Wayne “Chip” Rothery is, like many successful entrepreneurs in the rental business, proof that building a profitable company isn't going to happen overnight. In his case, it's taken 27 years to set the foundation, mix the concrete and fill the cracks at Rockingham Rent All in Harrisonburg, Va., and turn it into a million-dollar business.
It requires research, work experience, dedicated employees, money and wise choices along the way. But all of those are worthless without the entrepreneurial spirit to battle through the rough times and put in the early mornings, late nights and long weekends to serve customers.
“You have to work your tail off and you have to have a tremendous amount of self discipline,” says Rothery, who co-owns the Stihl dealership with his wife Karen. “If you can't do that, you should be working for someone else.”
For starters
Indeed opening a rental center requires the motivation of a self-starter but that is really only the beginning.
First and foremost you need money.
A small “mom and pop” equipment rental store offering hand tools and other consumer products is going to require a minimum of about $250,000 depending on the market you're in, according to Steve Drinkwater, president of Westside Rental in Savannah, Ga. That is upfront money needed to outfit the store with a computer system, furniture, rental equipment, and employees, including a good mechanic unless the owner has technical skills and the inclination to use them.
Start-up costs for stores emphasizing the big iron run in the $1 million-plus range. Additional costs, such as insurance and stocking a suitable parts inventory add to that number as the business grows.
Of course, if you want to eat it'll cost more.
“To start a (large) store you're going to need about $1.5 million, but you have to have more in reserve because you're not going to make money your first six months,” says Mark Irion, chief financial officer at Miami-based Neff, No. 8 on the RER 100.
Many owners strongly advise new entrepreneurs to be careful with borrowing excessively and getting too deep in debt before they have even opened up shop.
Drinkwater says it is imperative to go into the business with low overhead and low debt. Avoid tying up a lot of expense in the building, particularly if yours is a mom and pop operation without the luxury of being able to quickly earn the revenue generated from renting large equipment.
Finding a good banker who “keeps your feet to the fire and makes sure you don't get too far in debt” also makes good business sense, he adds.
Do your research
Before investing in a rental center, newcomers are advised to evaluate and decide upon a number of factors, including their preferred client, their service specialty, the best location, and their commitment.
Rothery opened Rockingham Rent All in 1974 after spending months researching the business and working in other rental stores.
First, he attended an American Rental Association regional meeting to network. He then worked for several weeks in three rental stores, each with a different focus — big iron, small equipment and party — to find out if he could make it in rental. Largely restricted by finances, Rothery focused on small equipment and opened his doors shortly afterwards.
“My advice is you ought to go work in a rental store for six months in the summer time,” he says. “Talk to the owners and find a mentor, someone you can get advice from.”
Selecting a store location, while often a matter of personal preference, is also shaped by the competition, the presence of niche markets and other factors, including city ordinances and zoning restrictions. In most cases, it is preferable to own the location versus leasing it.
Temecula, Calif.-based Rebel Rents, No. 56 on the RER 100, wanted two of its 15 locations to be that city, but government zoning largely dictated the available options for adding the second location, according to risk manager Mike Stevens. The company did open a location in an area the city deemed suitable for the rental business.
‘It takes a special breed to be a business owner and you have a lot of responsibility. I have 12 employees and my decisions affect those 12 people and their families.’
— Wayne “Chip” Rothery, Rockingham Rent All.
Customer base
Rental is extremely competitive and new store owners are best served finding a niche market that isn't well served by a competitor, regardless of the competitors' size, then stressing a commitment to customer service.
A priority is determining the type of customer a rental center wants to attract. Is the contractor more appealing or is the homeowner a better customer?
Admar Supply in Rochester, N.Y., chose to go the contractor route. General manager Gene Stupp says the company is a one-stop shop for contractors with millions of dollars of equipment on hand plus a $1.5 million parts inventory built up over 50 years in the rental business. Admar prefers contractors because they are repeat customers as opposed to homeowners who are largely one- or two-time renters. Contractors are also more experienced equipment users, minimizing the time staff devotes to giving operating instructions while reducing liability.
Other considerations: whether to serve as a full-line store or supply house; offer select product lines or opt for name brands over cheaper products, the latter of which isn't a choice at all, one owner said.
“You should pick the name brands because they are the only ones you can afford to stock,” Rothery says. “They are the only tools that will withstand the demands of rental and the brand itself is the selling point.”
Cover your bases
There are four types of insurance rental stores will likely need to consider — liability, inland marine, automobile and health. Of those, liability and inland insurance deserve the most attention. Liability insurance is calculated on a store's rental revenue while inland insurance is a percentage of the value of the equipment on the lot.
Westside Rental's Drinkwater says a good place to start when looking for insurance coverage is ARA's Insurance Services in Moline, Ill. and other regional carriers such as Allied Insurance in Foxboro, Mass. and Atlanta-based Towers Barber Hall & Hogg.
Insurance typically is not a large expense and can often be paid in installments.
Roger Gamache Jr., president of A & G Associates in Leominster, Mass., No. 87 on the RER 100, says insurance accounts for about 5 percent to 7 percent of his rental budget but that figure is likely to rise given the soft rates characteristic of the current insurance cycle. He estimates insurance costs will soon rise as much as 10 percent to 20 percent a year.
Regardless, rental center owners should search for rates from a variety of insurance companies each year to ensure they are getting the most effective and competitive coverage for their equipment and store.
The right employees
The availability of qualified and competent employees varies nationwide and it is clear the success of any rental store largely depends on the people behind the counter, in the maintenance shop and in the back offices.
Mechanics might be the most vital. Admar's Stupp said they are critical, particularly when the business is geared to the contractors who typically rent the larger, more complex machines. It's easier to find a guy who can fix a small machine than one who can repair a 125-foot boom, he adds.
Once the owner has hired the right employees, developing trust in each is the next step towards stability and success within the store.
“The hardest thing to do these days is find a person that you can trust and someone you can leave in the store while you go out to lunch,” says A&G's Gamache. “You usually have to go through four or five people before you find that person.”
Gamache says his company's 13 Massachusetts and Rhode Island stores have grown from within by promoting and rewarding long-time employees. When a new store is added, he offers the management position as well as partial ownership to a deserving individual.
The bottom line
The responsibility of running a rental store ultimately falls on the shoulders of the owner — the one with the most invested, the most to gain and the most to lose. But as the business grows, rental center owners clearly become just as dependent on their employees and customers to maintain that growth.
It will serve any owner well to remember that, no matter how big or how fast the business grows.
“It takes a special breed to be a business owner and you have a lot of responsibility,” says Chip Rothery. “I have 12 employees and my decisions affect those 12 people and their families. You always have to remember that you don't run the business, your customers do.”
