Are You Constantly Being Asked to Loan Out Your Heavy Equipment? Could a Rental Business Be an Option?
Whether you own a forklift, skid steer, or other piece of heavy equipment for business or pleasure, you may deal with frequent requests from friends or family members to borrow your equipment over the weekend in exchange for gas and a little cash. Although these requests can become burdensome if those requesting aren't willing to offer a fair price for the wear and tear on your equipment, in many situations your acquaintances or family members may not have many other local rental options. Is it worthwhile to begin acquiring additional pieces of heavy equipment to go into business for yourself? Read on for some of the factors you'll want to consider before launching a heavy-equipment rental business.
What is the demand for heavy-equipment rental in your area?
Even if there are literally no other competitors within driving distance, if there aren't enough individuals willing to rent out your equipment to help you turn a profit, your business is likely to fail. Those in suburban areas where residents are packed into large houses on postage stamp–sized lots may find that the local demand for heavy equipment isn't high enough to justify expanding your fleet, even if you're able to charge high prices. On the other hand, those in rural areas where homeowners are often excavating ponds, digging sewer lines, or performing other labor-intensive tasks may find that demand will outstrip your supply for quite some time.
Who is the competition?
Most areas, even rural or factory-dense ones, won't create enough demand for more than a couple of equipment supply places—often on the opposite sides of town. If your area seems to already be fully saturated with rental businesses that offer reasonable prices, and your only "customers" so far have been friends and relatives unwilling to pay fair rates, your business may be doomed from the beginning
What hourly or daily rental rate will your market support?
You'll want to give some thought to the demographics of your area—perhaps even looking at U.S. Census income data—to determine the maximum rental rate that can be supported by your market. Even if you have high demand for rental equipment, if those who utilize your services aren't able to pay enough to cover your overhead costs, you'll lose money. You'll then need to perform a rough calculation of your overhead expenses (everything from your own salary to equipment and maintenance costs, insurance, and storage space) to determine whether the maximum net profit you could achieve will make going into business for yourself worthwhile.
How cheaply can you acquire new equipment?
If you're paying retail price for your equipment, it's unlikely you'll be able to eke out much of a profit for a long while unless you're able to charge sky-high rental rates. However, being able to purchase used equipment at auctions or perform the necessary repairs to take a piece of heavy equipment from nonfunctional to working order can minimize your entry costs, allowing your business to become profitable much sooner. When searching out for new (to you) equipment, you'll want to keep demand in mind. Purchasing multiple high-demand items like skid steers or backhoes before purchasing even a single low-demand item is usually the better choice.
Can you perform repairs yourself?
Some mechanical ability (or access to a low-cost mechanic) is key when dealing in heavy-equipment rental. Your customers aren't likely to treat this equipment as carefully as you do, perhaps letting it run low on gas or overloading it well past the maximum towing weight. Unless you're able to perform most regular maintenance and at least minor repairs yourself, you may find that your equipment spends more time in the shop and costs you more money than it actually earns.
Check out what companies like Horizon Equipment Rentals are doing to get more ideas.