Improve productivity to prepare for the slow season
Action Rental and Sales has been located in North East Tennessee since 1982. The party and event rental season here starts in early April and runs through Halloween. Our slow season is late fall and winter, so that’s when we concentrate on management, marketing and inventory.
According to the book, “Duct Tape Marketing: The World’s Most Practical Small Business Marketing Guide” by John Jantsch, one of the best ways to lead your business down the path of predictable results is to map out an entire year’s worth of marketing activities on a wall-sized calendar. This calendar should include all of your foundational marketing work, such as creating or revisiting your website, as well as any planned lead generation tests and promotions. You have to map out a plan and complete it one step at a time.
Jantsch says another planning tool to employ is to give each month of the year a theme. This allows you to focus on building the tools and systems that you need for that theme. This is where blogs and Facebook are so effective. You don’t need to do something every week, but do something well each month. The progress you can make in six months may carry you for years.
This is where timing is so important. You need to promote the idea of winter activities six months before they happen. Plan your marketing approach on when and how to start your campaign well ahead of cold weather, so your customers will have time to plan their events.
The purpose of a management plan is to adjust labor and transportation costs to match seasonal demand of the party and event rental market. This maximizes our efficiency by minimizing the use of these two critical areas of cost.
To manage effectively, you need to have a good grasp of your financials. The profits and loss (P&L), the balance sheet and the cash flow statement must be timely, accurate, prepared on a monthly basis and compared to the industry benchmarks from the American Rental Association’s (ARA) Cost of Doing Business Report. Special care must be taken by the bookkeeper to make sure all expenses are under the correct general ledger code and under the correct profit center column of the P&L statement. These designated profit centers — such as linens rentals, tent rental and all other party equipment rental — should then be separated by revenue and cost. This gives you a mini P&L of your operational areas. By being proactive with good accounting you will obtain a picture of areas where cost drivers can be improved.
After an efficient accounting system has been developed that gives you accurate and correct numbers, the next step is to compare your data to industry benchmark standards from all over the country. In my opinion, the most important benchmarks are productivity. The definition of productivity is the accomplishment of an objective with the least amount of assets possible without sacrificing customer service.
A well-designed process that cuts out waste will improve overall productivity.
The productivity ratio — revenue per employee — is a benchmark that needs constant management. If you manage labor cost effectively, in relation to revenue per employee, you have just improved the key cost driver — dollars per year per employee. We are presently using historical data from past years in relation to productivity and have broken down our revenue versus hours worked per week and set goals to improve from the previous year.
The next area of improvement is the revenue benchmark. You must have a well-managed marketing plan that generates as much revenue as possible during spring, summer and fall to build up cash reserves required to make it through the slow times in the winter. Individual sales training for counter personnel that includes value added rentals and up-sell techniques also will help generate additional revenue. The addition of new trending rental items will increase overall rental revenue.
The most difficult part during winter is having the correct rental mix and finding other revenue streams when business becomes slow. By creating a better rental item inventory mix, a market research project can be done that focuses on existing customers with the objective of finding out what other rental items they need that we don’t currently stock.
Our winter activities are centered on maintenance of our existing rental items — such as tents chairs, candelabras and wedding arbors. Additional activities may include inventory counts, building maintenance, vehicle maintenance and training of employees to improve tent installation techniques as well as driver training and sales techniques. These activities should be a service that could be expanded to other party and event rental stores in our geographic location.
To smooth out the peaks and valleys of a party and event rental company, you must generate as much revenue as possible with as many customers as possible that you have turned into raving fans, implement outstanding accounting principles and marketing efforts, and manage all your cost drivers and improved processes, which will lead to increased productivity. Planning and managing these activities throughout the year will help you meet your goals of increasing revenue and profit margins during slow times.
Paul Nottingham III, CERP, president, Action Rentals and Sales, Kingsport, Tenn., can be reached at 423-246-5181 or email firstname.lastname@example.org.