In February 2020, equipment rental companies had no idea what lay ahead. Those who’ve stayed afloat got a baptism by fire into how efficiency makes the difference between failing, surviving, or thriving. As the economic uncertainty continues, if your business is to ride the wave, wherever it goes, you need control and deep knowledge of every single aspect of your rental business.
Rental businesses face overlapping challenges unlike any in the industry’s history. It’s been slammed by one brutal wave after another: a pandemic, staffing shortages, and rising fears of stagflation. As if all that certainty wasn’t enough, supply-chain issues are making fleet maintenance tougher than ever. As 2023 looms, there’s little sign of smooth sailing to come.
When even single-digit price, profit, or efficiency improvements can translate to double-digit results, data management is your most powerful weapon. That’s where efficiencies live. At Open Door, our focused expertise in equipment rental technology means we have the knowledge and insight to help you right your ship for any rough seas ahead. Keep reading to learn more about the risks of a recession, the importance of starting to “think lean,” and 5 tips to prepare your rental business for economic turmoil.
The Risks of a Recession for Equipment Rental Businesses
The pandemic was only the opening volley for economic turmoil that’s set the world on edge since early 2020. The supply chain felt the immediate impact, and it has worsened since, compounded by climate catastrophes, rolling lockdowns worldwide, and materials shortages.
It’s a volatile mix for an uncertain age. As 2023 looms, interest rates have hiked, inflation continues, and consumer confidence is shaky. We’re nearly three years into this era, but history shows that these upheavals may last much longer, like the Great Depression or the eight years of stagflation from 1974 to 1982.
The summer of 2022 was a wild ride for the economy. Consumer confidence sank to a 9-year low in July, then had a slight bounce back in August. In their study of consumer confidence over that period, McKinsey & Co. found that 30% of respondents “are feeling pessimistic, and that we may be headed toward one of the worst recessions we’ve ever seen. That’s twice as many feeling glum now than throughout the entire pandemic.”
If that public sentiment grows, businesses face a dark horizon. There are a lot of “ifs” on that horizon, but there’s nothing iffy about its implications: Rental businesses must get lean.
Why It’s Time to Think Lean
Running a “lean” company doesn’t mean automatically laying staff off and finding cheaper suppliers. Instead, it’s about eliminating inefficiencies. For equipment rental companies, inefficiencies creep into all areas of the business. From underused equipment to inadequate stock, you could be carrying unnecessary inventory while losing opportunities elsewhere. All the while, staff may not be working to their best abilities because you don’t have an accurate overview of your operations or fleet.
As the adage goes, every drop in the bucket makes a ripple. Every process you improve, every wasted moment of labor you save, they all add up. The trouble is there’s only so much you can do when your rental management system is cobbled together with Excel and QuickBooks, or other limited applications you may use in tandem, but which lack integration.
Maybe you think you’d rather make cuts elsewhere than change your inefficient rental management system because your team “gets” the system. But will you make wise cuts if your information and overview are inaccurate?
Changing to new systems can be tricky for a growing team, but losing money is tougher. The truth is, every time you open Excel, you’re opening a time machine – a potentially inaccurate window to the past – because someone might’ve saved a different version remotely instead of onto the shared server. It’s a hotbed for human error.
Managing rentals with an Excel spreadsheet leads to duplicate entries, the wrong data in the wrong cells, accidental deletions, and other common, easy-to-make errors. These aren’t just inconveniences; they’re lost money. Maybe that loss is through administrative time lost in fixing mistakes, lost income due to double-bookings, or other clerical fumbles.
The first reaction to an economic downturn is often to lay off staff. It can seem wise, but you don’t know how long the downturn will last, and when you’ll need to rehire. Laying people off reduces your capacity to serve customers. It should be your last-resort choice, not just because people matter, but because finding good staff and training them is time-consuming and expensive, at any time. Let alone when the job market gets hot again, and business has picked up.
“Running lean” is all about making strategic decisions that empower your organization to work better, easier, and with fewer mistakes, so you offer consistently professional service to customers. With less time-consuming administrative overhead, your team will have more time for maintenance and other manual tasks.
In the next section, we are going to share some expert tips on how you can start to run leaner before the real storm hits.
5 Tips on Preparing Your Equipment Rental Business for Economic Turmoil
Surviving economic turmoil comes down to working toward the best outcomes while anticipating the worst-case scenarios. It’s about being proactive on your finances while optimizing operations, so you run lean and cushion your cash flow all around. Here are 5 areas of your rental business to keep in mind moving forward:
Get Your Finances in OrderFinancial calamity seldom has such a hard start date as it did at the beginning of the pandemic, but there’s usually an inkling that times are changing. That’s when to act – not months down the road when lifelines have diminished. It’s why every company needs a cash reserve to float them through 6 to 12 months of lost income. But it’s also why an intelligent equipment rental ERP system can keep you proactive and nimble before challenges arise.
Before things get problematic, reach out to merchants and service providers about outstanding debts. Make arrangements that work for you both. Remember – paying creditors timely factors into creditworthiness, and access to credit could save your company one day. You may not presently need it but seek longer repayment terms on accounts of all kinds, so you have more flexibility in managing money. If cash flow concerns warrant renegotiating lines of credit, do so before needs become dire.
Getting paid is everything for businesses, yet chasing outstanding accounts is often neglected by small to mid-sized businesses. Collect what’s owed by staying friendly in good times and bad and remember to reach out as soon as bills become outstanding. The squeaky wheel gets paid quicker, and that money needs to be in your bank.
Cutting costs is vital for equipment rental business profitability, of course. Overhead expenses should be re-examined, whether it’s your office supplies or the spaces you’re in. Those percentages add up quickly. While lay-offs are last-resort territory, maybe you have staff returning to school or with other departure plans that could be sped up to alleviate payroll woes. Have those conversations.
Sometimes, even adapting how you manage inventory can improve your cash flow’s resiliency. Don’t hold more inventory than you need, whether in the supply room or your fleet. For more advice, download the full whitepaper here.
Leverage Real-Time DataImagine knowing exactly how often each item is rented – or not. Or, with just a glance, knowing when demand is peaking, or when needed servicing could complicate long rentals.
Imagine an instant view of every item in your fleet. Quickly check any service record, where items are in the field, or if you’ve got an availability crunch that could make sub-renting a feasible solution in the short term. You’ll not only get the maximum value from your equipment; you’ll protect your investments for far longer.
During a recession or stagflation, you need access to these valuable data insights to make decisions that count. You may track all this data independently now, but spreadsheets and disconnected systems will only make this more difficult to do in the long run. On the other hand, an integrated rental management system is built to centralize this information with billing, invoicing, and other scheduling all in one hub. This will also make it easier to increase the productivity of your staff throughout your operations, and that’s the quickest way to increase profitability, not just immediately, but into the future.
Focus on Enhancing the Customer ExperienceYour customers seek speed, accuracy, and accountability in meeting their needs. When your outdated software leads to rental foul-ups, incorrect invoicing, double bookings, slow service, or any other kind of delays, you risk losing customers. Worse, they may spread the word.
Reports show that only 26% of consumers change companies after one bad experience, but when it hits three foul-ups, 92% of customers will flee to competitors.
Consumers value their time. In a 24/7 on-demand world, they won’t wait for inefficient systems slowing down answers. When asked if they expect an “immediate” response from company support staff, 75% of polled consumers said yes. That means you’ve got 10 minutes to tell them what they need to know – what’s available, when, and for how much. And they want the answer from the first staffer they speak with because 87% of consumers loathe repeating themselves.
The good news is that with modern self-service technology (i.e., a customer portal) in place to provide quick answers and excellent customer service, you’re likely to win repeat business. Landing a new customer can cost 5 to 25 times more than keeping customers loyal. By leveraging customer-centric features, marketing and promotions can be used much more effectively to drive business from repeat customers ahead of slow periods, before the slumps hit.
Keeping customers becomes easier the more efficient your business systems are, because staff have the knowledge to give clients the friendly, personal, professional, and accurate service they seek. It’s good for generating business and increasing profit, too, because happy customers won’t just spread the word about it; 68% of consumers say they will pay a little more for better service.
Reduce Operational InefficienciesKnowledge is power, especially when managing process efficiencies. If you don’t know how your company’s performing, you can’t identify where the money’s being lost. Staying on top of AP and AR is great, but cash flow relies upon resource management. In the equipment rental business, that means knowing what’s rented often versus sitting idle, what’s well-maintained and what needs servicing. If some machines are forever in demand while others sit unrented week after week on the off-chance someone needs it, then that’s something you need to know — quickly, on demand.
When your various departments use different software solutions, that’s inefficiency writ large. Manual processes in older data management systems or swapping back and forth between Excel and QuickBooks means wasting your team’s talent and losing money. Overlapping software solutions cause data discrepancies and duplication errors, at a minimum. They’re a time-suck when information could be in multiple locations. Plus, it’s a challenge for IT staff to maintain multiple platforms.
One way to protect yourself in the future is to invest in centralized equipment rental technology that scales up or down with your business.
ODT Rentals, for example, is designed to bring your bookings, maintenance, service, and financials together in one easy-to-use platform where you can instantly access rental quotes, contracts, service records, invoices, and comprehensive, customizable reports. Managers can drill down into details, from client relationships to fleet availability, and adapt to changing conditions; Employees in the field can access real-time rental and service data processing from anywhere; And administrators can unload time-consuming-but-simple tasks and focus on value-added tasks.
Over time the efficiency improvements from ODT Rentals add up and you can grow your equipment rental operations to without needing to hire as often.
Start Future-ProofingIf you struggle to manage your resources – from financials to your fleet – that’s a warning sign. If a sharper downturn requires you to streamline, how quickly could you pivot? Could you fast-track the analysis required for smart, impactful choices? If growth opportunities arise, will you know if you can capitalize on them? And, if so, can your current systems handle the data of a burgeoning fleet and workforce?
You need nimble, scalable financial and operational management because that’s the world we live in now. But you also need industry-specific tools designed for the competitive, complicated world of equipment rental.
The future is automated. With decades of industry insight, we have built-in data solutions that add value to your business in times of economic decline. Like the ability to track sub-rentals in your main data hub or give clients a customer portal for self-service. Then there’s all the stuff you’ve wished for, like a visual rental availability calendar that’s intuitive, reduces friction, and prevents double-booking.
The future is also about being able to work where you need to, making mobile device support critical. Your staff can do everything in the field at client job sites, on minimal bandwidth – including creating rental contracts and capturing signatures or related photos, then and there. If you can do it on a desktop, it can be done in our mobile app. Plus, in-the-field updates are visible team-wide from the moment they’re entered. No need to head back to the office to file paperwork ever again. No need to call and say the contract was signed.
Finally, the future is all about data. It requires being able to pull up a big-picture perspective on your company in a click so you can respond quickly to fluctuating demand. With ODT Rentals, you get a highly adaptable, scalable, intelligent management system that gives a real-time snapshot of anything you need to know, the minute you need to know it.
For a deeper dive into solutions for weathering economic uncertainty, our new How to Economy-Proof Your Business whitepaper has insights and strategies to help you thrive, no matter what economic challenges may arise.
No Time for Delay: Steps to Get Your Equipment Rental Business Armed Today
Adopting a new system is daunting. Changeovers are complicated; training takes time. It’s easy to justify delaying that shift because, in your mind, there’s always a better time to take on that new challenge.
But this is one time that opportunity cost means early adoption can change everything.
Could the economy be headed for stagflation? Is the housing industry only beginning to contract? We don’t know. What we do know is that ODT Rentals includes all the tools you need to battle this storm and streamline your operations from top to bottom. By the time you’re up and running, you’ll have the most accurate picture you’ve ever had of where your firm stands, and where it’s capable of going.
At Open Door, our deep industry knowledge has come through our decades of working with equipment rental companies and their related industries. But we’re also a certified Microsoft partner and experts in Microsoft Dynamics 365 Business Central, so we are able to customize our solutions for every client. We configure our systems to your needs, for your goals, and at your budget. Our team will always be there to support you in scaling the system as you grow, because it’s impossible to outgrow these tools.
While we can’t make your future more certain, we can ensure you’re best positioned to weather the waves.
Don’t starve your rentals business of what it needs today. To learn more about our equipment rentals solutions, sign up for a no-pressure, no-obligation demo of ODT Rentals. We believe our solutions sell themselves, whatever your size, whatever your budget. Talk to us and find out why we’ve been servicing industry leaders for over three decades, and how we can transform the way you do business.