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Archive for May, 2011

Revenue Forecast Update

Revenue Forecast Update:
Global Insights Forecasting 5.6% Growth for the Rental Industry in 2011
Local Market Data Now Available at Very Low Cost

According to IHS Global Insight, the world’s leading economic forecasting authority, the United States Equipment Rental Business is expected to see a steep increase in revenues over the next several years. After bottoming out at about $26.6 billion in 2010, revenues are expected to grow 5.6% in 2011 and to reach $44.5 billion by 2015.



Source: April 7, 2011 Forecast Update by IHS Global Insights

According to IHS Global Insights’ latest forecasts, total U.S. Equipment Rental Revenue will grow 5.6% in 2011 and 67.3% by 2015. Growth of the major rental revenue sectors is forecast as follows:

• Construction and Industrial Equipment Rental revenue will grow 6.8% in 2011 and 73.0% by 2015.

• General Tool Rental revenue will grow 3.1% in 2011 and 68.5% by 2015.

• Party & Event Rental revenue will grow 4.4% in 2011 and 13.0% by 2015

Local Metro Area Data now inexpensively available through the ARA. Alert Management Systems recommends that rental store owners purchase this New local market data through the American Rental Association (ARA).

We believe this local data, which is updated and provided online each quarter, is critical for putting together realistic business plans for 2011 and beyond. After all, it is impossible to set realistic goals without knowing the environment in which a company competes. For each Metro area, the following data is provided for 2008-2015:

• Construction and Industrial Equipment Rental Revenue
• General Tool Rental Revenue
• Party & Event Rental Revenue
• Total Rental Revenue
• Real Gross Metro Product
• Real Total Construction Revenue
• Residential Construction Revenue
• Non-residential Construction Revenue
• Total Retail Sales
• Population Ages 25-54 and 55-64
• Total Employment
• Construction Natural Resources and Mining Employment
• Manufacturing Employment

For $100 per year ARA members can purchase the national data. The cost for your first local metro area is an additional $50 which includes all three segments. Additional metro areas can be added for $50 for one rental segment, $75 for two or $100 for all three. Additional discounts apply when multiple metro areas are purchased.

This information is available through ARA’s State of the Equipment Rental Industry Outlook 2009-2014 online Market Monitor, compiled by IHS Global Insight. For more information, go to www.ARArental.org/go/research or call ARA at 800-334-2177, ext 282.

(Note: This is one of a series of blog articles that will appear here frequently. All the blog articles focus on ways to improve rental operators’ profitability. All the ideas are based upon the proven experience of our most profitable rental operators. Return here often for additional proven business enhancing ideas. We welcome your comments.)

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Damage Waiver- Are You Charging Enough?

Think about it, a 10% Damage Waiver is likely to result in an 8% increase in overall revenue and it all falls to the bottom line.  If you are currently making an 8% pre-tax profit, implementing a 10% Damage Waiver program is likely to double your profits to 16%!

How Much Should You Charge? The next question is how much to charge for Damage Waiver.  In my meetings with several State ARA associations over the last year, I asked participants to raise their hand if they charged 6% or more.  Most hands went up.  I then asked them to keep their hands up if they still answered in the affirmative as I raised the percent.  When I got to 10% less than half the hands were still up.  When I got to 15% only a few hands were still up.  When I asked those with the highest rates what happened when they made their last increase, they replied “Nothing, the additional money fell to the bottom line.”

The point is that at a minimum you should consider charging at least 10%.  If you are already charging 10%, I recommend that you try increasing it in increments to 12% and then to 15%.

Bottom Line: If you do not have a Damage Waiver program currently you should consider implementing one immediately.  Furthermore, if you are not charging at least 15% you should consider increasing your current rate incrementally until you either hit resistance or achieve the 15% level. Experience has shown that in the vast majority of cases you will not hit significant resistance, even at the 15% level.

Implementing a Damage Waiver Program: Consult with rental professionals who have successfully implemented a profitable Damage Waiver program.  Review the programs of your close competitors.  Then have your lawyer bless it.  What will be covered and not covered under this program needs to be clearly spelled out.  The contract language should also make it clear that customers may opt out of the program under certain circumstances. Finally, it is important that customers signify their written agreement to the program.  This can all be handled by a correctly constructed contract form, little if any conversation will be required at the counter.   (Lots of contract examples are available online via Google; simply search “Damage Waiver.”)

When questions arise, one thing to train your people on is how to describe your Damage Waiver program.  It provides great peace of mind for your customers.  But it is important to recognize that it should not be called insurance.  Rental companies are not licensed or regulated as insurers. Rental companies treat Damage Waiver as a Waiver of the right to make the renter pay for damage to the equipment.

For further information on implementing a Damage Waiver program, we recommend the Q & A article by Dick Detmer on the ARA website:  http://www.ararental.org/HomeWrong/DickDetmerARAAdvantageNov_Dec09.aspx

Posted in Expense Reduction Strategies & Ideas, How to Build a High Profit Business Plan | No Comments »