By Michael Frey
Think rental for flexible equipment options on any jobCanadian Contractor Profitability Project Management canadian contractor Finning Canada Michael Frey rental renting
If you’re working in construction today, you’re likely under more pressure than ever to improve productivity and efficiency while reducing costs. This was true before a global pandemic slowed down or halted work in almost every sector. As the world starts to adjust to a new normal we are starting to see work ramping up again, but these pressures remain. So, what does this mean for contractors looking to grow their business while managing financial risk?
Looking at equipment differently and considering renting versus owning is a good first step. Incorporating rental machines into daily operations is a way to respond to shifting market demands, economic uncertainty, and increased competition. Whether it’s a compact machine for a quick landscaping job; a replacement for a unit that’s in the shop; or a more specialized piece of equipment needed to bid on a larger job; rental equipment can help contractors quickly scale operations to demand.
The biggest concern is being confident you can get the right equipment for the job, when you need it, at an affordable price.
Renting vs. buying – know your options
There is no one-size-fits-all solution when it comes to construction equipment. The benefits and challenges of renting versus owning often depend on the specific need for the job. But there are also other factors that should be considered before making a decision: cash flow; the condition of your current fleet; and short/long term equipment needs are just a few examples.
The primary concern when looking at rental options is equipment availability and ensuring the costs fall in line with your budget. Ownership might mean you have the equipment when and where you need it, but transporting, maintaining, repairing, and storing the equipment makes it one of your biggest assets and your highest expenses. Additionally, the constant wear and tear on equipment means it can quickly lose resale or trade-in value. Once you consider the impact of large down payments, financing, varying project demands and workload, you might consider incorporating rental machines into your fleet mix.
With the wide variety of equipment that’s readily available, many companies can better balance equipment availability and costs through rental. In such a competitive market, rental companies have stepped up in recent years, offering newer equipment that is in top condition and additional services such as preventative maintenance and parts support – all managed by the rental company. An added benefit is that contractors can focus on the job at hand, rather than worrying about having to deal with potential breakdowns and equipment failures.
When deciding between renting or purchasing, make sure you understand your return on investment. Finding your rental equipment’s ROI involves knowing the cost to rent the machine, how long you’ll need the equipment, and its frequency of use. On a new piece of equipment, you should look at the total cost of ownership. For example, if your revenue on a $100,000 machine is $25,000 after maintenance and ownership costs, the ROI is 25 percent – meaning it will take four years to pay for itself. Other factors to consider (your equipment dealer can help you with these) are maintenance, depreciation, the machine’s profitability and its resale value.
If you decide to purchase equipment, ensure you sufficiently research the specific machine. Some makes and models hold their value better than others, and some brands offer re-build options and maintenance plans to help you make the most of your investment, including access to technology and data analytics. Short-term and long-term contracts, rent-to-own, and other financing options such as leasing allow for even greater flexibility, especially when finances are tight. There may also be beneficial tax incentives when purchasing equipment, as well as the added benefit of adding an asset to your books.
Partner with your equipment supplier
The right equipment partner can help you plan for your equipment requirements to meet the demands of your business and advise when ownership or rental makes more sense. They can offer a wide variety of solutions, from ordering parts and attachments; on-site fuelling, service and maintenance plans; to delivery and pickup in the field. The right rental partner is not limited to small equipment and tooling but can cover your large equipment needs as well. Now contractors of all sizes can compete for jobs that may have previously been out of reach due to lack of equipment availability and the high cost of purchasing a new machine.
Rental equipment can provide contractors with the assurance of reliable equipment and greater control over operations, eliminating uncontrolled costs and managing regular upkeep needed to maintain the quality of the machine. Knowing your overall equipment costs can help make budgeting and estimating more accurate, while guaranteed uptime means your project will be on-time and on-budget.
Access to the best technology
Construction companies are looking to technology as a means to keep costs low, production high, and jobsites safe. There is a growing demand for technology that monitors rental equipment usage, helps train operators remotely, increases safety and tracks stolen or lost machinery. When you are dealing with an experienced rental partner you are not just accessing the best equipment for the job, but the latest, most technologically advanced machines that include GPS, connectivity, grade control, telematics and machine monitoring.
Technology is helping to monitor, manage, and maintain equipment, and these machines are producing a great deal of data. Our ability to understand what the data is telling us from a maintenance and performance perspective is the most important piece of the puzzle for both owned and rented equipment. Parts, maintenance, and scheduled service are tied to analytics from this data and can be managed to prevent downtime and identify productivity problems before they become costly issues.
With brand-new, next-generation, emission-compliant machines available to rent, contractors can also test new technologies without the financial commitment of ownership. Most will quickly discover that technology is getting jobs done faster, more efficiently, and with greater accuracy.
Demanding more from rental partners
The recent growth of the rental industry is providing substantial opportunities for manufacturers, dealers, rental companies and contractors. The idea of rental as a quick fix for unexpected needs is transforming. Rental is becoming an integral part of a much longer-term equipment strategy.
Giving companies the flexibility to access the right equipment, at the right time and at the right price will continue to help contractors manage the challenges they face today to keep costs low and productivity high. The right rental partner can not only provide the best equipment but help integrate technology into your operations to meet your specific business needs, maximizing operational productivity and performance.
Michael Frey is the rental operations manager at Finning Canada.