Rental companies learned some painful lessons the past few years. They'll need to remember them in the challenging times ahead.

After several painful years in the rental industry, 2011 was a welcome return to improved business, according to most rental companies, although growth coming from a low starting point did not make for a record-setting year. Still, an upward trend obviously beats a downhill slide.

Before getting caught up in euphoria over a more positive economic environment, with relatively upbeat expectations for 2012, there are a lot of reasons to pause and reflect about lessons learned from the past recession. These lessons need to be considered for a number of reasons, but primarily two dynamics dominate.

If the industry was on the verge of a boom-type growth period, a reflection on what lessons were learned in the past recession would be vital so that rental companies would avoid making mistakes that led them into trouble a few years ago. However, such a boom is not likely, and storm clouds remain on the economic horizon. And while most economists have backed off predictions of a “double-dip” recession, there are causes for concern and some in the rental industry feel the recession has never really ended for all practical purposes.

Although most rental executives interviewed say they are focusing on what they can control — their businesses — rather than on international concerns they can't control, a variety of issues are on the minds of rental people. The potential fallout from the European debt crisis; long lead times on equipment orders; the rising of equipment costs because of Tier 4 engines; component shortages and delays; costs of metals and other resources such as engines, tires, oil and steel; medical costs; lack of availability of mechanics; continued weakness in the housing market; governmental issues (mostly budget) on state and national levels; potential inflation; the results of the next national election; stubbornly stagnant rental rates and general lack of customer demand are all issues that cause concern.

Paying close attention to the balance sheet is the primary lesson stated by most rental people coming out of the downturn. “Balance sheet is important all the time,” says David Griffith of Modern Group. “Asset management is critical. Hard decisions need to be made early. Over communicate with customers, vendors and employees.”

Graham Hood, CEO of Neff Rentals also strongly emphasizes reacting as quickly as possible. “When you see the signs of a pending downturn, be prepared to take action early, rather than waiting,” he says. “Having a diversified customer base, being well capitalized and having a strong balance sheet will better enable you to weather any down cycles.”

Reacting quickly by reducing fleet is a common theme. “The lesson learned is not to carry too much debt and to quickly move out underperforming equipment in the fleet to manage that debt,” says Wayne Wadley, 4-Way Equipment Rentals, Edmonton, Alberta, Canada.

Fleet reduction was an almost universally practiced method of surviving the recession, from the smallest rental companies to the biggest. Rental companies aged their fleets and walked the delicate balancing line between aging the fleet and adding maintenance costs.

“Don't buy too much equipment and take on too much debt too quickly,” adds Joel Theros, Theros Equipment Rentals. “Age your fleet appropriately and keep the discipline in place in your operation to properly service and maintain the equipment through its useful life.”

“We learned certainly a better meaning of lean operations, while not taking the customer service out of focus,” says Brendan Horgan, CEO of Sunbelt Rentals. “In an asset-intensive business like we're in, from a practical standpoint, running a business such as this you always have to keep in mind your leverage and your debt. I think to those that have survived and fared well that was a key difference-maker.”

As much as rental companies emphasize adaptability, they also cite the importance of sticking to well-managed practices and focusing on what works well for the customer. “Always keep your composure and make the healthiest choices even if the outcomes are temporarily disappointing,” says Joe McCaffrey, business development manager, Able Equipment Rentals.

“We learned not to trust the banks and other financial institutions to make good decisions or decisions in the best interests of their customers,” says Bill Thompson, president of Thompson Pump. “Their poor decisions can result in serious damage to our businesses. We learned not to trust the government or the politicians to act in a fiscally responsible manner, to maintain effective oversight, or to make good decisions in the best interests of the taxpayers.”

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