Thinking about starting an equipment rental business in Arkansas

[BruceWard]

Hi,

I am considering buying used equipment and starting a rental business renting equipment at around 2/3rds the price of the larger rental companies that rent newer equipment.

Our initial inventory would consist of a B21, a JD 110 TLB, a wheeled skid steer, a tracked skid steer, a 5K pound excavator and a 8K pound excavator. We would likely have bush hogs, augers, trencher attachment and post drivers. The plan would be to reinvest profits into additional equipment but to start small as I am personally funding the initial land, building and equipment costs.

I would appreciate any advice you can offer on starting such a business. Specifically I would like to know;

1. What liability insurance do rental businesses typically carry, where can i get it and what does it cost?

2. What equipment would you recommend that we have available to rent?

 

[brin]

Hi,

I am considering buying used equipment and starting a rental business renting equipment at around 2/3rds the price of the larger rental companies that rent newer equipment.

Our initial inventory would consist of a B21, a JD 110 TLB, a wheeled skid steer, a tracked skid steer, a 5K pound excavator and a 8K pound excavator. We would likely have bush hogs, augers, trencher attachment and post drivers. The plan would be to reinvest profits into additional equipment but to start small as I am personally funding the initial land, building and equipment costs.

I would appreciate any advice you can offer on starting such a business. Specifically I would like to know;

1. What liability insurance do rental businesses typically carry, where can i get it and what does it cost?

2. What equipment would you recommend that we have available to rent?

Have you checked your competition and what they have ? I would suppose you could never have enough equipment...seems like everyone needs something sooner or later so you might have to go to work for an equipment rental competitor for awhile to find out what the most popular rental equipment is and be sure it is the type of business you want to invest in before you spend your money..but that is just me..Good Luck in your endeavor...but I would start with calling an Insurance Agency .....I bet that premium will get your attention and I would have an umbrella policy in place no matter what with a disclosure in it as to what you are doing.

 

[Pops15]

Liability insurance is based on the type of business and the amount of sales you do. Your agent can tell you what you need to know. You'll also need insurance on the equipment and building, as well as workers comp for your employees.

Have you ever owned or run a business before? If not there's probably allot more overhead than you've thought about.

Maintenance costs are likely to be higher on used equipment than new. That will make it tough to undercut the competition and still operate profitably. Not everyone is a price shopper. Location can be a major consideration.

Will your area support another rental yard? You may be better off to buy/buy into an existing business rather than start your own. Is there much new construction going on in your area? It's dead here.

You'll need some equipment trailers. You should offer delivery and pick up also if you're going after the DIY crowd as they might not have rigs capable of hauling equipment.

You'll need fuel tanks so you can top everything off when it gets returned (and charge the customer for the fuel). Our local rental yard charges about 150% of the going rate for fuel. Your tanks will have to meet EPA specs.

If you're going to have CUTs you might as well have every imaginable 3pt attachment. Start off with a rear blade, box scraper, pulverizer, landscape rake.
You'll also need chainsaws, pumps, generators, concrete saws, power trowels.......

The real profits are going to be in the smaller equipment, not the tractors.
Probably a good idea to look into a Penske or U-Haul franchise too.

Sounds like an interesting venture. Just be sure to do your homework before spending any money.

 

[BruceWard]

Thanks for the advice. I have been self employed (computer business) most of my adult life so I have an idea of the complexities of running a business.

I called the American Rental Association and found they wanted about 10% of revenues for a policy that covered the equipment, building, liability, trailers and just about everything you could imagine. The cost is high but low enough to keep me interested in the business.

Good point about fuel tanks. I am hoping to aquire a location beside a gas station that sells off road diesel but it may be a better deal to buy in bulk.

I have thought about CUTs but there are so many farm tractors in the area that I doubt anyone would rent a CUT. I do like the idea of renting 3 point equipment.

Trailers will certainly be necessary. I have a friend in the rental business who says that 1/3rd of thier customers have thier own trailers, 1/10th have the equipment delivered and the remainder rent a trailer with the equipment.

 

[/pine]

maintenance is the biggest factor for the shops I deal with...they all employ a couple of mechanics...
Also to be competitive I would think you would need to rent stuff like chainsaws and log splitters...and things like cement mixers and earth compactors...airless paint sprayers, compressors, nail guns and the list goes on...

then there is the transporting of the larger machines to deal with...

our local tool rental shop started off as a (small engine) repair shop and has grown to quite a profitable rental business

 

[MarkV]

Pine is right, you better have a couple of good mechanics in mind. A friend of mine has a rental shop geared towards contractors and is a Bob Cat dealer. He has 3 full time mechanics and spends a lot of time in the shop himself. I would say two mechanics are kept busy with the rental equipment. He has always said that insurance is a real killer for him. Also keep in mind the hours required. If you want to rent to homeowners then you have to be available when they are not at their regular jobs. Good Luck.

MarkV

 

[Reg]

I think repairs will SWAMP maintenance.
In any case a LOT of shop work, for which you will be retaining a substantial portion of the damage deposit... right ?

THAT might be what makes the business plan work, getting paid to fix the equipment that brings in the (relatively minor) rental fees (-:

 

[beenthere]

I do wish you well. But keep in mind the things mentioned such as mechanics, wash bay facility to get equipment clean and ready to go back out. Where I helped out at a rental desk was at a dealer that had all the backup facility with the rest of their Deere dealership. But did well renting out equipment not normally in someones line-up. Such as haybale blowers for landscaping, jackhammers, and concrete saws. Also a big item was a 3 pt Harley Rake or two. If into skidsteers, then the full range of attachments for them might be in some demand.

Big thing was to get assurance that the renters had insurance to cover them using your equipment. I remember well the time a track hoe came back, that had fallen into the dug ditch and was bent up pretty bad (as well as the engine kept running awhile too). Turned out the renter had said he was covered, but he wasn't.
Having an insurance policy available that could be purchased at time of rental (yes, think it would be expensive) would give some protection. Or show evidence from renter's insurance that they are really covered.
People want to rent on the spur of the moment. When the job is ready and when the weather is right.
Stay away from snowmobiles and ATV's that can break down back in some remote forest and they don't remember where it is. Walked out or rode out with someone else, and it is yours to find if you want it back. Again, insurance might help that. (whoops....Arkansas...scratch that snowmobile )

 

[Pops15]

Our local family owned rental yard does not charge a damage deposit or require proof of insurance. They carry insurance that covers damage or loss.

Every time I go in the place they tell me my Dad was their first customer back around 1948!

 

[BruceWard]

The ARA insurance policy I am considering would cover all of the equipment even when accidents occur while rented. It would also cover my liability due to the rental but not the renters liability.

I think we would have to have items like generators, jack hammers, concrete saws, pressure washers and compressors ready for rent. Initially I would want to limit the smaller items to tools needed to accompany the heavier equipment. I would want to expand over time but as I am paying for everything myself to begin with I need to start small.

I really appreciate all the suggestions.