Sports equipment rental business plan

sports equipment rental business plan

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It's frequently out on rent, and it's bringing a good rate. High time and low dollar: Rates are most likely too low. The unit is frequently on rent; it can probably draw a higher rate. Low time and low dollar: Sell! This is a lose/lose situation. The unit is probably costing more money to keep in the fleet than it's bringing. Low time and high dollar: Rates are probably too high. The unit doesn't go out as often, but when it does it's drawing a high rate.

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So, how solved does a rental manager determine if the business has the best fleet mix to maximize utilization, and memories thus, cash flow? The answer is with exception reporting, which can be done easily with most rental management software. A rental company's fleet is initially designed with several variables in mind that include: seasonality trends of the business' geographic location; the customer base, whether it's small contractor, large contractor or homeowner-based; and how much cash the company can afford to pay each month toward. But a rental fleet is an evolving commodity with equipment coming and going all the time. Rental managers should regularly monitor the fleet on a line-by-line basis with a utilization goal of about 70 percent, meaning that the unit paid 70 percent of its original cost back to the company in one year, says Stansberry. Rental managers should look at items with 50 percent utilization or less and ask themselves, Are rates too low? Do i have too many of a particular item in the fleet? Has a particular piece of equipment been down for repairs too long? Remember the four basic tenants of time and dollar utilization and review them for each item in the fleet. High time and high dollar: buy more of this item.

Spence calls this sensitivity analysis. After the appropriate variables are plugged in, the volvo rents program demonstrates that for every 1 percent of annualized dollar utilization, a rental business' cash flow can improve by up to 40,000. Though this is just one example based on one set of variables, it shows how significant a small improvement to dollar utilization truly. It is a very comprehensive program and tool; it makes you think through every issue that you can have in running a construction equipment rental business, says, paul Bullock, owner of Volvo rents franchise jps equipment, which has branches in West Monroe and Alexandria,. It tracks your month-to-month cash flow and gives you projections. It lets you know ahead of time if you have a cash flow problem on the horizon, which is the beauty of the program. Though Volvo's software is exclusive to that company, most rental management software has a feature that specifically highlights a fleet's dollar utilization, usually piece by piece. A rental manager may need to adjust the business' fleet mix to improve dollar utilization. In some cases a rental operation may be undercapitalized because it doesn't have a big enough asset base to pay the bills.

sports equipment rental business plan

Equipment rental business plan pdf —

Since payroll is generally the biggest chunk of cash expenses — often eating up 50 percent of a rental company's cash expenses, including salary, bonuses, health insurance and other employee benefits — stansberry recommends that payroll consume no more than 20 to word 25 percent. The second-biggest consumers of cash, Stansberry says, are repairs and maintenance, which make up between 6 to 10 percent of rental revenue. Software solution, edward Spence, franchise business planning manager for Asheville,. C.-based Volvo construction Equipment Rents, developed a proprietary business model program for the company that highlights a comprehensive business plan for new Volvo franchisees that works through financial figures and provides pecuniary summaries for the first five years. It has the built-in ability to show somebody at a high level of financials how and what affects their business, Spence says. They can see exactly how many different variables impact their financial data. We do a lot of training that addresses cash flow and how to do a cash flow statement as these new franchisees enter the business. Because utilization, like payroll, is another general huge influence on cash flow, Spence's software features a built-in utilization trend chart to address seasonality issues and other what-ifs such as accounts receivable and interest rates.

So often, all of this is in place, but it's not utilized, Stansberry says. Many times the software system turns into a glorified invoice-writing system. Most rental software is capable of capturing the data, but rental operators don't look. Many rental managers don't delve deeper than the top line of revenue and some expenses, Stansberry adds. To put it in a sports analogy: They played the game, but they don't have the final score — they don't even know what their opponent scored, Stansberry says. Every rental company should have a system in place to track cash flow and do trend analysis on revenues and expenses. You should be able to compare what they were this month, last month, year-to-date, this month last year and year-to-date last year. Making these comparisons allows the rental operator to see where variations are occurring and identify where adjustments need to be made. It also helps the operator isolate areas to watch more closely — common ones are payroll expenses and dollar utilization.

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sports equipment rental business plan

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Analysts who make these commentaries don't understand the rental business, says Kaplan. They want the business to grow and at the same time they want to see positive cash flow on top. Kaplan's concept is comparable to the familiar saying, It takes money to make money. A rental company that's truly growth-oriented generally requires more fleet, which equates to more money spent on capital expenditures. I believe that a rental company, if they're postured for the future, needs to be spending a minimum of 20 percent of its fleet treaty size a year on both maintenance capex and growth capex, says Kaplan. If they're spending less than that 20 percent then they're not providing for the future. He suggests that spending 20 to 30 percent of total fleet size on capex is healthy spending; 30 to 32 percent is really healthy; and less than 15 percent means the company is headed in the wrong direction.

Stay on track, tracking cash flow in the rental business is essential for keeping the company in balance and evolving in the right direction. Some rental operators, however, make the mistake of only looking at financial statements once a year. And in many instances, year-end financial data isn't available until March, April or may of the following year. Being this far behind real time doesn't give rental managers a quick enough opportunity to make the necessary adjustments to avoid repetition of mistakes. Gary Stansberry, partner in the cameron Park, calif., and Arlington, texas-based consulting firm of Hageman, Stansberry associates, says he cannot overstate the importance of having an accurate and timely financial reporting system in place to track cash flow on a monthly basis. In addition, line items such as revenue, dollar utilization of the rental fleet, payroll, and repair and maintenance expenses are important to track on a weekly basis. Oftentimes rental operators get so busy answering the phones and doing the day-to-day business that they don't make time for this kind of detailed tracking.

There are two ways to conceptualize the term. The first is to think of cash flow as a rental business' net income with interest, income taxes, depreciation and amortization added back in (known as ebitda). The second is to think of cash flow as the amount of true cash coming in and out of the business from day to day — just think of it as adding and subtracting from a personal checkbook. Whether a rental operator sets a goal to maintain positive cash flow or dip into negative cash, the goal is the same — to grow the business and broaden the fleet mix and customer base. According to dan Kaplan, owner, daniel Kaplan Associates, morristown,. J., The rental business is a negative cash flow business in good times and a positive cash flow business in bad times.


To further explain what he means, kaplan says that growing a business requires buying more fleet, which uses capital and depletes cash. Conversely, when times are hard, companies reduce the purchase of equipment and immediately cash flow turns positive. Growing the business completely depends on your capex expenditures, acceptable rental rates and good rental terms, he says. When you turn off the spigot of buying equipment, then your cash flow turns positive. And when business is producing positive returns and ebitda is good, then the business is growing, you have hard assets and your balances are in line. In that case, kaplan says he sees nothing wrong with negative cash flow. In 1997 and '98 during the era of consolidation in the rental industry, analysts wanted to see positive cash flow. They saw one rental company acquiring another rental company as a good way of expansion, which, naturally, included goodwill expenditures. But the cheapest way to grow a rental business, he says, is to add fleet when the need for additional equipment is justified.

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Monday - friday 8:00 am - 4:30 pm, contact Information 155. City hall room 218, juneau, ak fax. Fleet is purchased, rented again and again, and then eventually sold. Employees are paid salary, bonuses, health insurance and other barbing benefits. The building is leased, signage is purchased, office supplies are ordered, utilities are paid, and advertising is planned and bought. Sales trucks, trailers and delivery vehicles are paid for and insured. And then other inventory and maintenance supplies such as oil, transmission fluid and gasoline must be acquired to keep on hand. That is over-simplifying the cash requirements of a rental business, of course, but just that short list demonstrates the necessity of positive cash flow. But what exactly is cash flow?

sports equipment rental business plan

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Sports equipment rental business plan
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