies usually have multiple sales representatives who require monitoring on an individual basis. With the right benchmarking solution, sales managers can spot the situations where things are not as they should be and drill down to find out what equipment was rented, where it was rented, which rep rented it out and whether or not the optimal rate was achieved.

Some fleet managers feel as though they don’t have the time to put a benchmarking solution into place. However, as most in the rental industry know, having the right tool for the task is essential for success. The time it takes to acquire the tool is often dwarfed by the time it saves in the long run. Benchmarking will save time and money by making fleet management decisions easier and less uncertain.

This drives revenue and profit growth through better fleet management decisions and improved evaluations of company, branch and sales rep performance.

Because of advances in technology and the standards put in place by ARA, even small companies can have access to powerful analytical solutions that help them level the playing field against larger competition.

As more companies adopt this beneficial practice, the industry as a whole will begin to see the economic gains that sensibly-set rates make possible.

Jason Mayfield, vice president, Rouse Analytics, Beverly Hills, Calif., previously served as a district manager with United Rentals and RSC, and has more than 15 years of experience in the equipment rental industry. He can be reached at 310-360-9200 or jason.mayfield@rouseservices.com.


Rouse Analytics offers benchmarking service

Rouse Analytics, Beverly Hills, Calif., currently offers a Rental Market Metrics Benchmark Service, which allows rental companies to compare their performance to their peers on rental rates and strategic performance metrics in accordance with the American Rental Association’s (ARA) ARA Rental Market Metrics™ standard.

Rouse collects invoices and nightly fleet snapshots from each rental location’s point-of-sale (POS) computer system. The data collected is scrubbed and structured in order to provide meaningful reporting to participating rental companies on their key performance metrics versus their peers.

Rouse launched its benchmark reporting tool in 2011 with the participation of several national equipment rental providers and many independent rental stores across the country. All participating rental companies receive reporting on their own data as well as a total fleet comparison of their metrics to those of other participants at a national, regional and market level at no charge.

Participating rental companies then have the option each month to purchase product-type (CAT-CLASS) level rate data from Rouse. All of the reporting is delivered through a secure, interactive online portal.

Rouse’s goal is to report on more than 100 markets and more than 400 product types by the end of 2012 as well as launch reporting in Canada and Australia. Rouse is working with major rental software providers that have signed ARA Rental Market Metrics licensing agreements with ARA to automate the data submission process. ARA continues to work with all industry software providers to license and certify ARA Rental Market Metrics to make this business management tool available to rental businesses of all size rental revenue. For more information about ARA Rental Market Metrics, contact Tom Hubbell, ARA’s vice president for marketing and communication, at 800-334-2711, ext. 248, or tom.hubbell@ararental.org.
 

 

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