I want you to notice as we move down into the category of medium equipment, and those are products that sell between $50,000 and $100,000 typically, that the rental rates start to improve as a percentage of cost of the machine, but the rental periods start to decrease. In other words, the larger equipment tends to rent for months on end, and the medium equipment starts to be rented some by the month and more often weeks at a time, maybe two or three week intervals, and this can be a highly competitive market for this type of equipment because, let's face it, there's more smaller equipment dealers out there and smaller rental companies out there. So anyways, you need to know what you're getting into, and there is some sensitivity to price on this stuff if you're renting it by the month, but if somebody's renting something like this for the week, it tends to be more about availability and do you have it and can you get it to me. So that tends to be one of the best ways to rent this type of product and make money on it. So there's strong weekly rentals, there's a little bit of long term, and let's look how the financial utilization tends to run for medium equipment. So you got product that costs $58,000, the four week rental rate would be $2280 potentially, and 13 times the $2280, I could conceivably earn $29,000 if I could keep it busy all the time. That's not reasonable, so for this exercise showing you 60% time utilization would yield $17,784, divide that by the original cost of the equipment and I come up with a 30.6% financial utilization if I keep it busy 60% of the time. So now let's look at small equipment. Generally these items are less than $20,000, there are some excellent types of products in this space that you can make really good money on and you can attract some really good customers. As you can see the rental rates slightly improve, so you can generally count on 6-8% of dealer net in this space. These are products that typically rented by the day and the week. Now not everybody's operation is set up to be able to handle daily rentals, so don't go diving into this space if you're really not set up. If your processes don't match up well, you might rent something for a day and it'd take you three days to process it, so there you've basically shot a whole week trying to get a one day rental. So you need to be wise in terms of how you build a rental fleet to match up with the customers that you're serving and your processes. This type of equipment is really a convenience item, it's generally not shopped much, people usually call you because they think you've got it available and if you do and you can get it to them, there's usually not much discussion about the price, it's all about availability. So the small equipment, the numbers get better. So $26,000 for a purchase price of a machine, I can get $1,700 a week for a four week rate, I got 13 times that, so $22,000 on $26,000 is really good. But again I'm only going to keep it busy about half the time, so I've got $11,000 income against a $26,000 cost annually income, now I've got a 42.5% financial utilization, if I can keep it busy 50% of the time. Those type of items you should be in search of and see what makes sense for your dealership. We go into light equipment, those items that are under $20,000, again a variety of these items could make a good accessory if you will to maybe some of your core products. These rates get better yet, because most of the time they are dailies, some weeklies, and they create more versatility for your fleet because somebody knows they can get a complete solution at your place. They're going to dig a hole, you have a pump to go with it in case they need that, you've got some small compaction equipment to go with that, and so it can actually increase the utilization of your core products by having some of these ancillary type products. Very profitable group, I'd encourage you to be seeking those out. So financialization on the light equipment, $16,000 for a 50 cost, rental rate $1,400 for a 4 week rate, I could conceivably make $18,000 on a $16,000 investment, but we'll put a 50% time utilization, which gives me a 58.3% financial utilization, that's very strong and you want as much of that as you can get all day. Now the last group we're going to look at is attachments. Here's a group of equipment that generally doesn't take much to maintain this stuff, doesn't take much to store this stuff, and yet it will create activity for your core products, especially if you are in the skids and mini business. Anything that's got a quick disconnect to it, now your machines, your core machines have many more functions, which causes more people to be interested in renting them. So there's some good lists there, you can see the rates, 10-20% of dealer net, great versatility for the fleet, which makes my fleet better, I have actually worked with a Bobcat dealer that had just a hair over $100,000 in attachments in their rent to rent fleet and on an annual basis always exceeded $100,000 in revenue on those items, not to mention the revenue that's being generated for their core products. So now I'd like to, as you've kind of gotten an overview of these different categories of equipment, I'd like you to understand how all this kind of works together. So we've got, in this example, we've got a million dollars worth of heavy equipment, a million dollars worth of large equipment, about $6.50 in medium, $3.50 in small, and $1.50 in light, and about $80,000 worth of attachments. So we have spent $3.1 million putting this mix of inventory together. And we think it's a pretty decent mix, maybe it can be better, but I want you to be able to see that to get the kind of numbers that we're talking about, that heavy and large equipment has got to stay rented. So 70% of the time, that's something like 8.4 months a year, and if you happen to be in a seasonal climate, you've got to work hard to be able to get 70% timeout utilization. So I want you to see that your commitment to this whole fleet, those two categories of equipment, represent $2 million out of the 3.1. So 60% of your cost is tied up in these two groups, and actually 62% you can see in the column percent of fleet, and then you can see how much revenue of the total is generated by this, and it's actually 52%, almost 53%. So as you go down the categories of equipment, medium equipment, you don't have to keep it as busy, smaller equipment, less yet, but when you look over at the percentage of revenue that those things generate, the small and the light equipment generally out-produce their investment. So one of the analogies I like to use here is the candy counter as you're checking out of the grocery store. There's really good margins in that candy stuff. That's why the grocer has that stuff sitting right there. It's an impulse item. It's something that at the last minute you decide to buy it, and it drives the ticket price up and their margins get better. And so it's all about the mix. So for fleet mix, you need, obviously you've got to have the dollars in the equipment, but I'm going to suggest to you that it's the blend that really makes things go, because that makes an attractive offering to your customer, and as you can see, the blend of equipment also makes your financial utilization goes up, which gives you a better chance of making money, and it's the combination of those things that in this example would give you 33.34% financial utilization, which means this blend of equipment would take you about three years to pay for everything. But that would be a good starting spot, and then if you can massage this a little bit, if you'll recall, one of our slides was targeting 40%. That's where you'd like to be able to try to get to, if at all possible.

rental market

construction equipment

rental rates

competitive

small equipment