I'd like to take a few minutes to answer a few questions that I typically get about this time during a seminar or a rental program that tends to be on the minds of dealers and their personnel, and one of them, when we talk about rent to rent, they want to know, does this have to be a separate business for me to put a rent to rent fleet together? Does it make sense doing it in my current operation, or should I have a standalone facility? And my most common answer to this question involves the redundancy or replication of overhead, that type of stuff. I'm not a fan of that. However, if you do not have the space in your current shop facility or in your yard or maybe even in your sales area, then it's going to be challenging for you to try to start a business that probably is going to have some pretty rapid growth to it and you not have any space to operate in. So it is a key ingredient to look at relative to really starting a rent to rent fleet is what happens if this thing is successful? Do we have enough space that this thing can grow over the next couple of years or maybe even five years? If not, we need to be thinking that way. It's much more difficult to move a business that is in production than it is to do a little bit of planning on the front end and prepare for the proper amount of space. Can I operate it from the same location? You absolutely can. But again, you've got to earmark space so that you know where the rental equipment is, and that's separate from the customer's equipment and that's separate from the sales equipment. Some dealers think, well, daily rentals, it's really not worth the effort. And depending on the type of equipment, you may very well be right. Because let's just say you rent a piece of equipment for the day and it comes back and it takes you three days to turn that piece of equipment around. Go through your shop, get it washed, get it serviced, document and turn it back. So that's a losing proposition if it takes you two or three days to spin a one-day rental machine. You would be much wiser to only rent it by the week or maybe you have a two-day minimum or something along that line. Sometimes when you rent by the day, you attract a smaller type of customer that maybe you don't even want to deal with. So again, certain market segments rent equipment by the day, the week, for a week, and others generally rent it by the month. Well, most dealers are very comfortable with renting equipment by the month. Most dealers have significant experience in that. When you start to rent it by the week, now it puts a little bit more pressure on your internal processes. And then when you start renting by the day, it really puts pressure on your internal processes. So, we can't compete with the nationals. And in some cases, that's true. The national rental companies are pretty darn good at what they do. They've got a good footprint. They've got good IT systems. They know where their stuff is. They've got an urgency factor that many dealerships do not have. What the national rental companies don't have, though, is they don't have local ownership. And so, I'm a strong believer that a privately held business, all things being equal, a privately held business is pretty attractive in a local market. Oftentimes, people like doing business with folks and leaving their money in the local community. So, I believe in some cases you can. You probably can't replicate what they do, but you can be really good at the niche of the market that you serve, both in the market segment as well as the products. Another frequently asked question or a statement is that the rent-to-rent fleet is going to have negative impact on my service department. And usually that's because we're going to have to take time away from making money on customer's equipment and we're going to have to focus on rental machines. Or I'm going to have to send a truck out to service a rental machine and I'm not going to get paid for that maybe the same way that I would if it was a customer's machine. So, as we get more and more into this, you're probably going to hear me recommend that the rent-to-rent department have some of its own service support personnel so that it can not have to use highly skilled people on the service side that make revenue for the company. It shouldn't have to use those folks to do routine stuff on the rent-to-rent side. That is a bad choice. And so that would be a negative impact on your service department. Some dealers say, look, if we start renting equipment then people are going to stop buying and we're going to lose our sales focus and we don't want to do that. Well, that is one way of looking at it. And I would say that that's why in most cases it requires a separate group of people so that the sales department continues to do what the sales department does, which is prospect and try to find ways to sell new machines or use machines. Meanwhile, we've got some folks that are really trying to drive rental revenue. Sometimes it can be the same people, but usually the way that they get compensated will really drive their behavior either towards rental or towards sales. Additionally, some folks say, okay, what's the least amount of money I could get involved in the rent-to-rent business for? Like how much? Do I have to do a million or two million or what's the number? Well, in each market it's a little bit different. So what I'll tell you in this situation is that if you're going to go out and try to solicit business from a medium-sized contractor or maybe even a large contractor, they're going to look at the size of your rental fleet compared to the amount of equipment that they currently own or compared to their current sourcing for rental, and they're going to make a judgment. And so if you only have a few machines and their fleet that they own is larger than you, then what they're really going to say is you're really not committed to this. I don't think I could trust you to have what I want because you just don't have enough of those machines. Next question or statement, can I use the same sales personnel? I alluded to this a few minutes ago, and it is possible. I'll say that it's not possible to use the same ones if you don't have the right measuring and monitoring system so that you are rewarding the right activity in their paycheck. So people, especially salesmen, will figure out what it is they get paid to do, and they'll spend their time and energy doing that. So if their compensation for rentals doesn't become a significant part of their paycheck, and I would say a minimum of 20 or 25 percent of their earnings, then they're going to spend their time selling, and then rental will be kind of an afterthought. So I think it has more to do with how you compensate people and the structure of your plan than whether somebody can do two activities. What about the existing rent-to-sell fleet? Do I keep it separate, or do I roll it all into one? And I guess that would be a call you have to make in the local market because we've got to figure out how long has this stuff been in rent-to-sell. Is there really a price point coming soon using the current depreciation schedule that we have? Is there a market waiting for that? Or the reality is no, we don't really have a price point and a customer in view. So by putting that piece of equipment in the rent-to-rent fleet, now at least we've got somebody that sees it as an asset in how to make money. So it's not a given that those two fleets merge, but if you don't have very many machines in your rent-to-sell, it might make sense to bring them all in under one roof. Some folks think that the reason I don't want to be in rental is that customers will tell up the machines. Well, I'm going to suggest that you need to know who you're doing business with. And so typically you start out with your current customer base and that's who you rent to, and then over time you start to move away from those folks and find additional customers. But to get in the rent-to-rent business is not suggesting that anybody that calls up or walks up to your place is a candidate to rent from you. So there's a qualifying idea here that your salesman or your rental manager or your rental coordinator needs to identify what are the key characteristics of a potential client. And anybody that doesn't match that, we're going to discourage them or suggest we can't rent to you. So we don't want to rent our equipment to people that are going to abuse it. Equipment will get dinged and damaged even without trying very hard. And what's the best rollout period for machines? So the best answer I have for this is if I was working with your dealership, you ask me this question, I would want to sit down with the used equipment manager and say let's talk about your used equipment sales. How old are the machines that you're typically selling? What kind of hours do they typically have? If somebody wanted to buy a three-year-old dozer, is there very many people that want that? Or there's more people that would like a five-year-old dozer? How about wheel loaders? Because they're not going to be the same. So we need to start with trying to identify where's the target group of people we're going to sell this machine to when we roll it out. And if you remember, we're in the parts sales and service business, and so we would like to, if at all possible, make sure that machine stays in our own backyard because then we get future revenues off of that. But if we miss the window, meaning that there's a group of people that would like to buy it when it's three years old and we hang on to it until it's five years old, then maybe we don't have as much choice in the local market to sell it and we may have to send it off to an auction. And then lastly, I hear dealers say, you know, you can't trust those national rental companies. They're manipulating their depreciation, and that's how they really make money. Well, I would suggest to you that most of the big boys are publicly traded companies, and they have to abide by all the accounting rules that large companies have to. And those days, maybe there were some of those days 20 years ago, but not now. And so you've got real live equity companies that have great financial expertise and expectations. And so please don't buy into this myth that rental is not a profit-making business unless you play games with depreciation. The fact is different than that. Depreciation, as we talked about, is a large expense, but it is not the magic that makes you make money or not make money. So I hope this helps you understand some of the questions that the dealers ask that are maybe reluctant to get involved in rental, or maybe they're in rental and they're struggling with it, and so they're trying to figure out, what do I do? Should this be separate? Do I combine my fleets? What about this depreciation? So I hope this helps.

rent-to-rent fleet business

existing operation

sufficient space

compensation structure

machine abuse concerns