Earn Long-term Profits from Short-term Rentals9 May, 2005 By: Ronelle Ingram imageSource
Earn Long-term Profits from Short-term Rentals
Independently-owned office equipment entrepreneurs have the ability to provide a lucrative service that the "Big Guys" cannot offer—the short-term rental. The term lucrative, however, has not typically been associated with this service.
Most of you likely have the perception that this rental process is too much hassle for too little return. For a moment, disregard that way of thinking. This is a segment of the business that is being underserved by the dealer community. There are big profits to be made in short-term rentals.
Take a look around your office. Every dealership has a few older demos or returned equipment in good condition. All of you have a piece of equipment that can be useable for at least a one month rental. In the rush to new and better, we forget that many end users care more about getting a cheap copy than they care about the copier itself.
What is most odd to me is the same dealer who refuses an offer to be paid for a one week or one month rental quickly agrees to do a free two week trial. Historically, more rentals turn into sales than do free, no obligation demos. In fact, more than 50 percent of short-term rentals turn into long-term rentals or purchases (leases).
With that in mind, here are some steps to creating an effective, profitable short-term rental program:
1. Create a Form
Have a short-term rental form ready to be filled out that can be faxed or emailed to a prospective client. Make sure your form has space for:
Equipment being rented (specify all accessories)
Cost of the equipment
Cost of the delivery and pickup
Minimum length of rental
Value of the equipment
Total due upon delivery
Method of payment
2. Designate an Employee
All random rental requests should be connected to a pre-designated, knowledgeable and prepared employee. Typically, these callers haphazardly pick you from the phone book or find you searching the Web. The random caller requesting short-term rental information must NOT be sent to a voice mail. A customer that is calling around often will hang-up before leaving a message, or another company will have made the deal before anyone from your company returns their call.
When an end user has unexpected, short-term copying needs, they are ready and willing to pay extra for their needs to be fulfilled. That is why an ideal in-house person should be someone who knows the current availability of equipment, delivery schedule and ability to provide customer training. If it is a current client, this designated employee should have a working knowledge of the customer’s history, pay record, overall needs, and restrictions (stairs, limited work hours, space or electrical irregularities).
Also, the service manager, or this designated employee, must use the non-hectic, mid-month work hours to make sure demos and trade-ins are always ready for delivery. Service managers can think of it as a need to provide an emergency loaner machine with the added bonus that you get paid for it.
3. Establish Pricing Guidelines
There are six key components to your pricing:
Base rental rate
Number of copies
Amount of time the copier is needed
It should be immediately established with the customer that there are delivery and pick up charges and a base rental rate. A standard one month rate at my company is charged whether the customer keeps the equipment for 24 hours or 24 days.
Also, make sure that they are within your servicing area and question if there are stairs or any other special delivery circumstances. Then provide a price range. It can be anywhere from $300-$1,000 depending on copier size, copies needed, delivery and pickup dates, and length of time the product is needed. The $300-$1,000 quote instantly gets rid of 25 percent of the callers.
However, 75 percent of the potential customers are typically thrilled to find a dealership that is willing to provide a short-term rental, so costs go out the window. Once the approximate cost is approved, begin asking questions concerning specific needs, anticipated volume, space availability, accessories, etc.
You can be very creative with base cost and overage charges. Very often the overage charge on copies is greater than the base rental rate. People who think cheap understate the amount of copies they plan to make. Big profits can be made by pricing a lower base rate and higher overage charges.
Below is an example of typical rental charges:
Small copier (12-15 pages-per-minute): $95 delivery; $95 pick up; $75 base rental, which includes 500 copies, service and supplies; and overages at 3.5 cents per copy.
Mid-size copier (30-45 ppm): $230 delivery; $230 pick up; $310 base rental, which includes 5,000 copies, service and supplies; and overages at 2.5 cents per copy.
High-end copier (50-plus ppm): $265 delivery: $260 pick up; $600 base rental, which includes 10,000 copies, service supplies; and overages at 2 cents per copy.
I know of no other way to earn $300 to more than $1,000 on equipment that is taking up space in a warehouse or showroom. My company’s average short-term rental generates an $850 initial billing.
Customers should be required to pay for delivery and pick up and first and last month’s rental by credit card or upon delivery. A signed rental agreement must be faxed back or emailed before any preparation is started. Delivery can be within 24 hours of receiving the signed agreement.
4. Set a Service Strategy
It is very important to state the hours that service is provided. Many people requiring a special event weekend rental think you will provide service 24/7. Under special circumstances, and for an increased charge, you can provide 24/7 service on a short-term basis.
When a customer does ask about 24/7 service availability, I always suggest that a back up copier can be provided for less than the additional charge of having a qualified technician on call for after hours service.
It is more cost effective to have an immediately available backup copier than wait for repairs.As a dealer, the backup copier adds little to the cost of pick up and delivery, but it places emphasis on having a high cost-per-copy overage rate. If the backup copier is used for making additional copies, you will receive additional revenue for the copy overage charges.
It is important to make sure when the rental is delivered and picked up, the beginning and ending meter readings are clearly stated on the paperwork that is signed by the end user. This helps to alleviate any additional copy usage charge challenges at the end to the rental.
5. Prepare for the Long-term
I have found that over half of the short-term rentals that we install are extended into longer rentals. The average one month rental from my company turns into a seven month rental, and 25 percent of our short-term rentals turn into sales.
All rented equipment should come with an automatic 50 percent credit on the first three months of the rental if new equipment is purchased. Any rental that is kept one year is picked up at no charge. Any rental that is kept for two years is credited back the original delivery charge. If they later buy equipment, 50 percent of the first three months of the rental are credited back.
The secret is to set up a system that commits the customer to continue to do business with you. Once you have a little bit of their commitment, continue to treat the customer fairly and you have the opportunity to earn much more of their money.
But none of this can happen with the positive answer to the question, “Do you do short-term rentals?”
It is just a matter of planning ahead, taking advantage of those seemingly worthless analog trade-ins and providing a service that the bigger companies are refusing to offer.