Building a Wildly Successful Machinery Rental Business

By Walter J. McDonald

The most successful machinery dealership rental operations are under the close control of a Rental Bus Driver. This Revenue Center Manager is responsible for the overall profitable operations of the department.

To be successful, your rental business management process must include qualitative insights together with quantitative performance metrics that are reviewed weekly.

Today’s rental market dynamics are dramatically shifting toward more rental utilization by end users. Many high-profit machinery dealers now enjoy rental revenues that are as much as 20% of total dealership sales. If you are a growing dealership and eager to strengthen your rental business, here are my recommendations.

Assess Your Rental Market

Begin by listening to the voice of the customer. Identify your top 15 industrial rental customers. Schedule personal interviews. Tell each that you are upgrading and expanding your rental program and would like to have their suggestions.

During these on-site interviews, you want to find out:

  • What will they be renting next year?
  • How important is low-mileage newer equipment in their rental selection? (this value-added characteristic can justify a slightly higher price. This is the way Bobcat and others built their dealer rental business.)
  • Who do they consider to be your major rental competitors?
  • How easy/difficult is your rental reservation and checkout procedures compared to the competition?
  • How attractive/convenient is your delivery and pick-up service compared to the competition?
  • What are the main reasons they rent from your dealership?
  • Overall, other than reducing price, what could our dealership do to make rentals more attractive to you?
  • What additional equipment would you rent if we had it?

Next, I would shop for the competitors mentioned in customer interviews.

  • What is their pricing?
  • What is the age and condition of their fleet?
  • What are their delivery/pick-up services?
  • How difficult/easy is it to rent?
  • Can you make a reservation on the website, complete forms online, present a credit card, and get the unit without hassle?
Structure and Monitor Essential Performance Metrics
  1. Pricing: Monthly short- term rental rate must be at least 10% of the Total Acquisition Cost.
    Weekly Rate is Monthly ÷ 3.
    Daily Rate is Weekly ÷ 3.
  2. Rental Return on Assets: Annual Rental Sales Revenue (before costs) ÷ Original Acquisition Cost. Goal > 54%.
  3. Rental Dollar Utilization: Monthly Rental Revenue ÷ Monthly Rental Rate. Goal > 75%.
  4. Rental Unit (Time) Utilization: Monthly Days on Rent ÷ 30. Goal > 75%.
  5. Rental Maintenance as % Rental Revenue. Goal < 18 -20%.

or more detailed guidelines on Rental Sales and Marketing, Rental Policies, Rental Department Duties and Responsibilities, and World Class Rental Best Practices, please refer to my Master’s Program in Dealer Management available on my website: