During the tough economic periods it is worth revisting your business value as a hire or rental company, no matter what sector you service. The business value of hire and rental companies is actually at its highest during tough times, particularly those servicing the business to business sector.
So what is the business value of the hire and rental industry?
Well here are five good reasons why companies should hire from you.
Cash flow saving
Companies who elect to hire or rent equipment from you are able protect cash reserves. Rather than spending valuable cash on buying items up front, your clients can effectively defer cash outlays through period payments for the hire or rental items. If timed correctly by your client, their receipts from their customer payments from the project can help fund the on-going rental or hire payment (obviously for medium to long term hires). For those of you who have Corporate clients, hiring or renting is often perfect. Many corporate clients have capital budget constraints during a downturn. Therefore hiring or renting can be an ideal way for some corporate clients to get what they need, as hiring or renting is considered to be an operating budget expenditure. Operating budget expenditures are often delegated substantially down the corporate ladder.
For many clients hiring or renting actually aids their project costing, in turn aiding them in improving their profitability. Hiring or renting is a known cost. Whereas often supplying the equipment from their own internal assets does not enable them to determine the actual cost of the item. Many don’t know the actual depreciation (replacement) value to be assigned, the actual cost of servicing and storing the item. It may sound trite, but for many companies true costing is a major issue.
Buying items also increases risk. How long is the item they buy going to be used for? Will it be needed again? Should we buy something that may last for the project duration or something that we can be used again? What happens if the item breaksdown? How long before the manufacturer can get a replacement, this can impact the project and hence cash flow. Hiring and renting eliminates these concerns.
Servicing costs and compliance
Related to the risk element above is the need to ensure that the item is correctly serviced and maintained. Many hire and rental companies, especially in the construction hire and rental, eliminate this concern by providing on-site servicing and service histories. If your hire system doesn’t do this then you really need our HireEzy product.
Assets require maintenance as described above both when in use and when stored. This costs money, in fact in Logistics the average assigned value to store, maintain, insure and account for an item is usually 35% of its cost, depending on the equipment. Furthermore, many listed companies and larger companies use Return on Assets as a performance measure. The more they hold in asset value the greater the revenue they need to generate in order to meet this performance figure. Hence hiring or renting can actually aid them in achieving there performance targets as the hired or rented item is not considered an asset.
For many people these statements above will be blinding statements of the obvious. But are they so blindingly obvious to your customers? Renewing and reminding them of your value proposition is often a good activity in these times. Especially when many of your clients are going to look at the costs they spend with you on hiring and renting. Many of your clients will just see the dollar figure and not reflect on the benefits you provide.
If you are a party rental or party hire company the following article provides more specific how to information on this subject.
Making Life Ezy are the makers of HireEzy the world’s most innovative hire software and rental management software. We are committed to helping our clients grow through the provision of business value, such as the information provided in this blog.
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