How to Right Size Your Rental Fleet

A guide to the top 5 factors to help you optimize your rental equipment fleet and maximize your profits

The equipment rental market has experienced consistent growth for over a decade, growing 60% between 2010 and 2019 and is projected to grow to an estimated $59.5 billion this year alone. If you own or manage a rental equipment business, you know how challenging it can be to balance the supply and demand of your fleet, especially through this growth, whether or not you have a great fleet management system. You want to have enough units to meet your customer needs, but not too many that you end up with underutilized assets. You also want to have the right mix of equipment types, models, and features to match the market trends and customer preferences. On top of that, you want to keep your fleet in good condition, so that you can avoid costly repairs and maintenance issues that can eat into your rental revenue.

So how do you achieve this optimal balance? How do you know when to buy, sell, or trade rental equipment? How do you measure the performance and profitability of your fleet? Plus, how do you plan for the future, considering the changes in technology, demand, and competition?

These are some of the questions that this article will help you answer. We will provide you with five factors to consider when right sizing your rental fleet, and some tips and tools to help you implement them. By following these guidelines, you will be able to improve your business management, increase your customer satisfaction, and boost your bottom line.

Factor 1: Do you have the right mix of equipment to meet your customer demand?

The first factor to consider is whether you have the right mix of equipment to meet your customer demand. This means that you need to analyze your market and customer segments, and understand what types of equipment they need, how often they need them, and for how long they need them. You also need to monitor the seasonality and cyclicality of your business to anticipate the peaks and valleys of demand.

Having the right mix of equipment will help you optimize your fleet utilization, which is the ratio of rented units to total units in your fleet for a defined unit of time. A higher utilization rate means that you are making the most of your assets and generating more revenue per unit. A lower utilization rate means you have excess or idle units, which are costing you money in depreciation, storage, and maintenance.

You can use data from your rental software or fleet management system, your sales reports, and your customer feedback to identify the gaps and opportunities in your fleet. You can also use industry benchmarks and market research to see how your fleet compares with your competitors and best practices.

Based on this analysis, you can decide whether you need to add, remove, or replace any units in your fleet. You can also consider diversifying your fleet by offering different equipment categories, models, and features, to cater to different customer needs and preferences. For example, you can offer more energy-efficient, environmentally friendly, or technologically advanced units, to appeal to the growing demand for sustainability and innovation.

Factor 2: What are the current & future trends of changes in the equipment technology & demand?

The second factor to consider is the current and future trends of changes in the equipment technology and demand. This means that you need to keep up with innovations and developments in the rental equipment industry, and how they affect your market and your customers. You also need to anticipate the changes in customer behavior, expectations, and preferences, and how they impact your rental offerings.

Keeping up with the trends will help you stay ahead of the curve and gain a competitive edge in your market. It will also help you enhance your customer value proposition and increase your customer loyalty and retention. By offering the latest and best equipment, you can attract more customers, charge higher rates, and differentiate yourself from your competitors.

To keep up with the trends, you need to monitor industry news, publications, and events, and see what new equipment, features, and solutions are emerging. You also need to listen to your customers and collect their feedback, suggestions, and requests to see what they need and expect from your rental service. You can use surveys, interviews, reviews, and social media to gather customer insights.

Based on your research, you can decide whether you need to upgrade, update, or modify any units in your fleet. You can also consider investing in new equipment, features, or solutions, to offer more value and convenience to your customers. For example, you can offer more digital, connected, or smart units, to enable remote monitoring, control, and diagnostics, and improve your operational efficiency and customer service.

Factor 3: Can you meet the demand for change or more units of a certain type by sub or re-renting those additional units from your competitors or other sources?

The third factor to consider when right sizing your rental fleet is whether you can meet the demand for change or more units of a certain type by sub or re-renting those additional units from your competitors or other sources of supply. You also need to evaluate the costs and benefits of sub-renting versus owning and how they affect your profitability and customer satisfaction.

Exploring the options and alternatives for sub-renting will help you optimize your fleet flexibility, which is the ability to adapt your fleet to the changing market and customer conditions. A higher flexibility means that you can quickly and easily adjust your fleet size, mix, and features, to meet the varying and unpredictable demand. A lower flexibility means that you are stuck with a fixed or rigid fleet, which may not match current or future demand.
To explore the options and alternatives, you need to network and collaborate with other rental equipment providers, such as your competitors, suppliers, or partners, and see what units they have available and what terms and conditions they offer. You also need to negotiate and communicate with your customers, and see what units they are looking for, and what expectations and requirements they have.

Factor 4: Are your current units, whether individually or as a group, reliable enough that repair costs are not overwhelming your rental revenue?

The fourth factor to consider is whether your current units, whether individually or as a group, are reliable enough that repair costs are not overwhelming your rental revenue. This means you should monitor and measure the performance and condition of your fleet to see how often they break down or require maintenance. You also need to compare the repair costs with the rental revenue to see how they affect your profit margin and return on investment.

Monitoring and measuring the performance and condition of your fleet will help you optimize your fleet quality, which is the level of functionality, efficiency, and safety of your units. A higher quality means that your units are in good working order and deliver the expected results and performance to your customers. A lower quality means that your units are in poor or faulty condition, and cause problems or issues for your customers.

To measure the performance and condition of your fleet, track and record the usage, wear and tear, and maintenance history of each unit, and look at how that affect its reliability, availability, and lifespan. You also need to calculate and analyze the repair costs, rental revenue, and profit margin of each unit, and analyze how those affect its profitability and return on investment. You can use your rental software or fleet management system, your accounting system, and your maintenance records to collect and process this data.

Based on these metrics, you can decide whether you need to repair, maintain, or replace any units in your fleet. You can also consider implementing preventive, predictive, or proactive maintenance strategies, to reduce the frequency and severity of breakdowns, malfunctions, or failures, and extend the lifespan and performance of your units. For example, you can repair or replace a unit that has high repair costs and low rental revenue, reached the end of its useful life, or has become obsolete or outdated.

Factor 5: Is there an additional investment in technology that could help decrease your ongoing repair & planned maintenance costs?

The final factor to consider when right sizing your rental fleet is whether there is an additional investment in technology that could decrease your ongoing repair and planned maintenance costs. This means you need to evaluate the potential and feasibility of integrating new technologies, tools, or a fleet management system, that could help you improve your operations. Estimate the costs and benefits of each technology to see how they would affect your efficiency, productivity, and profitability.

Evaluating the potential and feasibility of adopting or integrating new technologies will help you optimize your fleet efficiency, which is the degree of optimization, automation, and integration of your fleet processes and functions. A higher efficiency means you can reduce operational costs, increase operational speed, and enhance your operational quality. A lower efficiency means you have high operational costs, low operational speed, and poor operational quality. Nearly 90% of people surveyed said they trusted automation to get more done without errors and help them make decisions. Automation isn’t a nice-to-have anymore; it’s a must-have in your equipment rental company.

To evaluate the potential and feasibility of adopting new technologies, research and test the available and emerging technologies, tools, or systems, that could help you manage, maintain, and operate your fleet more effectively. You also need to calculate and compare the costs and benefits of each technology, and see how they affect your operational performance, customer satisfaction, and competitive advantage. You can use your rental software, market research, and customer feedback to assess and select the right technology.

Based on your evaluation, you can decide whether or not to invest in any new technologies, tools, or systems, that could decrease your ongoing repair and planned maintenance costs. You can also consider upgrading, updating, or modifying your existing technologies, tools, or systems, to make them more compatible, user-friendly, or secure. For example, you can invest in a fleet management system, that monitors, tracks, and optimizes your fleet utilization and performance, and automates your fleet processes.

Conclusion

Right sizing your rental fleet is a crucial and complex task, that requires careful and continuous analysis, planning, and execution. By considering the five factors that we have discussed, you can achieve the optimal balance between your fleet supply and demand, and improve your business management, customer satisfaction, and profitability. You can also use the provided tips to help you implement a right sizing strategy and adapt to the changing market and customer conditions.

We hope that this article has been helpful and informative for you. If you have any questions or feedback, please contact us. We would love to help you with your rental equipment software needs.

Malcolm Roach, CPA, is CEO of Open Door Technology. He has over 30 years’ experience working with mid-market account and ERP systems, and over 20 years’ experience working with equipment rental & equipment service software, and fleet management system solutions.