After years of pivoting and constant challenges, the equipment rental industry is finally experiencing steady growth and unprecedented demand. According to the American Rental Association (ARA), the equipment rental market is forecasted to grow 3.4% in 2023, thanks to major increases in the construction, mining, medical, and oil and gas sectors. These numbers are aligned with estimates from Allied Market Research, who predict a compound annual growth rate of 4.5% in the global construction equipment rental market alone.
To fully capitalize on these rental expansion opportunities, equipment rental companies can no longer lean on reactive strategies to stay competitive. To get ahead of the curve, your rental business must start dedicated planning processes and exercises. Like the adage goes, “A failure to plan is a plan to fail.”
3-to-5-year planning will not only help you understand the current state of your rental operations, but it will also help you stay focused on your goals moving forward. Starting a documented plan doesn’t mean giving up agility either. Not only should the process be constant and evergreen, but Mid-term planning also helps ensure short-term problems are prevented, allowing rental businesses to be more dexterous while increasing their competitive position. How you approach expanding your offerings, scaling your operations, and responding to unexpected changes in market conditions, should all be part of the ‘plan.’
This article will outline the importance of planning and provide tips on how to address this increasingly important exercise in the wake of emerging industry trends. We believe that with a deeper knowledge of the changing industry climate, and their impact on your business, you can better plan for success and survival.
Start with SMART (Planning That Is)
From sales and finance to inventory and infrastructure, it’s safe to say that rental businesses have changed over the past few decades. With increased competition and growing demand, planning for the highs and lows is essential to survival.
A comprehensive 3-to-5-year plan can aid in navigating a company through this fluctuating growth, provided the plan is rounded in goals that are ‘SMART’ – meaning they are Specific, Measurable, Achievable, Relevant, and Timely. These goals and benchmarks aid in proper planning for realistic objectives and help to forecast and solve problems while providing you with a solid sense of direction. The results can be very profitable.
Before you can start to incorporate SMART goals into your plan, however, you need to know which Key Performance Indicators (KPIs) to track, and which ones to implement in relation to your goals. Focusing on incorporating the relevant metrics you want to move and dials you want to turn, then tying those back to your company’s goals is key to successful planning.
For example, a good SMART goal tied to growth and expansion might be “have 40% of our revenue come from the new [insert product category] line within 2.5 years.” This is specific, tied back to measurable KPIs, assumingly achievable with the right efforts, relevant to where you see the best margins, and a solid timeframe has been identified.
From there, you can start to build your plan around ‘how’ you expect to achieve your SMART goals.
Consider Impactful Trends
Positive and promising growth comes naturally from shifts in how rental industry organizations manage and modernize their overall operations, including adjusting to changes in consumer demands, technology, and resources in the face of developing market changes.
It is up to individual companies to plan and execute initiatives and operational changes that will have the biggest impact on their business in the future. A comprehensive 3-to-5-year plan should include the foresight to handle growth in consumer demand, changes in customer expectations, as well as shifts in labor practices.
Here are three examples of prominent industry trends that will impact your rental business and should be considered in the context of your plan:
A vast majority of industries are experiencing a labor shortage right now, and the equipment rental sector is no exception. With an aging workforce set to retire, finding and retaining employees is difficult and expensive. Traditional thinking demands hiring additional staff, but this is a high-risk strategy in an uncertain economy and not a feasible solution for long-term growth.
Expectations around work have also changed, like offering flexible work hours and work-from-home options. It’s imperative to understand that work culture is increasingly important to retain quality employees. Competitive wages are just a start, and in today’s environment making workers feel valued and appreciated is equally crucial.
Changing Consumer Buying Behaviors
Nowadays, customers want to shop on their own terms and time. Plenty of options are out there for you to build out your self-service offerings and strategies. The more information your website has about your products and rental terms, the more likely prospective customers will engage with you.
From being able to see inventory, access pricing, reserve rentals, get product details, and make inquiries, customers need the ability to steer their own buying experience. As an equipment rental company, if you want to stay competitive and keep customers loyal, it is imperative that you deliver a user-friendly buying experience to cater to the demand for a simplified buying experience.
Customer Service and Loyalty Strategies
It may seem overly simple, but providing excellent customer service can help grow and retain a loyal customer base. According to recent studies, there’s a 70-80% chance of reselling to an existing client, as opposed to only 5-20% for new ones. Plus, this percentage is amplified by the Pareto Principle – 80% of your profits are earned from 20% of your clients.
Since it is easier and more profitable to engage with existing customers than pursue new ones, investing in and planning for customer loyalty can truly pay off. Successful rental companies need to consider how they will improve the equipment rental customer experience and retention. A well thought out plan that focuses on exceeding customer expectations can further maximize your profits.
Determine the Biggest Impacts
Before you start developing your 3-to-5-year plan, it’s important to understand which trends may have the biggest impact on your business. Without proactively arming your business in anticipation of inevitable market shifts, trying to implement changes will be more difficult and raise more issues down the road. Expert advice and guidance can help alleviate wasted time and money on impractical solutions by focusing on using the right plan and growth strategies for your business.
We discussed staff shortages, changing consumer buying behaviors, customer service and retention strategies, and the importance of planning for long-term growth. But there are other significant movements impacting the equipment rental industry that you shouldn’t ignore, including:
- Technology stability
- Planned maintenance
- Fleet equipment mix optimization
- Real-time data
- Niche offerings
Learn more about these emerging trends and how they relate to your rental business in our latest Equipment Rental Industry Outlook 2023 whitepaper. This resource provides guidance on affordable and achievable steps to help you implement and capitalize on today’s rapid growth and industry changes.
How Will You Approach Scaling?
As outlined above, your 3-to-5-year plan should include executable growth strategies that address, adapt, and fit into the changing industry climate. From there, it’s imperative that you don’t ignore how your operational management will need to smoothly scale for growth without disrupting or cannibalizing your progress.
You’ll need to prepare your equipment rental business for expansion and modernization across everything from customers and staff, inventory and rental offerings, or locations and servicing before you unintentionally slow down your business with error-prone, manual, legacy processes and systems.
At Open Door, we help equipment rental and service companies run more efficiently, improve profitability, and realize growth by centralizing their operational management into a single, scalable rental software solution that enables complete real-time visibility into every aspect of their business performance.
If you haven’t already started putting your rental business plan together, we encourage you to start now. Let the equipment rental technology and business process management experts and veterans at Open Door help you get started on your path to preparing your business for seamless scalability by contacting us today!