Welcome to the first of a three-part professional education program sponsored by the AED Foundation. The curriculum has been developed and will be presented by Larry Kay of Script International. Mr. Kay is a second-generation rental entrepreneur and has owned and operated multiple rental companies and is recognized within the industry today as a subject matter expert. He has worked in over 30 countries working with equipment dealers and rental companies helping them grow their business. This first course, Introduction to Rental, is designed to give you the foundational background and understanding of how the industry has evolved over the past 50 years and how customer attitudes have changed, therefore requiring distributors of construction and industrial equipment to shift the way that they have traditionally sold and delivered equipment to end users. As we look at the learning objectives for this first course, I hope you'll take advantage of the participant workbook that has been provided with the course so that you can take notes along the way as well as answer some very thought-provoking questions. So let's take a look at the learning objectives. We'd like you to understand how the rental industry has changed from a market segment to an important distribution channel for construction and industrial equipment. We'd like you to understand why renting makes sense, especially from the customer's perspective. And we need to understand why dealers must have a rental strategy to increase machine population and gain control of the used equipment market. You'll need to understand the challenges that a traditional dealer environment has when implementing a rental department and understand that rental is a process-driven business to achieve profitability and will allow you to understand what it takes to get started in rental. So let's get started with Module 1. Rental is vital to distribution. There was a time not too long ago that distribution was actually rather simple. You had original equipment manufacturers, and they need to be able to get their products to consumers, contractors. So they set up dealer distributors. Dealer distributors generally had some type of territory that they were given. It could be a county. It could be multiple counties. It could potentially be an entire state. And they had a protected territory, and they were expected to make fairly sizable investment in both real estate and inventory and training for their employees, put in parts, have adequate service department, have trained sales staff, and they then would provide these services to the end user. This was the added value. So the end user knew the manufacturer because of basically the customer service that was rendered to them by the dealer distributor. So they would have salesmen call on them, help educate them about the equipment. Sometimes they would educate them about competitive products and the difference between those things. The dealer distributor had a local presence, so the customer could take their product back and have it serviced somewhere or warranty repair done. The dealer distributor would also help the end user secure financing. A dealer distributor might also take a trade in to be able to accommodate a sale. So that's the way it has always been for a manufacturer working through a dealer distributor and adding value to an end user. So the dealer distributor was a key component in being able to take care of customers. So the business model for a traditional dealer had three main parts. They were going to sell machines. They would sell new machines. They'd sell used machines. And as markets developed, dealers started doing some rental purchase options. A customer could rent a machine for some period of time, three months, six months, maybe even a year, and have an option to convert that to a purchase. Dealers also would take in trade-ins, and they would provide financing. In addition to machine sales, dealers also make money through parts sales. They also sell supplies and lubricants, and they do component exchange. And lastly, a traditional business model revenue stream for a dealer is selling service. They do preventive maintenance. They do repairs. They do rebuilds, oil analysis, and also warranty repair. That's the three primary revenue streams for a traditional equipment dealer. From the eyes of a customer, these are the types of things that really deliver value. So these are things that a manufacturer cannot do directly for an end user. And that's why the relationship with a dealer is so important. And the dealer have a broad set of services, and have easy access, and really deliver value to the customer wrapped around the product that they're selling. So now that you know how a dealer makes money traditionally, I want to talk about the typical characteristics that you'd find within an equipment dealer. They're generally focused on the products that they sell. They're very in tune with the capacities, the features and benefits, and competitive products. Manufacturers require dealer distributors to also focus on market share. It's very important for the relationship between a manufacturer and a dealer that the manufacturer really feel like the dealer is making every effort to capture their specific market share. It's a protected territory usually with the dealer. He's got brand loyalty. He's got an investment in generally a main line of equipment. And so he's not going to usually have competitive products against that primary brand of equipment that he represents. Sometimes the dealer location is in an urban or industrial setting, generally not where a new construction is taking place or residential growth is going. Usually the dealers have been around for a while, and their locations are oftentimes away from that. A dealer is also really focused on product support services. You'll hear that word used a lot, product support. And there's a lot of things that would fall under that category. And for an equipment dealer these days, it requires a tremendous amount of capital investment, both in real estate, parts inventory, new machines inventory, sales training, systems, can be vehicles. There's lots of things to run a dealership today that require capital. It's a very expensive enterprise.

professional education program

AED Foundation

rental industry

rental strategy

equipment distributors