Many of our suppliers are not exclusively rental companies. They are distributors, dealers, manufacturers and service providers who have taken an opportunistic approach to starting a rental business. In many cases, a substantial line of revenue has been developed and without tremendous effort. If you are on the fence about adding rentals to your business, the decision starts with understanding why your customers would want to rent equipment from you.
1.) Like any other small business, your customer may not be in a position to purchase or qualify for credit to purchase new equipment. Even if they are in a position, it may behoove them to preserve cash for operating capital or certain assets that offer a larger ROI. Renting allows them to realize asset ROI while maintaining a healthy balance sheet. This holds true for both new businesses and those going through rapid expansion. As a side benefit, renting reduces their tax burden. Rent would be an expense whereas a purchase would be a balance sheet transaction.
2.) Certain technology depreciates or becomes outdated rapidly. Renting offers accessibility to the most current technology which usually translates to a positive impact on customer acquisition and business profitability.
3.) Renting offers agility. It could be a good way to experiment and obtain proof of concept with a new service offering. A business may want to expand into a certain area for short time to assess demand and impact before making a sizable financial commitment.
4.) Short term needs. Equipment breaks down or requires calibration, especially complex mechanical and electronic devices. Renting eliminates disruption of service while their equipment is being repaired.
5.) Your customers make money from equipment rentals. When your customer needs a specific piece of equipment for a job, they will often mark-up the cost to their customer. Equipment rentals becomes a line of profitability. They could be in a position to purchase the equipment, but they would not get away with charging their customer for the purchase. However, it’s perfectly acceptable to charge their customer for the cost of a rental and additional service fee for arranging the rental.