Issue link: http://read.dmtmag.com/i/221076
Best Practices engines, the same pumps. There is so much consistency in the product it has eroded most of the brand loyalty, and now it's just the price and it's the dealership. Even with rental, it still comes back to how good is the dealer's service and parts – if [the machine] is always broken do you want to rent from them? There is more strength in the dealership than in the brand. Machine availability for the rental business is one of the multiline dealer's biggest challenges these days. excavators over 20 metric tons. That's where we can break out and do not have to compete with them. What works best to market your rental services? The sales guys beating the streets. The next thing I would say is Internet marketing. We also use direct mail and e-mail marketing. How do you track the utiliOur system generates some utilization reports. We generate an Excel spreadsheet that ties several reports together. What we are looking at is six-month, 12-month and life-to-date return on investment, rather than utilization. We look at the potential revenue possible in that period versus what we actually achieve. We don't use original equipment cost; we look at rental potential. We track all rental maintenance costs, capital costs, original equipment costs. We have a capital side and noncapital side. I don't care if my machine goes out for one day or one month, if I get my desired return, who cares how long it has been out? Time utilization doesn't make any sense. The real number is what we are making on that piece of equipment. What are your targets for return on investment and costs? We like to see a 28-month return. We go through our spreadsheet every couple of months and update it with revenue and costs. We compare our maintenance cost to rental revenue. We flag machines that are costing too much (more than 18 percent) and look at why. We look for trends. That goes into the decision to sell a machine. What are the leading indicators for construction equipment rental? For us it is rig counts. We look at oil prices. We look at residential and commercial building permits. We have a lot of conversations with our customers about what they see coming. Oil business is erratic. When it shuts off, it shuts off. We are watching the big oil companies. We are constantly asking other customers, other equipment companies for their feel on the market, determine what is going on, and roll with it. Has rental eroded machine brand loyalty? I don't know if I would blame it all on rental as much as I would blame it on the consistency of the machinery today. Traditionally, CAT was the premium line and it was always better than everyone else. Their stuff was ahead of everyone else. Deere was up there with them. They were the premium lines. Then you had the Asian market that was coming up. If you look at CAT, Deere, Link Belt, Hyundai and the other products today, they are running the same When will buyers start pulling the trigger to purchase? I haven't seen it yet. It's a constant tweak. I think for somebody to say we are going to be in this box and stay in this box [rent-to-rent] and that's all we are going to do – I think that it is the wrong way to look at it. In the equipment industry, you have to be pretty fluid. You have to able to provide all aspects of the business at a moment's notice. By having one sales guy calling on the customer we have that ability to offer whatever the customer wants. What has been the key to successfully running a rental operation? You have to have your thumb on the market; understand your market and customer base and be able to anticipate the changes that are coming. I think you have to have a very strong relationship with the customer. Relationship with the customer base is critical. To make money in this business you have to look at your returns; what are you getting, and ask how can I adjust it? The reach fork market didn't work for us. We tried it; there were too many players and the return wasn't there so we got out of it. JOANNE COSTIN is a freelance writer and marketing consultant focusing on the construction industry. She can be reached at (847) 358-1413 or jcostin@costincustom.com. December 2013 | Construction Equipment Distribution | www.cedmag.com | 59