Years ago, when I was visiting rental stores to do magazine articles on their operations, I used to take a couple of hours beforehand to analyze their business environment so I could see what they were up against and be prepared to ask how they were dealing with it. Sometimes the resulting questions produced a look of surprise and then quite a bit of discussion. It dawned on me that some of the things I wondered about had never really occurred to the rental people.
At first that seemed strange — they were, after all, very good at what they were doing or I wouldn't have picked them to be featured in a magazine. But eventually I concluded that sometimes things that seem obvious to an outsider are so much part of the environment the locals are used to that these things can become invisible. Poe even wrote a story about it — “The Purloined Letter” — in which he showed that the best place to hide something is right in plain sight. You never think much about your thumb until you get a paper cut and try to button your shirt. Sometimes you have to force yourself to take a close, cold look at the situation and play the “What if?” game.
I would try to get into town the night before and drive around, stop in at a few businesses that seemed likely to have rental needs, and ask them what they do about this, where they go for that, what it's like to do business here, what are the frustrations, the difficulties, the upside potential — just out of curiosity.
Once, on one of these trips, I drove down the main drag that led to the rental store, through the center of the commercial district, and clocked the distance at 4.2 miles. But it was rush hour and it took me most of 45 minutes. When I interviewed the owner the next day, I mentioned that and he shook his head and said, “Yeah, I know, it's awful — we spend a lot of dead time out there, just going back and forth.”
Think about the cost of that. Employee time, gas, wear and tear on the trucks, working assets (rental inventory) that's sitting instead of earning, customers waiting for help and getting antsy. The store's reputation is at stake. Well, the accountants may say, reputation is not a metric you can measure. Maybe not now, but eventually it will show up in lost business, disguised in metrics you can measure, like all that indirect labor such as delivery time, that doesn't add value, and poor ROA ratios.
I asked the guy if there were any other markets the other direction, outside of the busy area, that could be developed. Well, he said, there are new subdivisions and commercial zones all over, out east of town, but they're 20 or 25 miles away. So I asked how long it would take to drive out there. Oh, maybe 30 minutes, he said, maybe 40 at rush hour. That might seem like a tie game … until you factor in the mileage — say 22 mpg vs. 12 mpg — not to mention the future market potential of high-growth areas, especially if they're underserved by rental.
Another time a guy told me he was planning to open a ninth satellite location. It was an area where rental was just developing and people didn't understand the concept very well. They compared these small satellite outlets with the big building-supply center nearby and it looked like the rental store was a failure. Why? Because the shelves were so bare.
I told him, look, these folks come in here and don't see much inventory. You and I know that means you're doing pretty well, but you're reaching only your existing market. To get to the potential market, you need to change their perception. Why not skip that ninth location and use the money to put more inventory on the shelves in the other eight? If it's on the shelves, it won't be working assets, no, but to the newbies it will look like a going concern, and as business builds you can keep adding inventory to serve it — without the development and overhead costs of another location. Less than two years later, he told me he'd tried it and his business went up dramatically.
The message in all this is that sometimes it pays to step into the shoes of an outsider and analyze the situation from the customer's point of view, and in mind of the hidden-cost realities that could be tweaked to yield incremental growth over the long term.
Brian Alm worked in the rental and construction industries for 30 years, including 17 years with Deere & Co., primarily as a manager of corporate communications, and 10 years as editor of Rental Management magazine.
