Well, good morning everyone. I appreciate you being here today for the final in a series of rental webinars we've had this year sponsored by the AEB Foundation. And today's topic is dealing with rental rates. And we're going to maybe take a little bit different spin on rates. So I want to walk through some objectives for today. Some of you may have more experience than others when it comes to where do rental rates come from? How are they established? What are they connected to? And then trying to understand what drives the local market rates in your particular area. And something that's often overlooked in rental is what is the gross profit in a rental transaction? We can usually come up with that pretty easily for a sale, whether it's parts or machines. But if somebody asks you what's the gross profit in a rental transaction, you may not know that. And so that has to do with what rental rate are we charging versus what are our actual costs. And then I think it's really important for you to have a strategy for discounting rental rates based on what's going on in your particular market. And believe it or not, there's a possibility that strategically discounting may really drive your ROI on your fleet or a particular group of equipment. So that's our goal today is to take on these four topics. So let's get started. So the formation of rental rates, what's it associated with? And I've been in the business since the early 70s. And as I started working with dealers in the mid to late 90s, I discovered that most manufacturers were kind of guiding their dealers towards setting rental rates at about 5% of the cost of the equipment. And so that was a pretty mechanical approach to renting equipment or establishing rental rates. And the challenge with that particular approach was, well, if one particular brand of equipment sold for $100,000, then 5% of that would be $5,000 a month. If another brand sold for $90,000, then that'd be $4,500 a month. So which one's the correct rate for the market? So over time, that has changed a little bit because the fact of the matter is the customer out there really doesn't care what you paid for the machine. He doesn't know if you got a great deal on it and you got some extra incentives to buy. He also doesn't know whether you overpaid for something. So the formation of rental rates, we're going to look at this and determine that it's not exactly a formula. When I first started working with dealers, everybody said, just give us the formula for setting rental rates and we'll apply it to everything. Well, there's some fallacy in that being able to work, and we'll talk about that. So profitability should be one of the key things that you have interest in when you set your rental rate. And the rental rate hopefully is attractive enough to the customer that he'll keep the unit on rent, which ultimately drives revenue, and then you have an opportunity to make money. So one of the things that we want to keep in mind when we're trying to establish rental rates is that tension, if you will, between the price that we set as a rate and are we putting it right at the right place that it will drive utilization. Because if we price it too high, then we frustrate the demand for that particular machine. If we set it too low, we may get the demand we want, but we won't make any money. So then rate structure. This is the relationship between daily, weekly, and now we use four-week rates instead of monthly rates. And so, again, oftentimes people in the rental industry make a mathematical formula out of this. So let's just say they decide that $4,200 a month is the four-week rate. And in the marketplace, it's generally accepted that three weeks of rental is equal to four weeks. We're giving the customer a discount. So if you apply that logic, then that means the weekly rate is about $1,400. Now, oftentimes the daily rate is computed off of that weekly. And so that could be anywhere between three and maybe three and a half divided, the weekly rate divided by three or three and a half times. So it, again, is a very fixed formula which does not take into account market conditions or pricing levels. So, for instance, I'll use the example of if you go to the grocery store and you buy a gallon of milk. And I guess a gallon of milk now is probably about $4.99. If you went in and bought a half a gallon, it might be $2.99. It might be 75% of what a whole gallon is. You're only getting half of the milk. And then if you go down to a quart, you might pay $1.89. You might pay half. And so the smaller the unit size is, the price goes up kind of disproportionately. But why would anybody then go in and buy just a quart of milk? The idea there is they don't really care about a gallon of milk at that particular time. Either they're going to consume it or they don't have any way to store it. Recipe they're doing only calls for that amount. So, likewise, with rental rates, there are some machines that their mere nature of the machine is a short-term rental. Somebody's only going to rent this generally by the day or three or four days or maybe a couple of weeks. They probably wouldn't use this item for a whole month. So with that being said, it's really, really important that you get your daily rate and your weekly rate correct. And it really doesn't matter about the monthly rate because generally no one rents it by that particular time period. So the point I want to make here is that if you look at all the products in your rental fleet, probably two of the prices are important and the third one is not. There's probably some of your equipment that you don't want to rent by the day. I mean, by the time you rent this thing out and get it back, and if it takes two or three or four days to get back through your service department and be ready to go again, you really can't make any money renting that thing by the day. So with that being the case, you might want to put a higher daily rental on that particular machine to sort of discourage daily rentals. But if you do get one, you can make money with it. So the idea here is to look at all your rental rates, and I would suggest to you that you break the idea of this formula and you start to look at marking conditions. Because if you took the $4,200, divided it by three, and you got $1,400, what if you were to rent that thing for $14.95 a week, or maybe $15.25? Would you really lose business? Because most of the time, daily and weekly is about availability. Do you have the machine? And so just don't get boxed in to that we've got a fixed formula for daily, weekly, and for a week. And then rates influence the customer behavior. I travel a lot, and so I don't care if it's hotels, cars, airplanes, what they do every day is they work supply and demand. And you can look in the morning online to make a reservation for something and go back three hours later, and it's a different price. And so actually, we're in the same exact business. It just doesn't have the same dynamics in terms of by the hour is it changing. But rental rates will influence behavior. And some of you already, as we head into the winter season, you're highly aware of this if you're in the north. Some of you have a seasonal rate structure. And so you can cause customers to potentially lean towards you because you've got an attractive rate that only lasts for a particular period of time, and maybe it's even for a reduced number of hours. And so rates can cause people to maybe stay away from renting something by the day because it's a little bit too expensive, and that's actually what you want to have happen. But also, rental rates can attract people to maybe keep things a little bit longer. So if you set a rate at, you know, 43.50, maybe 42.95 is a better number because it doesn't cross the threshold. So just be, the point here is that I believe that there's a little bit more art form, if you will, to setting rental rates than there is science. Just so that you know, the formation of rates in terms of pricing, I mentioned back in the 90s, the rule of thumb was pretty much 5%. I hear dealers today talking about 3%. And so that has dropped a lot. There's much more competition in the marketplace. The cost of equipment continues to go up. And so what that means for you to be able to make money, if you're only going to get 3% a month, is you've got to keep it busy. And so you've got to, there's that tension between getting the rental rate right and keeping it out on rent. So what about new technology? How do you go about setting rental rates on this? So I have some experience going into some developing countries bringing equipment that's not been used before. And when you go in with something like that, the customer has no idea how much that machine costs. They have no baseline, nothing to measure against. And some of you here in the U.S., you're representing brands of equipment that also brings new technology to the marketplace. And so the customer has no basis of understanding of what that machine costs or what the maintenance and repair costs are. What they look at is how much time savings am I going to get out of this machine? And I was just in a meeting a few weeks ago with some dealers that are bringing out some machines. And I asked them about how did you go about setting the price? I got two different answers. And one of them said, I think we left some money on the table. We set the price too low because the contractor was able to get his project done approximately 60 days faster with less labor involved because the equipment that he was using was more efficient. So my recommendation here about setting rates is when you're considering putting a unit into the marketplace and you're one of a kind, you have the chance to be the leader in pricing. So I would suggest to you to try to go to the high side of pricing, but you do that through talking closely with your customer and trying to understand how this might really change the way that they do work and then how does he value it. So what I have done in the past, I've gone to a trade show, buying some equipment that I think I'm going to bring in. I go sit down with a customer. I show him this stuff. Maybe it's through a video. Maybe I bring the piece of equipment in and he demonstrates it. And I say how would this impact what you do and what would this be worth to you because that's really what he's going to create value or establish value associated with not what the price is. He doesn't really care about that. He's really understanding how much faster he can work. So there's going to be continued opportunities for you in the future with the rapid advancement that's going on with technology. I'm just suggesting that whenever you're the first one in the marketplace, you have a chance to set the bar. And you just need to be real smart about that because there's opportunity there. So typically dealers have kind of looked at setting rental rates associated with a lot of their costs. And at the end of the day, the customer doesn't really care about how big a facility you have, your staffing costs, your fleet of trucks and trailers, those types of things. They don't really want to pay for that. They just want to pay for the machine that they are renting. So overhead, you've got to manage that cost, but it doesn't really play into your rental rate. So here's what I would like you to digest is that we're going to build a rental fleet and the whole idea of doing this is so that we can make money. The elements that are involved here, the top OEC, that's the original equipment cost. So whether we're talking about a particular item or a whole fleet, we've got the cost, we've got our subject matter rates, and rates will generally drive our time utilization. And then we've got our overhead costs. That is our facilities and our staffing and trucks and everything. And then we've got our maintenance and repair costs. So these are the five numbers that are going to drive whether we make money or not. So we can go out here and let's just say in the perfect world we buy some equipment and we decide we're going to put 4% for our monthly rental rates and we expect to keep that stuff busy 50 or 60% of the time, maybe more. We're going to manage our overhead, keep our costs under control, and do a good job with maintenance and repair. So which of these items do we really control? So you get to decide who you buy your equipment from and what price you pay. And do we always need to start with brand new? Or could we potentially pick up some used iron and if you're thinking about an entire fleet, then the average age of your equipment actually starts to become a factor here. And then our rates. We establish the rates. And then who's in control of how much time that fleet is out? Well, you are because you get to decide how many salesmen we put on the street, how we compensate those people, how we monitor their activity, how well do we get the stuff through our service department. So our maintenance and repair costs. Some of you may from the rental department inside a dealership, some of you may have a few dedicated technicians that are 100% against the rental department. Many of the equipment dealers today make a deal with the service department and they say we will pay you X percentage of the rental revenue, and we'll call it a day. So we're still doing work orders, but we're not basically itemizing those things out. We just need it done quickly, and we're going to give you a share of our income. So here's the perfect world. Those are all the factors. The issue comes that there's outside pressures going on in the marketplace that we've got to adapt to. And what are they? So you've got competition, and there's lots of that. We've got demand in the marketplace. So sometimes this can be seasonal. Sometimes this can be driven by particular market segments. Those of you that might be in the mining areas or where fracking is going on, these are things that clearly trigger huge demand, and then if something happens that makes those things stop, we've got to adjust to it. And then overall economic conditions, whether people are spending money, whether we're getting infrastructure. So the point I wanted to make here is that as a rental manager or a fleet manager, we have to be reacting to this outside pressure because we don't live in a vacuum. And so when competition either shows up with more machines, or maybe they show up with newer machines, maybe they show up with better technology, maybe they show up with more locations, what if demand falls? Then what do we do? So our observation in the industry for years is that whether you're a rental store or an equipment dealer, we usually know how to react to low demand. We either begin selling stuff or we start discounting it because we can see that the demand is not in our favor because we're looking out the window and we see all the stuff parked by the fence. What we don't know in our industry is when demand is in our favor and when utilization is going north and should we be adjusting our pricing accordingly. Some of you may know, some of you may not know, but that's how the hotel business works. That's how the rental car business works is they are monitoring demand and United Rentals got this put into their system I think probably somewhere around six or eight years ago. So they are, their computer system is telling them it's monitoring demand and it's telling them to be able to adjust the rate north. So most of the dealers that I know don't have any information like this and so it makes it a bit challenging. So some of you say, holy cow, how can they rent the equipment so cheap? You know, my salesman comes back in and says, you know, they're renting $3,500 on a machine that we want $4,500 for. No way, we can't do that. It could be that who you're competing against, maybe they're not very sophisticated. I mean, honestly, I have worked with some dealers that really don't look at what's going on during their owning and operating time of renting equipment. Their end goal is to sell this to somebody. So I can give you an example where sometimes manufacturers will come out with some programs and maybe it's a leasing program. And I've seen this where loader backhoes were $1,500, $1,600 a month, normal rental rate, and then somebody comes out with a program and you can lease a backhoe for $999 a month for three years with a little bit of down payment. It's a lot like what BMW does that you can drive this $75,000 car for $499 a month. The fine print says you have to have $4,500 down and you get 10,000 miles per year to drive it. But what the customer sees in the sports section is this ad that shows I can drive a $75,000 car for $499 a month. Pretty attractive. The same thing happened with the equipment business. The average contractor is coming through the sports page and he sees this ad that suggests that the going market rate for a brand-new backhoe is $999 a month. He doesn't take into consideration that this is a special offering. What it does is it educates him that there's a different price point. The homeowner rental business saw this same thing happen when Home Depot and Lowe's got in rental. The average homeowner rental business used to rent a pressure washer for maybe $60 or $70 a day. You made a lot of money with those things. Then all of a sudden, Home Depot started showing up with them at the front door and they showed like $35 a day. It wasn't the same quality unit, but what the consumer, every time they went in the door, they were seeing this was $35 a day. It changed because they were the big box. They influenced local rental rates down. They put pressure on them. That gets to the point of maybe a better footprint. It could be that your competition has more location. That was a challenge for me back in the 70s and early 80s. Hertz Equipment was probably my biggest competitor in the area. When there was a big project, they could bring in fleet from six or seven locations. For me to compete, I had to own it all the time. It made it very challenging to compete against somebody that had a better footprint or larger fleet. It could be that who you're competing against also has a different business model. It could be that their main objective is just to keep the piece of equipment busy so that they can sell it. If they can get $1,100 a month and keep it out all the time, they're really working towards a price point to selling it. But if you're owning and operating that piece of equipment, you might think that, no, I need to try to get $1,400 a month because I'm trying to make money while I'm renting it, not just at the end when I sell it. Let's talk about cost of goods sold or the gross profit margin in rental. Some of you may have participated. Maybe you've seen the results. But the AED produces a cost of doing business survey every year. What has been established for the cost of goods sold for rental is two numbers, depreciation cost and maintenance and repair costs. One of those numbers is fixed for most people. And the other one is variable. But there are some dealers that use an 80-20 split or 70-30. And so even their depreciation is a variable cost. So I want to look at an example here. So we've got a machine that costs $135,000, original equipment cost. Let's just say our booked rental rate on this is $4,500 a month. If I have that particular machine, $135,000 machine, and I have it on a five-year straight line, that's what that 5SL stands for, a five-year straight line depreciation, I'm taking the cost of $135,000 and I'm dividing it by 60. That would be five years. And when I divide by 60, I get $2,250 a month is my depreciation cost. So for that machine to just sit out by the fence, it costs me $2,250 a month is what it's being written down at. So then if I did put it out on rent, now I've got some maintenance and repair costs that goes with the activity of renting. So the number that I put down here, 12%, is actually the worst-case scenario that I have seen where a rental department negotiated with their service department and said, we'll pay you 12% of our revenues to support our fleet. If you decide to have a couple of your own people that are dedicated to the rental department full-time and they do the PM, just the routine inspections and grease and oils and changing filters and that kind of stuff, you'll have a much less number than that. I would probably say more dealers probably put 10% there. And if you are using some of your own people instead of the shop all the time, I think the number could be less than 10. So we're just using worst-case scenario here. So that means that if I rent the machine out for $4,500 a month, that my cost of goods sold are the $2,250 plus the $540. So I've made $1,710. So the numbers to the right give you some idea about a percentage. So the $4,500 represents about 3.3% of that machine cost. Is that a good number? I don't know exactly. As I said, I have seen numbers that go lower than this. What I wanted to show you was the relationship of what I would consider your fixed cost is that your depreciation plus your maintenance and repair is generally about 2% of the machine cost per month. That's one of those little numbers you need to stick in your pocket and know that if you're trying to figure out something, what's the cost of me owning and operating this machine? My cost of goods sold is generally about 2% of your machine cost. So that means that anything that I make above that is gross profit. It's not net profit. It's gross profit. The difference there is that gross profit allows us to pay our overhead, which is our personnel and any other trucks, trailers, those types of things. So this is just gross profit, not net. So the question gets into play. If every month you're a rental manager and you had $10 million worth of sleep sitting out there, you've got a fixed cost that's going to happen and you've got a variable cost that's going to take place and you actually need to outrun that. You need to drive enough revenue to make money. So hopefully you get the idea. 2% is really what you need to put in your pocket for monthly cost of goods sold for rental. So let's look at the utilization. What's acceptable? So financial utilization, we'll get into it in just a second, but there's a range for this by types of products and for fleet mix. Time utilization, what's a good number? And then, so what is fleet utilization? Fleet utilization is an indication of how much of your fleet is out at any given time. So historically in the rental business, most fleet owners were trying to keep their equipment out 50% to 60% of the time, maybe a little bit more. So if you went by a particular rental yard, and you can still use this, you'll find it to be true. If you're looking at what's inside their fence, you're probably only seeing about 30% or 35% of what they own. So I use this all the time in terms of trying to size somebody up and try to figure out what I think their fleet investment might be or how much equipment that they have. This is, again, a rule of thumb you can put in your pocket. So we'll just quickly go through these numbers. Financial utilization is your annual rental revenue divided by the original equipment cost. Why is this important? Because it has to do with the total amount of rental revenue that you generate. But remember, that's connected to the rate that you put out on the street. So if you put a too high a price, you're not going to drive the rental revenue that you would hope to, and therefore, your financial utilization is going to be lower than you expected. So that's why this is a measurement that comes into play, and it's very important. So here's an example. My fleet value is about $3.5 million. I took in about $1.2 million, and so I've got a financial utilization of about 34%. For most dealers that handle heavy equipment, I'm talking about excavators and wheel loaders, things that have a lot of machine costs, say $100,000 to $200,000. This is actually a very tough number to get to because they are generally not getting more than about 28% to 30% on those big machines in the course of a year. So unless they have some smaller items that are helping improve that number, so the low 30s is where most dealers tend to find themselves. Time utilization. I haven't seen a lot of dealer systems that actually help you with making this computation. If you're a rental manager, I think you need to make sure that your system can generate this, but it's the number of units in your fleet times the number of rental days in the month. So the reason I have 22 in there is if you want to use 28 or you want to use 30, you can do that, you can do that. This just basically becomes an internal measurement for you, but I look at it in terms of the number of billable days in a month, and usually that's 22 or 23 on average. So I've got the number of units times the number of rental days means the total potential days, and then I've got some weekly rentals, some monthly rentals, and daily rentals, and I can come up with, in this case, 199 days things were on rent of a potential 264, so I got 75% time utilization. I would suggest to you, if you don't already, break out your rental activity by your daily, weekly, monthly, or four-week rental rates to kind of see what kind of activity you're getting there because it could be that you're really not getting any weekly rental for some types of machines that you should be, and maybe that tells you that you're not talking to the right customers. It could tell you that you don't have it priced correctly, or maybe your monthly rental rate is so attractive that people are keeping it a little bit longer. So I think you could, rather than just looking at overall time, I think it's important to take a look at the breakdown in monthly, weekly, or daily activity. So the fleet utilization, hopefully this is something you're beginning to look at, which is the value of all your fleet at original equipment costs, the total revenue divided by the original equipment costs. So if I, and this is a snapshot of a day, this is not an accumulated measurement. This is at any given time. My son was just recently working with Hertz Equipment, and the number that they were shooting for on a daily basis was about 72% at his branch. So, okay, let me get this question. Great question. So David has asked, how does shop status or demo loaners adjust the utilization? David, that's a great question, and here's what I would suggest to you, that oftentimes rental fleets actually beat up because they're bailing out the sales department because the sales machine isn't ready. Maybe it hasn't come in yet, or the service department can't seem to get something fixed on time, so they give the customer a loaner. So my opinion on that is that a rental ticket and the daily or weekly charges, whatever those are, that should actually get back charged against that department because otherwise they'll continue to do it. So we want to do the right thing by the customer. Please hear me correctly. We want to take care of the customer. However, if there is a department that is basically utilizing the assets of the rental department to kind of cover their inefficiencies or mistakes, there should be some cost to them for that. Otherwise, they don't have any incentive to ever fix that. So I think you should, you know, the customer gets the rental ticket because we need to keep track of where it's going. He doesn't have to see any numbers, but that should go. I think you should have some type of internal G.L. code, and you should charge that because otherwise those are, I'll call that leakage. It's almost like spoilage in your fleet because we didn't have it available. We weren't getting any money from the customer, and so it makes our results look bad. So it's a great question. Please feel free to type in others that may come to you. So I think you get the concept of fleet utilization. What this really tells you is that the majority of what you own, the expensive items, are the ones that are out on rent. That's what this is an indicator of. Rather than saying I've got 50% of my fleet out on rent, but unfortunately it's all the inexpensive items, the small things, and the big equipment is sitting in the yard. This is an indicator that would tell you that. So I think the target for your fleet should be north of 60 and striving hard to get towards 70. So when I'm doing analysis on a rental fleet, I start to look at individual categories of equipment, and what I really want to do is see how a particular group is doing, what's the average that that group is producing, and then I'm going to measure everything else against that average. So in this particular case, I've got an average cost of my fleet. I've got some units that are more recent that are over $100,000. I've got some older units there, and so my average cost of my fleet is about $100,000 for low tobacco. Then I'm looking at my rental income that has been created, and I'm seeing what the average income is on that equipment over some period of time. So if you want to look at this every month, or you want to look at it year to date, and so you're trying to identify the winners and the losers and which ones are underperforming according to income, and then you look at the same exact thing for time out. And so in this case, I did a little math. My average time for machines is 19 days out on rent out of the time period, and so I can say, okay, this is doing pretty well. So here's the piece that I really wanted to spend some time on because I talk to equipment rental salesmen a lot. One of their biggest beefs is that there's about $50 to $75 difference between us being successful on this job. The customer wants it for, you know, $2,050, and we're at $2,150, and my manager won't get off $100. Well, my feeling is the reason that the manager won't get off $100 is he doesn't really understand if there's a real bad impact to that or not. And so what I would suggest you do is create a little spreadsheet for some of your equipment, and so I'm giving you an example here, this same $135,000 machine, and I've got 13 billing periods, so that's the four-week approach. And so I can show the rental revenue by month, $4,500, and I've got a number one for the time utilization. For every month I keep this busy, that's what that number one is, and if I didn't rent it that month, I get a zero. So if you follow that example number one across, at the end of a year, I have brought in $35,000 in rent, $35,100, and I've kept it busy eight out of 13 periods. And so my time utilization was 61%, and my financial utilization was 26%, because I'm taking the $35,000 and I'm dividing it by the 135. And so then you can see your cost down there, my five-year straight line depreciation, so whether I rented it or I didn't rent it, every month I had $2,250 going against it. And then I took my 12% maintenance cost, and so you can see month by month, the months that I rented it, I was making $1,750, and then the third month, I lost $2,250 because I didn't have any rental revenue at all against that. And so at the end of the year, I made $35,000 in gross rental revenue, my depreciation, my depreciation was $29,000, and I had $4,000 in repair, so I made a total of $1,600 on that one machine during the course of the year. And I did that where a few months, you can see in what would be April, May, June type of thing, I discounted the rate about 6% or 7% about 30% of the time, and you can see what the results are. Go down to the next example, I've got the same machine, same depreciation, same maintenance and repair, only this time, I'm going to be more aggressive with my discounting part of the time. So I've doubled the discount, so it's not 6% or 7%, I went down to 15%, so I'm renting at $3,800 a month, but when I get to that price, I'm picking up some three or four month rentals. But the machine is staying out more, so it stayed out two more months, two more periods, and so what I want you to see is that the time utilization and the profitability went from $1,600 to $6,000. So I think if a rental manager creates a worksheet, a what-if scenario, if you looked at this, you would discover, gee, I can rent it for a little bit less than I expected, as long as I get what I'm after, and we'll make more money. But when you have to make that decision one-off all the time, you won't realize the difference. So now I would like you to see what happens if we do the depreciation, just so that you have an understanding. If you happen to be at a dealership that is doing the 80-20, what's going on with that? So the top line, $4,500 a month rental, my depreciation is 80% of that. So you can see that my depreciation is more expensive. It's $3,600 instead of the $2,250. You recall that? So again, as a rental manager, you may not have any say-so at all about what depreciation is being charged against you, but you can see it's a pretty significant difference. It's almost $1,400 a month difference. But if you don't rent it out that month, you don't get any charges. So let's take a look at what happens at the end of the year with this scenario, where I discounted it about 10%. So you can see months three, four, five, and six, I took it down to $4,100 a month. And at the end of the year, I had 25% financial utilization, and I kept it out about 63%. And I made $2,700. All right, now let's look at the look at the second one. So now I'm getting more aggressive with the rental date. So I'm going down into the $3,500 bracket. But when I went down to $3,500, now I can get this customer to rent it to me, from me for, let's say, five or six months. So some of you, you may question, so how do we do that? So that the guy just doesn't rent it one month and turn it back in. I would suggest to you that I'm a fan of backloading a deal so that it could be that at the end of four months, he's paid all he's going to be charged. He gets the fifth month, there's got to be some type of agreement. Rental rates are like mini contracts. And so when you give something, you need to get something. And so is it foolproof? No, it's not foolproof. But I just think that we need to be more flexible in the way that we go to market. And part of this, again, I go out and work with a salesman. We go to see a customer who's never rented from us before. I'm going to ask the customer, what kind of rental volume do you do? And the guy says, well, I probably rent $10,000 or $15,000 a month from different suppliers for different types of machines. Okay, so that's pretty substantial. But I'm going to ask the customer, what kind of rental volume do you do? Okay, so that's pretty substantial. So what if I could be the guy's number two supplier, if not his number one, would I be willing to give up some discount to be able to get that kind of volume? So this is something that you can say, yeah, we're going to cut the rate to be aggressive because we'd really like to get your business. And let's run this in every 90 days. I'll come by and talk, and we'll see whether the level of service that we are providing is up to your standard, whether we're doing okay. And then I'm going to look at the revenues that we're driving from you because the idea here is I want to be a preferred supplier. The concept there is that if this is not going the way you expect it to, and the customer's really not giving you the volume that you'd hope for, well, you have a chance to sit down and review with them and say, that's not working. We were giving you these prices, and in exchange for that, we were hoping to get a little bit more volume. So it's something that you can run for some period of time, check back in, monitor it. If it's going the way that you think it should, wonderful. If it's not, and you can't make the adjustments, then you can call it off. But don't get stuck with book rates. I think you've just got to be in tune with what's going on in the customer's demand. So we've got a couple more things. So the discounting strategy, I think for daily rates, that there really shouldn't be any discounting for daily rates. It's all about availability. Usually, customers need things right away. If you've got it sitting in their yard, they usually don't have time to go shopping around. Usually, minutes are really important to them. And so it's really about how fast can you get it there. But weekly rates, maybe you decide to discount a couple percent. Maybe you have to get more aggressive than that. Monthly or four-week rates, I think you can easily be in this ballpark. And so the salesman, when somebody says, what's your best rate on such and such, the qualifying question from a salesman should be, do not answer that question right away. What I really want to do when the guy says, what's your best rate on a wheel loader, don't answer the question. You come back with a question, and you say, so tell me about how often you rent wheel loaders. In the course of a year, how many of them do you rent? Because I want to be competitive with my pricing, but I need to really understand how you use this type of product. So sometimes our salesmen are shooting themselves in the foot because they're giving a very short term view on pricing, trying to abide by the company rules of the rates when they should be looking at it more from a global perspective. And then being able to come back to you and say, look, this guy wants this type of pricing, but here's the kind of utilization we can get out of it. So we're getting close to the end. I need to wrap up here. For you to be a market leader, you really have to ask yourself some hard questions. And the rental rates are part of this, but it's not all of it. So you can have attractive rental rates, and if you don't have these other things, you don't have a very strong offering. And so I'm encouraging you to try to take a hard look at your operation and look at your technology compared to the other people in the marketplace, and are you keeping up? Do you have, it doesn't have to be you own all your trucks, you can use outside transportation. The key is, can you get it from point A to point B and do it quickly and efficiently? So one of the ways that you can be competitive in the marketplace when rate is you can start with using your transportation costs potentially as the flex. So if you want to maintain the integrity of your rental rate, let's just say $4,000 a month, and your normal transportation is $250 or $350 a month, you can start with using your transportation costs $250 or $350 each way, you may decide, look, for this particular deal, I'm going to cut you a break, but you held your pricing of your machine. That's a strategy that can be very effective. But we're not giving away transportation. That's not the concept here. We're not trying to discredit it, that it's not a cost, but it is one of the places that you can get some, you can make your deals a little bit skinnier. So you've got to be easy to do business with. You do have to have expertise. And oh, by the way, if you haven't seen what some of the nationals are doing on rental protection plans, you should check that out because they're getting very aggressive there. So what do you control? You control virtually every one of these pieces. What you don't control is this piece that's outside. And so you have to react to competitive forces in the marketplace, the demand for your products, and the economic conditions. So rate structure, don't get locked into the formula. Pay attention to these market drivers, which is the circle that I just showed you. And in gross profit margin, you need to really understand what that looks like for your machines and understand where your floor, where your cost is by machine. And then I believe you need to have a strategy for discounting so that you don't have to make all these decisions over and over and over. I think it should be understood. Another question came in, aggressiveness on rental insurance. So the issue with insurance plans is not about the price, whether it's 12% or 14%. What it really has to do is with the deductible. And the one that has caught my eye recently is Sunbelt Equipment. If you go on their website, you can look up their terms and conditions and $500, $500 is maximum out-of-pocket if a machine rolls down an embankment. So customers are trying to do business with people that they can push all the risk associated with the event over to a dealer or rental company. So we need to be competitive with what's going on in that type of environment. So check that out. And there's actually some third parties, some very good third parties out there that if your company is currently self insuring, you might choose to sell some of that and be able to shift some of your responsibility over to a third party. So it's right at 12 o'clock. I'll take any more questions. We now have an online study course that we just produced earlier this year and would love for you guys to check that out. And then we've got some live presentations that I'm going to be presenting, one in the spring in May and then one in October. One more question has come in talking about liability. So there is a difference, you're absolutely correct. So the insurance policies that I was referring to has everything to do with property and casualty. It does not have to do with liability. So that's something that you would have to, you know, if somebody takes your machine out and digs up a gas line and there's an explosion, you've got the issue associated with the machine, but then you've got the issue, maybe this person didn't have any liability insurance and they were using yours, and then somehow you may get tangled up with that. So it's a great point, Rick. The policies that I was referring to has to do with property and casualty, not liability. So that's still something in terms of how you check out your customer, whether they've got liability insurance. Okay. Thank you for attending and supporting our efforts here to continue to put rental education programs in the marketplace. Thank you so much.

rental rates

equipment rental industry

market demand

gross profit margins

competition

attractive rental rates

profitability

discounting rental rates

return on investment

daily rates