Welcome, everyone, to another in a series of rental-specific seminars that are being sponsored by AED. Today's seminar is focused on financial management. Today's seminar is being presented by Script International. Script International is a consulting firm that focuses on manufacturers and their dealer networks, primarily in the area of rental and developing markets and driving efficiencies in rental departments so that they can drive profit, which dealers desperately need these days. In today's seminar, focusing on financial management, we need to think about all the different aspects of financial management. The first and foremost is how do we drive revenue? Today's seminar is really going to focus on how does the top line, how is it driven in a rental operation? What we would like to be able to understand today is that in a rental fleet, the mix of equipment, it does not all earn at the same rate. You need to understand why. Why do bulldozers behave differently than wheel loaders or mini-excavators, for that matter? Once you understand the type of fleet that you have, you should be able to predict somewhat what the revenue is going to be in the days ahead. That has a lot to do with the mix of equipment that you have. Then we're going to take a look at how you should be measuring the activity of your rental fleet and what to look for in performance measures. Then, once we have measured things, we can now start to identify the things that are making us money and the things that are not making us money. Basically, the winners and the losers. Then, once we have identified those underperforming groups, then we want to understand what are the key factors that make those things underperform. There really are some analysis that you can go through to determine how to make that group better or that individual item better. Let's get started. Typically, an equipment dealer is focused on selling equipment and they make money based on the gap between what did they pay for it and what did they sell it for. Oftentimes, when I'm working with an equipment dealer, they have an incredible focus on trying to drive that extra 1% or 2% discount from the manufacturer in terms of what they paid for in buying. That's important in a sales transaction. This is a one-time event. It's the difference between what they paid for it and what they sold it for. That's the only chance they have for creating profit on that sales transaction. In rental, it's a little bit different. In rental, to drive revenue, there's a number of factors that come into play. The rental rates that you have for equipment based on daily, weekly, or four-week rates. Then, it depends upon do you primarily rent your equipment by the week or by the four weeks? How often do you have the equipment out on rent? It's a combination of things that actually drive the top-line revenue in rental. I might say, most people are keeping the equipment in their fleet for two or three or four or five years. Consequently, this is an ongoing struggle all the time. These are the key drivers to determine how much rental revenue you're actually going to produce. It's the rates. It's the time periods that you have it out on rent. Then, the frequency that you have it on rent. I have a table here to be able to show you the different characteristics of the groups. First of all, let's look at heavy equipment. Just for discussion purposes, I have determined that heavy equipment are those items that cost $150,000 or more. Typically, as I look around the country and I look at rental rates compared to what the equipment costs, typically that rental rate you can expect is between 3% and 4% of the original cost. If you keep that equipment out, let's just say the number was 4% per year. If you could keep that equipment out 12 months of the year, you could potentially produce 4 times 12 is 48% of your original cost. Most people can't keep the equipment out for a year. Let's just say it was 70% of the time. 70% times the 48% would get you in the neighborhood of about 30% total financial utilization. For this exercise and discussion, I'm putting a number of 25%. That is something that is reasonable for you to expect. 25% to 30% per year of your original cost on heavy equipment. That's kind of how that group performs. Large equipment, that equipment that has an original cost between $100,000 and $150,000, it actually behaves the same way. In this case, there is maybe a little bit stronger demand. More people are interested in this size product. Potentially you can keep it out more often, but the rental rates are basically about the same. Then we move into medium equipment, small equipment by attachments. You can see that they have different characteristics. I want you to be able to take a look at how the calculation is done and how this equipment behaves. Large equipment would typically include your backhoes, your dozers, excavators, large telehandlers, compact wheel loaders, compact rollers. Usually this type of equipment stays out potentially three to six months at a time. The market rates are very competitive. There's a lot of players in the market. This would be considered a shopping good. A shopping good, as I would describe it, is something that a contractor is going to probably call a number of suppliers and try to get the best rate they can possibly get because they know they're going to keep it for a long period of time and it represents a lot of money to them in the project. It's usually not something that they just call and immediately give you an order for unless they've already shopped you. What we know about this equipment is that it doesn't drive a lot of profitability during the period of time that you are renting it, but at the end, when you get ready to roll equipment out of your fleet, there's a good potential for your resale value. That's when a lot of dealers show the profitability associated with this equipment. Let's look at the financial utilization. Let's take an example of a unit that costs $115,000. In the market, rental rate for this is $4,045 for a four-week rate. If we take 13 four-week periods times the rental rate, potentially we could earn $52,000 with this equipment. Reasonable time utilization of 70%. Actually, that's probably on the high side. Reasonable might look more like 60 to 65, so 70, I have it in red because it would be very unusual for you to be able to keep the equipment out at a greater time utilization than 70%. But if you could, we take the 70% times the potential revenue and we end up with about $36,000 potential gross revenue for this unit. Then we'll take the $36,000 and we'll divide it by the original equipment cost and we get 31.7%. That's the calculation for financial utilization. And you can do that on an individual basis, individual machine. You could do it on a group of machines or you could do it on your complete fleet. So going back, now that you've seen kind of how the larger machines operate, now we can look at medium equipment, smaller cost, look at the gap in percentages of rental rates, anywhere from 3.5% to 8%. So compared to the larger equipment, it has the earnings potential of two times per month as a percentage of its original cost. Again, it's a very competitive space. There's lots of equipment dealers and a lot of rental companies out there renting equipment that's in the $50,000 range. Small equipment, you can see the rates start to increase because people think about the rental rates that they're paying for the equipment, they think about it differently. They don't feel like they're going to spend a lot of money and therefore they don't need to shop around as much. So it would be considered more of a convenience item for people. So we've seen a little bit about how the equipment performs in terms of rates. Now what I'd like to talk about is the rental periods themselves. So equipment just has a natural use of it. Larger equipment tends to be on larger projects and therefore they stay out longer. Smaller equipment does smaller projects and it can be out for days and weeks instead of months. If you look at the backhoes, primarily they are rented by the week or the month, dozers the same way. Does that mean you can't rent a backhoe by the day? Of course not. But typically when you set your rental rates, the focus is going to be more on weekly and four-week or monthly rates, whichever one you choose. And smaller equipment, you can see over here skid steer loaders, mini excavators, light towers, those things tend to rent more often by the day or the week instead of the week or the month. So now I want to describe and illustrate a potential fleet mix. And in this case we're going to look at a fleet that has an original cost of a little over $3 million. And you can see the different categories of equipment that we have. We've got representation in heavy, large, medium. And I want you to be able to see how our fleet mix is. So in the column to the right where it says percentage of fleet, in this case we've got 31% of our fleet mix or our investment is in the heavy equipment. Same thing with large equipment. And then medium equipment we've got about 20%, small 11%, and light equipment about 3%. But I want you to be able to see in terms of revenue that's produced, the 30% heavy equipment only generates about 23% of our revenue. The large equipment only produces about 29. So it's about even. I've got a 30% investment, 31, and I'm getting back 29. As we move down the list here, you can see that, for instance, the small equipment, it outproduces. It has 11% of my value and produces 14% of my revenue. So think about when you put your rental fleet together, an example of a grocery store. A grocery store has a variety of items in there that they all earn different margins. And so a grocer is looking to get an average return or an average gross profit on you by the time you check out. So they've got some things in the store that are virtually no margin, lost liters. And they've got other things that they know are impulse items for you. And by the time you check out, they expect to make a 3% to 4% return. Well, a rental fleet is exactly the same way. So in this particular blend, this mix of equipment, based on this particular time utilization, would give us a 33.34% financialization as a group of equipment. And I have highlighted these top two areas because large investment equipment has to work really hard to produce revenue. So look at the timeout utilization, 70%, to produce the 23% of our revenue. And then as we get into smaller equipment, it doesn't have to work as hard. So pay close attention to the utilization, time utilization. The larger equipment, to be effective, it's got to stay out more than 60% of the time. I'm showing 70. That should be a target. And then the smaller equipment, it can stay out more like in the 50% to 60% range. And then look at attachments. You say, how could I have anything in my fleet that only stays out 20% of the time? Well, attachments are one of those perfect items because they help in many different ways. They make your equipment much more versatile, which means that your core products are more interesting to people because they can do a wider array of jobs. And the investment isn't very large, and the return is exceptional. So as you see, with 20% time utilization, an $80,000 investment, I can get back basically about three-quarters of that investment in one year, only keeping the stuff out 20% of the time. Plus, it drives the utilization of the rest of my fleet. So let's take another look at time utilization. So why isn't time utilization, why isn't it the primary measurement for fleet utilization? Well, time is an indication that the market likes what you have, and they're taking it from you, and that there is market demand. Time utilization in and of itself does not describe whether you're making money or not. So for instance, if you have your equipment priced too low, the rental rates are too competitive, then you can have people renting all of your equipment, and you can boast, hey, I've got 80% time utilization. But the reason that you're experiencing that is because your rental rates are too low. So time utilization is a measurement, but it's not the measurement. And so it needs to be taken into consideration along with financial utilization, and we'll talk a little bit more. So to do the calculation, we look at the amount of time that the item was on rent versus the total amount of time it could have been on rent. So let's look at a group of 12 units. We'll say we've got 12 backhoes. And the billable days for us, we're going to say 22, it could be 23. So we do a little math, 12 units times 22 days in this month. The potential that I could have rented that equipment was a total of 264 days, potential days. So the number of days that I actually rented this machine turned out to be 199 days. And that was a result of seven monthly rentals, five weekly rentals, and 20 daily rentals. And so what that gives me is a total of 199 days out of a potential 264. So in this particular example, this group of equipment had a timeout utilization of 75%. So in the table that we looked at, we looked at financial utilization. This seems to be the standard bearer within the equipment rental industry. It would be like talking about what is par golf. Everyone knows that 72 is par in golf. And so in the rental industry, financial utilization is a description of how your yield or how your revenue is compared to your investment. And so the formula is we take your annualized rental revenue and divide it by the original equipment cost. The reason that we divide by the original equipment cost is because if we were to look at your net book value, then we start to get complicated because of the way people treat depreciation. And then it's no longer apples and apples with comparing your investment versus someone else's investment because they treat depreciation differently than you do. So this is an easy way to calculate annualized rental revenue divided by original equipment cost. And so you can see on the left that you're going to have some items in your fleet that you may be in the 20 or 25% range, annual earnings. And you have to understand that that's how it works for some equipment. And you also have to understand that there are some pieces of equipment and some categories of equipment that will yield almost two times their value in one year. But what we're really looking for on the right is a blend. Just like we looked at the table a few slides back where we had 33%, the target range for you should be a floor of 40%. National rental companies that deal in all types of rental periods, they do dailies, weeklies, monthlies, four weeks. They also have items from cutoff saws to excavators. These guys are operating in ranges between 60% and 65% as a blend. So they have figured out the science of how to drive the most return for their shares. So I work with dealers each and every week, and 40% should be a minimum that you're trying to achieve. And if you can get north of 50, that's even better. So let's look at a typical example. $3.5 million fleet. My annualized rental revenue is $1.2 million. I divide the $1.2 million by the $3.5 million, and I get a 34% financial utilization. Another example, just to reinforce the math, $11.647 is my fleet value, $11 million, and I earn $4.3 million in rental revenue. I divide the 4.3 by the 11.6, and I get 37% financial utilization. So another key measurement is fleet utilization. And fleet utilization gives me a sense of how much of my investment is out on rent on any given day. So this is a period that it's a snapshot measurement that gives me an idea of how much of my equipment is out on rent. You could potentially do it by units. You could say, I have 300 units in my fleet, and I have 200 of them out on rent. The only challenge with that is you could potentially have the 200 smallest units, and basically you could be losing money because you're not renting your big equipment. So this formula is taking a look at the original equipment cost of the machines on rent divided by the original equipment cost of the entire fleet. This gives us a truer indication of whether my heavy equipment, my bigger items, are actually involved. So let's look at example number one. The fleet value is $3.5 million. The equipment that's on rent is $2.3 million. So I divide this, the 2.3 into 3.5, and I get $2.3 million. I get 66% fleet utilization. That means that two-thirds of my investment is actually out on rent. Another example, $11.6 million divided by my equipment on rent is 5.9. And in this case, only 51% of my investment is actually out on rent. So in this particular example, you would conclude that actually in example number two, this bigger fleet, there's opportunity for improvement. We should be able to drive more rental revenue and more time utilization out of this particular fleet. I would say it's underperforming. So the target we're trying to get in fleet utilization is somewhere between 60% and 75%. For years in the equipment rental business, it was almost understood that when you looked at what was in someone's yard, what you were really seeing was about a third of what that company owned. The rest of the stuff was out on rent. And that still seems to be true today. So the target that you're looking for is to try to keep two-thirds of your fleet out on rent at original cost, not measuring units. And that will generally give you a healthy financial return. So we have talked about how equipment earns, and we've talked about rate periods. I want to talk to you about how you need to organize your data so that you can actually do analysis. Many of the dealers that I work with, when I ask them for a list of their rental assets, they are organized according to stock numbers, or they're organized according to serial numbers, and they are not classified in different earning groups, if you will. So I'm giving you an example of how I believe you should format your equipment so that you can actually do analysis to determine which groups are working and which are not. So in this particular example, I want you to see in the top left-hand corner we have category and class. A category in this particular case would be loader backhoes. The class configuration, if you can look in the list, I have three different sizes of backhoes in there. So those represent my class configuration. I've got an 08, an 09, and an 010, which represent three different sizes of backhoes. It also represents three different investment levels of the backhoes. You can see that I have the smaller group is typically around $90,000, and the larger backhoes, $118,000. $118,000. So significant difference there. So I need to, as a fleet manager, when I'm looking at financial management, I need to understand where my money is coming from and if it's all earning the way I expect it to. So in creating a report that looks similar to this, now it's in front of you and you can see how it's working. So I need to know my category class, I need to know how many units are in that category class, and I need to know what's my investment. So I have six units, and I've got about $600,000 tied up in that equipment. Then I need to see how is that equipment earning for me. And so then I'm starting to look at my life-to-date financial utilization. I have it broken down by month-to-date revenue, year-to-date revenue, and life-to-date revenue. And so once you have it in a category like this, then you can also start to create some averages for your group, and you can start to see which units are underperforming and which ones are not. So in this case, my life-to-date financial utilization is about 37% for my best performer and 29. One of the other things that's really important is how long has something been in my fleet. And so these numbers that are below that, that show 12% or 13%, those have not been in my fleet long enough to have a financial utilization number that's on par with the older units. So I need to be aware of that, that how long has this equipment been in my fleet. So we have a different report that's looking at time. So again, I have the category classes, and now I'm looking at the timeout utilization for this group. And over this particular period, the time utilization was 70%. And so then I start to look at the average age of my fleet. This is also a very important piece for dealers. Dealers are very interested in rolling their equipment out at the end of a designated period. And it's really important to understand what the average age of your machines are because that also will maybe make you competitive or not competitive. There are some folks out there that have brand-new equipment. A lot of their stuff is brand-new, and it makes it a bit challenging with the current rental rates. So typically what you're trying to do is create a blended average of age in your equipment. So that means that you may have some units that are easily four years old, and you've got some brand-new units, and your average age of your fleet could potentially be in the two-year mark. It wasn't too long ago when the recession was going on that major rental companies were aging their fleet out past 42 months, and in some cases it was approaching 48 months. Since 2012, they've been doing major reinvestment in their fleets, and I'm sure that number has been brought back inside probably between three to three-and-a-half years. So to be competitive in the marketplace with the customers, we need to have an average age that competes in your marketplace, and that helps us with our maintenance and repair costs as well by keeping the equipment in a reasonable period of time and not too long. So let's just say now that we've got the reporting coming to us, and we're starting to see some underperformers in our fleet. So do we immediately decide to put those units up for sale, never to rent that type of equipment again? Well, we have to start looking at why is it underperforming. So I'm going to go through a few of the things that you should be looking at as to why your fleet is not performing. So the first thing that we can look at is our rental rates and our discounting. So for instance, if you went and you ran your financial utilization report, let's say it was coming in at 30% for a particular group or item, and you really thought that it should be at 36%, the next thing that you would do is look at the time utilization for that particular item or group. And if the time utilization was as expected, let's just say it's out 60% of the time, then what you are led to believe is I've had it out 60% of the time, but it's not yielding the money that I expected. Well, the reason that it's not is probably we're discounting rates. And so you need to go back and look and see what's the average rental rate that I'm getting out of these particular machines. Maybe the market is more competitive than you expected. It could also be that you've got a new salesman and they are not pushing back against price pressures. The next thing that you could look at is overall from my time utilization, is there enough demand for the number of units that I have in my fleet? Maybe not. Maybe you've got eight units and when you really look at the time utilization that's on the total number of machines, you may discover that I really only have a market demand for six units. And if I reduce the fleet to six, that would size that particular group of equipment according to market demand. So fleet mix. How important is fleet mix towards financial utilization? Well, it's highly, highly important. Your fleet in terms of how the customer thinks about it needs to represent real solutions. In other words, if you only have one size excavator or you only have one size wheel loader or you only have one size skid steer loader, the customer's projects usually require a variety of sizes. If they don't think that they can use you as a source for a wide range of equipment, then they'll find someone else. It's almost like the grocery store example again. If you went in the grocery store and you could only buy some base products to make your meal and you couldn't get the complete meal, you would shop somewhere else. And so the fleet mix, another example would be everyone that's digging a trench or a hole, you can probably expect that they're going to have to put the dirt back once they put the pipe in the ground and they're going to have to compact the soil. So if you have large excavators and you do not have large compaction rollers, you are probably not considered a complete solution for your customer. In some markets, when the customer digs a hole, you may find groundwater. And so not having a few pumps, I don't mean being a pump specialist, but we need to anticipate what's our customer going to do next. He digs a hole, then what? Does he need to lift pipe into the ground? Does my excavator have a thumb on it so that I can actually pick up the pipe? Do I have wheel loaders that have various attachments for being able to pick up raw material and put it into a ditch without breaking it? Those are the types of things that fleet mix will have an impact on your overall financial utilization. I mentioned the machine configuration. That can be everything from a thumb. It can be the tire configuration. It could potentially be four-wheel drive versus two-wheel drive. It could be enclosed cab. It can be open ROPS. Those are the types of things that will keep you from being competitive in the marketplace. So you really do need to understand what are customers looking for, what are their expectations when they rent, and you need to make sure that your rental fleet lines up well. I will also say that customers are not interested in paying additional rental rates because you have over-configured your machine. For instance, if you are in an open ROPS market and all of a sudden you have a machine with a cab and air conditioning, although that might be nice, I will say that most of the customers maybe don't care about paying an extra $200 or $300 per month for that machine. They would like to be able to get it for the same rate. So you have to be careful in terms of how you configure your fleet and whether the market is really going to pay you for that. So transportation. One of the things you can look at if you have low time utilization on your fleet and yet you know the market is strong, it could get down to how well your transportation is doing. And that has two things to look at. One is, are my transportation and delivery pickup rates, are they competitive? And then secondly, how responsive are we? Can we actually get things from point A to point B in a timely manner and when we say we're going to deliver it? I have seen dealers that don't do a very good job with transportation and consequently their rental fleet sits a lot more than it should because they haven't figured out how to drive efficiency with transportation. And then attachments. Some of the most successful dealers I have seen with attachments are, say, Bobcat dealers. A Bobcat machine, whether it's a mini excavator or a skid-steer loader, is in some ways like a Swiss Army knife. I can have four or five attachments or I can have 35 attachments. And the dealers that invest in attachments usually win because their customers start to understand what a wide range of tasks they can do with that particular machine. So I highly recommend that you explore the potential of expanding your attachment group because it will drive utilization of your fleet. So now we want to look at some internal factors that also retard the amount of revenue that you get or how good you are in responding to the market. So marketing. It may be that you have just touched the surface with the rental market. Maybe your salesmen are a bit adrift. They're out trying to sell equipment and really not focused on the rental market. It could be that you have not segmented your customers. I highly recommend that you take your customer base and identify probably 15 to 20 subcontractor groups or marketing sectors that operate in your market. And once you've identified what those groups are, then go and assign all of your customers into one of those groups. Now you can start to get a little clarity on who it is you're doing business with. And that will help drive some focus as to what groups you should be spending your time with. Secondly, our employees will do what we pay them to do. And if you don't have compensation lined up with either driving rental revenue or financial utilization, it won't happen just by itself. You have to be focused on that. So whether it's a rental manager and you have key operating metrics that he's tied to, and then some type of specific rental compensation for salesmen. And something that's interesting, not something that at the end of the month they have earned $120 in rental commissions. That's not interesting. It has to be a significant part of their income to get them to focus. Service processes. How do service processes affect our financial utilization? Well, whenever our equipment is in our shop, it's not earning us money. And so I have seen situations where dealers will fix everyone else's equipment before they fix their own equipment. And consequently, even something routine, a machine may stay in the shop for two or three days, well beyond what it should. So our service processes are critical to our turnaround time and being able to get a machine back out on rent. So this is something that's got to be looked at, and you've got to be able to measure how equipment gets through one step to the next, how long did it stay at the wash rack before somebody finally got a chance to inspect the machine. You have to decide, do I want to open a work order every time a machine comes back from rent and just get in a queue? Or maybe you might want to consider putting a full-time DM maintenance tech focused on your rental equipment, who may have the ability to spin that machine, basically do oil inspection, top off fluids, put it through an operational check, and if everything's okay, put it back out to the front. Only when there's something wrong, maybe should it go through a work order process and through the shop, because we need to get the equipment turned quickly and get it back to the ready line. Your own facility, the ability to store the equipment, stage it, all of these things are important in trying to drive process. So it could be that your facility is cramping your ability to develop real processes because you're tight on space. Are the personnel that are working at your rental counter, do they know competitive product models? If someone calls and asks for a competitive model, do they know exactly what your model is that crosses over to that? Or if you're all out of those machines, do they know how to upsell to the next category without losing the deal? If somebody calls and describes a problem, are they skilled enough in application knowledge that they can make a strong recommendation? Your own computer system, if you can't get data out of your system similar to what we're looking at in terms of reports, it can handicap your ability to make decisions. So your computer system is very important in being able to really do analysis of your fleet and figure out what it is you need to tweak. Your credit policy, whether you are free to give credit out to people and whether you're able to put people on hold, how fast can you open an account? If a salesman is out on a job and a customer is ready to say yes and you can't get a credit application processed in less than a day, you may miss a deal. So I highly recommend that you get connected to a database. Somebody can pull information. Somebody can render a decision so that we can say yes to customers as soon as possible. So now we've looked internally why we may be not doing well. Now we've got to look outward. What are the external factors that are keeping us from being successful in driving our finance utilization? I briefly mentioned about the market segments. We need to find as many market segments that use the same type of equipment. So, for instance, you can have a wheel loader in the mining business. You can have a wheel loader in an industrial application. You can have a wheel loader on a general site clearing project. You can have a wheel loader in many applications. And so it's a very versatile unit. The different bucket configurations or the work tools that we can put on a wheel loader, that's very important. So don't just get locked in on one particular market segment. We have to find multiples within your region to do business with. Customer sophistication, how does that play? Well, there are some companies out there that have professional purchasing departments, and especially around industrial sites. These guys, their job is to know the market, negotiate pricing on behalf of their company. So you can potentially get a lot of business, but you're going to have to do it at the lowest possible price. There are other customers out there that are not as sophisticated, and they use the same exact product, and they tend to work a little bit more off of relationships. And so you can get the same unit into two different markets, two different sophistications of customers, and get two different yields off of the same exact machine. So it has a lot to do with the customers that you're calling on and how sophisticated they are as to the rental rates you're going to end up with. Competition, I think, speaks for itself. Competitive forces in the marketplace clearly drive down prices. It typically doesn't make it go the other way. Your market demand, again, self-explanatory. When things get soft, you can expect your rates to go south, and therefore your financialization is going to go south. I work with some dealers in the north, and their rental period may only be nine, maybe ten months tops. And so it clearly has a significant impact on how they drive revenue. Brand preference. In my own personal experience back in the 80s, if a particular marketplace wanted a case, for instance, or a John Deere, a rental company might try to come in with some other product brand, and although the equipment might be able to function as well as the others, the customer preference was focused on a particular brand. I tend to find that in most markets across the country, is that there is a brand that seems to be the dominant brand, and if you can line up with that brand of equipment, it's much easier than trying to be a pioneer and bring in some other brand. Commodity. Let's face it, there are half a dozen types of machines that everyone has them. LotoBacco probably is the best example. Then maybe a 6,000-pound, 36-foot forklift. These are the machines that generally get beat up in terms of pricing, but a lot of people want them. I want you to be able to keep up with market demand. I highly recommend that you have a phone log at your front counter or your rental department. Whoever it is, it's going to answer the phone, taking the majority of the rental calls. We want to keep track of the phone activity, the number of calls that come in, the nature of what it is that people are looking for. We want to record what it was they wanted. We've quoted them the prices. We record that here in case that we have to reference back to it, but we also want to keep up with whether we were successful in getting the rental. If for some reason we are not, we want to record why were we not. Did we not have the equipment available? Was it not in stock? Was it associated with the price that we quoted? Or ours was in repair? Because this is one of the ways that we have the voice of the customer. This is the market demand that we are recording, and this helps us understand what the market is asking for on any given day. Also, the last bottom line, missed rental opportunities are now quantified. So when we put down that we missed a backhoe rental, we want to put that we missed a two-week backhoe rental, and that was equal to, let's say, $1,500. When you put dollar signs there, it starts to mean something as opposed to I just missed a backhoe rental. So make sure that you have some type of tool at your rental department to be able to record all the opportunities that come in. So different reports that you might look at. I believe in exception reporting. I don't want to look at all the activities that I have on my entire fleet and then try to find the ones that didn't meet my expectations. So the reverse is what you should be trying to create. I want to see all the machines that I own that have less than 25% finance utilization for the last 12 months. That would be one of the things that I want to monitor and try to figure out why is this underperforming. Because it will tell me a trend. It will tell me something about my pricing. I then go and look at my time utilization, and I want to make an adjustment in that area. I also want to see my top ten performing groups, and I want to see it by financial utilization and my timeout. Why is timeout so important? I need to measure how hard is this equipment really working to produce the dollars that it's earning. There may even be more upside in that particular group. Let's just say I'm earning nicely and the equipment is out 50% of the time. What if I could make it be out 55% of the time? Potentially I could get a 10% increase in my revenue out of that group. Then I want to see my lowest performing asset groups. Again, lowest performing by timeout and lowest performing by financial utilization. This gives me an idea of where I can make the adjustments to earn more money. Discussion and questions. We have a question from one of the attendees, and the question is of the measurements for financial utilization, time utilization, or fleet utilization, which do I think is the most important? As a business owner, I'm interested in knowing what my investment is doing. Financial utilization has always been my number one because similarly if I went and invested a million dollars with a financial investor and he told me that he was going to put it into a mutual fund and that my mutual fund would earn 7% per year and I thought that was an acceptable yield, I'd say fine. Every month they send me my statement. I go through it and I look and I see I've got some investments that are making 11% and 12%. I also see that I've got some that are earning 3% and 4%. But as a combined group, they're earning me 7%, which is exactly what I wanted to happen. So although I see that background detail, I'm very content because my investment is earning what I expected. So that's why I think financial utilization is the number one number to look at. Then you can begin to look at the time utilization to say I'm happy with my results, but if my equipment is having to be out 70% or 75% of the time to earn this, what I know is that that is not going to be sustainable. I will not be able to keep pace at this rate, especially if I'm maybe serving one really big project because as soon as that project comes to a halt, then I may be in trouble. So financial utilization would be first. Second, I would look at my time utilization. And then third, I would look at my fleet utilization. I want you to be aware of some additional webinars that we plan on doing later this year. We've got one in March talking about internal charges to rental fleets. And then in November, we're going to talk about machine salesmen versus rental salesmen. Are they the same person? And then later in December, we're going to talk about setting rental rates and sales. Is it a formula or is it more art form? And I'd also like to extend an invitation in May. In May, we're going to be doing a live two-day seminar in Las Vegas, May 17th and May 18th. And you can go to aednet.org to register for any of these events. So I thank you for being part of our webinar today and look forward to working with you in the future. Thank you very much. .

financial management

rental operations

revenue

rental rates

rental periods

fleet mix

financial utilization

fleet utilization

equipment categories