Articles in the Starting a Tool and Rental Equipment Series:
- How to Start a Tool and Equipment Rental Business
- Tool Rental Business: What Tools and Equipment to Rent Out
- How to Start a Profitable Tool Rental Business
A tool rental business can be a profitable venture to start. There is a continued strong demand for tool rental because of the high cost of purchasing tools and the wide variety of tools to choose from. Home owners and businesses needing tools turn to tool rental companies to help them save capital, provide flexibility and free them from the cost of maintaining the tools themselves. With the right business plan and marketing strategy, offering home improvement tools and construction equipment for lease or rental can provide you with a steady growing income.
Before you start your own tool and equipment rental business, be aware of the challenges that you are likely to face and the things you need to ensure a profitable tool rental business:
Taking control of the business
There are a lot of moving processes for a tool and equipment rental business. Some of the things you will need to do include:
- Handling rental quotations
- Doing rental quotations
- Setting the price for tools and equipment to be sold
- Manning the rental desk
- Dealing with customers
- Managing the equipment life cycle
- Procuring tools and equipment
- Tracking rented-out tools and equipment
- Doing maintenance and repairs
- Handling financials, including collections, invoicing and cashflow management
- Marketing the business and manage your marketing assets, including your website
You need to have systems in place to track where your tools are, who rented them out, when do they need to be returned and how are they returned.
A tool and equipment rental business is a complex business, and you need to be prepared to take control of it. It is important to find software or technological solutions that can help you be on top of everything. There may not be one solution, but take time to find the solutions that are right for your business.
Having sufficient capital investment and cash flow.
To rent out tools, you first need to have tools. This means that you need to have the capital to purchase your tool rental assets. This can affect your cash flow, so you need to be careful and deliberate when purchasing the tools for your rental business.
You need to maintain a balance between your capital investments and your tools inventory portfolio. You don’t want to buy tools that will languish in your shelves or yard (worse, you incorrectly predicted demand and bought too unwanted tools). You also don’t want to have too little of the tools that customers actually want that you end up turning away potential customers because all the tools are out for rent.
Ensuring the return of your tools and equipment
One of the biggest challenges in a tool rental business is ensuring that your tools and equipment are returned. There is the risk that customers will not return your tools and equipment. To help mitigate this issue, here are some things you can do:
- Require that payment be made through credit cards, and make the customer agree that any unreturned items will be charged to the card.
- Require deposit
- Make the customer fill out forms with their name and address and verify it with a government-issued ID such as driver’s license. You want to know how to locate them (including when you report them to the police) to get your tools and equipment back.
- Engrave the name of your business on the tools along with your phone number. Not only is it a way to advertise your business, but it can also help the police in the recovery of stolen items.
- For your high-end tools and equipment such as trailers, consider using LoJack and other tracking mechanisms.
Handling items that are returned in damaged or poor condition
There is always the risk that your tools and equipment are returned, but they are now damaged or in poor condition. Here are some things you can do:
- Be sure to have your prices reflect some buffer in case you will need to replace tools when they get broken or stolen.
- Offer customers damage insurance that they can buy. If they are not inclined to purchase the damage insurance, require them to sign a damage waiver that they are responsible if the equipment and tools are lost or damaged.
Maximizing the utilization of your tools
Your goal is to maximize the days on rent or utilization of your tools. You need to keep track of your rental assets: where are they now, service records, as well as information on parts and accessories. You need to know how long and what kind of usage the tools can handle and do the needed servicing and repairs to ensure that you maximize their re-sale value at the end of their rental life. Being on top of maintenance and repairs help you reduce your equipment and tools down time.
Adding revenue stream of selling old tools
One way to supplement your income is to consider selling new and used tools as well. You can repair your older or damaged-but-still usable tools and sell them – the important thing is that the tools still work. You can add a section of your website about tools for sale. You can also check out Craigslist or eBay for wider venues for selling your tools.