Issue link: http://read.dmtmag.com/i/221076
Best Practices Renting Right Fred Leach of Cisco Equipment talks about his approach to managing a thriving rental business. BY JOANNE COSTIN Cisco Equipment, based in Odessa, Texas, is a New Holland construction equipment and ag dealer that also represents Hyundai and Link-Belt excavators, as well as Sakai, Clark, Nissan, Genie, JLG, Wacker and Multiquip. Ranked No. 82 on RER's Top 100, Cisco's four locations in West Texas and Southeast New Mexico have increased U.S. rental revenue 20 percent in 2013 with help from a surge in oil and gas activity. Approximately 50 percent of the company's revenues come from rental. Cisco also has an international division serving clients in Russia, Papua New Guinea, Iraq, North Africa, Asia and South America. These days, availability is the biggest problem, despite growing the rental fleet to more than 275 machines over the past few years, according to according to General Manager Fred Leach, who has been featured at the AED CFO Conference this year. CED caught up with Leach on the telephone recently to tap into his thoughts and insights for managing Cisco Equipment's growing rental business. Why are contractors turning to rental? I think there is still some uncertainty in the market. That, along with an increase in the acquisition cost of equipment, seems to make rental the best option for a contractor. Do you need to be in the rental business today to be successful? I think so. The best returns are in our rental business. If you are not in rental you are going to struggle. Profits on service and parts are too hard to control. The absorption rate in parts and service has been eroded by the ability of the customer to find parts elsewhere. On the Internet you can type in a part number and find 20 dealers who will sell in your territory. Your service business is limited by a lack of technicians. The one thing you have for making the most margin on is the rental business. That is where our business is good. That feeds the rest of the business. You can use the rental fleet as a paid demo. And it builds a fleet of used equipment that you know the history of. To me, that is better than buying a used piece from someone else with an unknown history. 58 | www.cedmag.com | Construction Equipment Distribution | December 2013 Why do you think it works best to have one staff responsible for both rental and sales? We don't have a separation between new, used and rental in the sales effort. Our effort is spent taking care of the customer. We provide the customer with good quality equipment, whether he wants to buy new, used or rent. In our market, you have so many different sales guys from so many different companies calling on each customer. The customer doesn't have time. Having one guy that can do all aspects gives us one central point of contact. The salesman builds one relationship and it's a stronger bond between that salesman and that customer. We are all fighting a battle for personnel, as well, so fewer sales people help to reduce the need for employees. How do you successfully compete against the national rental stores? Figure out what the national rental stores aren't in. It depends on your focus. In 40 percent of our business, we are competing against the national rental stores. For us, we compete in backhoes and skid steers, but not in