Why Rentals Will Save You Money
Many contractors like to have a yard full of machines. They like to know that no matter what kind of job they are about to take on, they own most of the equipment and tools they will need. And when they measure company assets, they take pride in the amount of machines their companies own.
It seems convenient. When a job comes up, they’ve got the equipment, and they’re ready to go to work.
But what so many companies fail to consider is the cost of ownership. They calculate the purchase price but don’t take into account the myriad additional costs that can be eliminated, significantly reduced or converted from fixed to variable.
Owning equipment means you have to finance the purchase of it. You have to maintain it. You have to store it, which also means you need security and protection to keep it safe and protect it from the ravages of weather. You need a maintenance staff that costs you money in hiring, training and salaries. You have to train that staff continually because equipment innovations create new service requirements.
You need to pay for transporting the equipment to job sites, which means trucks, their maintenance, drivers and their training. And you continually need to educate your equipment operators regarding the unique requirements of each job because every construction application is different.
There is a way to reduce these costs dramatically and, at the same time, take advantage of other services that can benefit your company. It’s part of the outsourcing trend that has driven business development throughout the world in recent years and will, without doubt, be a major business philosophy of the 21st century. Outsourcing allows you to concentrate on what your company does best—which is grounds maintenance—rather than on buying, selling, organizing and maintaining equipment.
Of course, equipment that you use constantly is probably not a candidate for rental. Mowers, trimmers, blowers and other equipment that you use all day long are more cost-effective to own than rent. But equipment you use less than fulltime—especially some of the pricier or more-specialized types—may be more cost-effective to rent.
That's why more and more contractors are discovering that renting equipment makes sense, not only in times of extreme need but as a regular way of planning equipment usage. A good rental company can benefit a grounds maintenance contractor or organization in the following ways:
- Maintenance. If you own equipment, not only do you need to employ mechanics, but you need tools, machines and expensive diagnostic equipment to help them to do a good job. You need a location for them to work in, which is a major expenditure. You need to train mechanics and continually update and retrain them to be aware of developments on the latest equipment.
In addition to the initial investment in tools and equipment, there is the continual expense of fluids and solvents and their disposal.
- Modernization. Equipment continually improves. New generations of equipment can save you time by being more powerful and more efficient. Why not take advantage of these continual innovations from equipment manufacturers? Rental companies make it their job to have new equipment in their inventories, taking advantage of the latest innovations in equipment manufacturing, as well as the latest attachments and accessories.
- Selection. In good times, you can pick and choose projects. If you want to specialize in a certain type of job, you usually can find enough work to keep you, your workers and your fleet of equipment busy. However, in tougher economic times, the ability to specialize is frequently limited. Too often, you have to take any work you can find and be willing to take on different types of jobs. In such times, contractors don’t get enough utilization from their equipment inventories to justify ownership. By renting, you can find whatever you need, when you need it, without the costs of purchasing and maintaining it.
- Expertise. The unique ability of a rental company is to be knowledgeable about a variety of work and equipment. The rental company can offer this expertise, not only choosing the right equipment for the job but also teaching you how to use it safely and productively.
- Transportation. Getting equipment to the job site is a major cost in itself. Sure, for small equipment it’s a minimal problem. The contractor grabs a few items, tosses them into the back of a pickup truck and takes it from the yard to the construction site. But larger equipment requires greater efforts and the use of tractor-trailers or other delivery vehicles.
Such vehicles are expensive. They must be maintained and stored just as equipment must be. And you have to find skilled drivers who know how to secure equipment on the truck, how to drive safely and how to load and unload equipment.
- Breakdowns. Equipment breaks down on the job. The quick repair of equipment is vital. You have budgets and deadlines. Often when equipment breaks down on a job, it can take hours, days or even weeks to replace. Meanwhile, workers stand around with nothing to do.
When a piece of equipment breaks down, do you have a replacement machine ready to take its place immediately? Do you have competent mechanics who can stop what they’re doing and rush to the job site to diagnose and repair the machine? Do you have the necessary parts to repair the machine immediately?
These are major costs. By outsourcing these costs, you reduce fixed costs and convert them to variable expenditures that, generally, will not be as high as if they were fixed.
An effective rental company is stocked with repair and service trucks that carry the parts, hoses, fluids and solvents needed to repair equipment quickly. And if equipment cannot be repaired immediately, the well-stocked rental company quickly can replace the broken-down machine with another that can do the job.
- Parts. Parts alone are a big expenditure as well as an organizational nightmare. How many parts do you need to stock to keep your fleet running? You might need hundreds or even thousands of parts. Parts require storage and, more important, organization. You need to keep an updated inventory of parts to have what you need, and you need to replace them as quickly as they are used. You need a parts strategy so you know how much to stock and where you can obtain parts quickly when needed.
- Utilization. Why buy equipment you don’t expect to use often? If you have a need for a particular machine but don’t have the certainty of long-term utilization, why risk the financial health of your company with a major capital expenditure? It simply doesn’t make sense when you can rent the same machine. Similarly, rental allows you to test equipment. If you think a type of equipment might benefit your company, why not rent it to make sure it is, in fact, the type you really can use?
- Brand strength. Most equipment rental companies carry major brands that are well-respected in their fields.
Your core competency
Taking a look at all these needs brings up a major question that contractors and constructors must answer. What do you do best? What makes money for your company, your investors, your family and your workers’ families? Is it operating a mechanics’ shop? Is it hiring and training mechanics? Is it running a parts department? Is it owning, operating and organizing a fleet of trucks? Is it talking to bankers to find the best lines of credit to buy equipment? Is it spending time looking for the most economical way to dispose of aging equipment that is no longer as efficient?
The answer, most likely, is none of the above. The answer is installing or constructing or maintaining whatever it is you specialize in. It certainly isn’t running a mechanics’ shop, a parts department or an equipment-delivery service. If any of those were the business you wanted to be in, that’s what you’d be doing. You have come to accept all these tasks as part of the necessary cost of doing business instead of concentrating on building or looking for building jobs.
So why not outsource these services? Why not let an equipment rental company, whose main source of income is all of the aforementioned tasks, take over these tasks? Why not convert these fixed costs into variable costs? When you have more work than you can handle and income is pouring in, you might not mind handling these tasks. But that is probably not the case most of the time. Yes, when your equipment is being fully utilized, it might make more sense to own it. But chances are, much of your equipment is not utilized enough to make it worth your while to incur so many infrastructure costs.
It’s obvious to many contractors that renting makes sense when there is a sudden short-term need for more machines than a contractor owns, when there is a need for a piece of equipment the contractor doesn’t use frequently or in case of a breakdown. These are times when many contractors rent equipment.
The growing trend is for contractors and grounds maintenance specialists to outsource an increasing percentage of their equipment needs. More and more companies rent as a way of procuring much of their equipment, for all the reasons above. They have found that rental enables them to concentrate on their core competencies. They have found that they simplify operations and reduce overhead and infrastructure. And they find that they can do a better job by having a greater variety of equipment, tools and attachments available when needed, benefiting from the expertise of rental company personnel who act, in effect, as advisers to their projects. And, because they use the rental company’s fleet instead of their own, they tend to have a more modern, well-maintained fleet, with a well-stocked parts department, enabling them to operate more efficiently.
The option of rentals continues to grow dramatically for all kinds of grounds maintenance applications. It will save you time, money and heartache and allow you to concentrate on what you do best without having to concern yourself with fleet management.
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© 2016 Penton Media Inc.