Get it together
It should come as no surprise that equipment rental companies require major and ongoing capital investments in equipment. Whether it’s party / event / tent rental, industrial services like rigging or scaffolding, staging and audio / video companies, or companies that rent construction equipment or concrete forms, their equipment is the lifeblood of their business and, as such, necessitates significant capital investments.
For these types of companies, the value of their rental equipment is often the largest determining factor in the overall value of the business. It’s also, however, often misunderstood. That’s because, for these types of companies, the value of their equipment is only as good as the value of their inventory management and organizational systems.
Take, for example, a company that rents scaffolding equipment. They can only make money quickly and easily when their systems are organized, well maintained, ready to transport and complete with all necessary assembly components. After all, any systems which are disorganized cannot be readily or easily deployed; any systems which are not in top condition will need components replaced or fixed upon the next deployment; any systems which are not ready to transport cannot be rented on aggressive delivery timelines; and any systems without all the necessary hardware and accessories cannot be utilized. Which means the valuation of the equipment takes a significant hit.
Unfortunately, many rental companies have major portions of their inventory fall under this scenario in which they are not able to be quickly sold or rented and deployed. As such, these assets have very little value to a buyer of the business enterprise. They’re also not able to be easily liquidated, because buyers will not have the necessary confidence that the systems are complete and all components are in good condition.
On the flip side, those rental companies that do have modern systems and disciplined inventory management practices may earn an equipment valuation above expectations. Their equipment is able to be readily sold and deployed by the next owner of the business, which can make it worth more than the sum of its parts.
If you own or advise an equipment rental company and you’re unsure if your inventory-management and organizational systems are sufficient to ensure maximum valuation for your business, let us know. We’re happy to provide a thorough review of your specific systems and provide objective input and advice based on our extensive experience.