Be prepared for major change with these top business trends
You don’t want to get left in the dust. But how do you keep up? There are just too many things going on and you can’t look after all of them yourself. Or afford to hire all the people you would need.
So what’s the answer? We’ll look in a two part blog at business trends that are going to bring major change to your business over the next few years.
We have included 22 business trends, that will, not may, will impact your rental business, along with some suggestions. Do you want to tread water and just keep your head above the water? Or do you want to more than survive, to flourish, with the goal of comfortably retiring someday knowing you were able to successfully adapt to the many changes going in today’s business environment? Read on.
Let’s be serious, you can’t implement all 22 of these items at once. Fortunately, accomplishing some will help with others. Don’t pick too many. Start with one or two that you can immediately make progress on and move on from there once you have momentum on your side. It was Jim Collins in his book, Good to Great, who said that you just need to keep at it. Keep pushing at the flywheel, a little every day, day after day. It might not seem like much is happening but one day you will notice the flywheel has momentum of its own and things are happening.
It is not going to be business as usual
There’s a lot of good stuff here but don’t worry about reading all of the detail. The headings will give you the gist of what we are talking about and you can zero in on the ones most interesting to you. Then pick a few key ones that you can work.
1. Brick and mortar stores without expertise disappear
Brick and mortar stores offering only merchandise will continue to disappear. Amazon is eating their lunch, both on price and availability, and many find it impossible to compete. Others such as Home Depot and Nordstrom’s offer expertise and have managed to find a place. USA Today reports that many chains are struggling, forever changing the landscape of business.
So what does this mean for your rental business? Think about how you can better meet and exceed customer expectations, and do it on a regular basis. The point is not whether you necessarily need to today but that these changes will come into your market space. It is only a matter of time. Don’t be afraid to steal ideas from competitors. It’s much easier now with websites!
2. The Millennials are coming
Millennials, those members of our society following Generation X, were born in the early 1980’s to the early 2000’s, and are now the most numerous group in America. Besides being the largest group in the workforce, Wikipedia states this generation is “generally marked by an increased use and familiarity with communications, media, and digital technologies.” An example of the difference this generation will bring to our society is 55% have stated that they have no intention to purchase a vehicle and will rely on services such as Uber or Zipcar.
Not only will the millennials bring different ways of utilizing technology into your business but they need to be trained and soon. Senior staff are rapidly retiring as the baby boom generation works its way out of the workforce. Don’t get caught short when you have lost many of your key people and the up and comers aren’t ready to go.
3. Get rid of the fluff!
Have you noticed how customers are becoming averse to generic or “fluffy” answers? They want a real solution. They have often already arrived with the facts and now are trying to answer a question or solve an issue. Having a generalist trying to do six jobs at once will just invite their scorn as they go off in search of an expert. Be the person who hires that expert.
You can’t rely on a “one size fits all” approach anymore. Each customer needs to feel that he or she matters. Do that and you’ll have an evangelist for your business. Tailor your approach to the audience you are after. If you are looking for an example of how this works, pay attention to what Netflix and Amazon are doing in their efforts to deliver content configured to customer preferences. You may not have the budget these organizations have for technology but remember the 80/20 rule. You get 80% of the benefit for the first 20% of the effort.
4. Better options for internal systems
Have you noticed that your business requirements are becoming almost as complex as those for enterprise-sized organizations? You probably don’t have the same IT budget, I am guessing? No? Well, there is hope.
While cloud computing, which is the movement of IT and in some cases services to the web, isn’t the only answer, it has been used by larger systems providers to try to bring their solutions to the mid-market or lower. You don’t have to buy those expensive servers and other equipment. If done right, cloud computing offers simplicity.
The applications typically found in the mid-space may offer both cloud or in-house solutions for those who want to control where their data sits. As the enterprise organizations have been trying to move down into the mid-market to gain more sales, the mid-market solutions are trying to move down into the entry level, or just above entry level. Microsoft Dynamics 365, as an example, is specifically targeting those ready to move off QuickBooks, most likely because they have outgrown it, with specific transition tools to import data from QuickBooks systems.
In the past mid-market organizations seeking specialized functionality for different areas of their business needed to buy multiple systems and hope they would talk to each other. The mid-market offerings have advanced to the point where one integrated system can handle the requirements for most organizations. With the move downstream by systems such as Microsoft Dynamics 365, smaller organizations can now take advantage of advanced functionality while retaining the desired simplicity and enjoy much lower costs.
5. The demand for rental equipment continues to grow
Buy equipment or rent it? That is the big question equipment users face. During the downturn of the economy in 2007 and subsequent upturn, companies found it was easier and much cheaper, in many ways, to rent equipment and send it back after the project was complete. No longer did equipment users have to bear the risks of catastrophic equipment failure or technical obsolescence. They could just rent the specific equipment they needed for each project. If they needed different equipment for the next project, it was a simple task to source it out instead of trying to figure out whether to sell an old unit and how to finance the new one. This strategy forced the responsibility for service back to the equipment rental companies.
Currently, the penetration of rental units in the equipment market is about 50%. Sunbelt Rentals in its annual report estimates the potential market penetration for rental equipment to be in the range of 60%. That additional 10% is actually a 20% increase in the demand for rental equipment, even without the predicted 3-4% annual growth in the equipment rental market over the next several years as noted by the ARA (American Rental Association).
Every good business owner always has several plans in his back pocket to deal with whatever comes along. You should have one for extended growth in the range of 10-20%, depending on your specific industry and location. If you are able to successfully execute on a number of the other trends noted in this document, i.e. marketing and customer service, that growth could be 20-30% in future years. Execute well and you will find yourself with the opportunity to grow your business through acquisition or to be acquired.
6. Peer-to-peer rentals
An interesting side note is the continuing growth of peer-to-peer rentals, which Wikipedia defines as the “process of an individual renting an owned good, service, or property to another individual.” Equipment Share and Yard Club are a couple of organizations promoting this market niche. If you are not in the tool rental business, you might look at this and think it doesn’t apply to you, but it does. Businesses are now renting equipment they own to other businesses, often at a much lower price point as they may be trying to recover costs, in some cases, only the finance costs. A typical equipment rental business cannot compete with this price structure, which is why it is critical for you to concentrate on the other things that add value to your customer, such as better service, education, and tailored content that adds value.
7. Technician shortage worsens
If your business relies on diesel technicians, you probably know about this already. If you need these technicians, you better be prepared. Get ready to train your intermediate staff to cover the gap. In the short term, you can concentrate on better recruiting policies and staff retention.
8. Online markets grow
The internet is increasingly becoming the tool of choice for the purchase of used equipment. In 2016 Ritchie Bros. sold approximately $2.1 billion of equipment and other items to online buyers, which represented a 10% growth over 2015. Newcomer IronDirect is offering new Chinese equipment purchased online but serviced locally.
As Bob Dylan said in one of his songs, “Times are a-changing”. It pays to keep your eyes and ears open so you can stay ahead of new trends. You may not be seriously affected by online equipment sales but something to keep an eye on is how Amazon is changing perceptions of customer service with same-day delivery services into 20 cities. Amazon now offers two hour delivery. While this doesn’t directly affect most rental businesses, some will notice the impact, especially when customers become accustomed to this level of service. More proactive equipment rental organizations will be thinking about how to apply these concepts to their businesses.
9. New AEMP standards for telematics data
2017 is introducing a lot of change for construction equipment dealers as new AEMP standards (Association of Equipment Management Professionals) for telematics data are introduced throughout the industry. This allows equipment users to track mixed-fleet telematics and track more information. This will allow users to more effectively analyze information and improve their maintenance management.
This change will take a while to trickle down to your organization. If you utilize construction equipment, this new capability is important as it will allow you to reduce repairs and more effectively manage your planned maintenance activities. But your accounting/ERP software will need to catch up first.
10. Growth in financed equipment acquisitions to outpace growth in total equipment investment
ELFA, the Equipment Leasing and Finance Association, which represents members involved in financing over $1 trillion in equipment, reports that the growth in financed equipment acquisitions will outpace the overall growth of equipment sales. Get your financials cleaned up and go talk to your bank or finance company. You might need a new business plan. There are many situations where financing equipment makes sense and you should be prepared to act quickly.
11. Oil industry drag on the U.S. economy will cease
Finally, the oil industry seems to have adapted to lower oil prices and can function with oil prices about $50 per barrel. Although this price is too low to generate any significant boom conditions, it is high enough with lower operating costs to remove the drag present over the past few years. If you are involved with this niche of the equipment rental market, you should already be seeing improvement.
12. Expect additional interest rate increases
The only thing that is certain about interest rates is that possible increases are uncertain. The last increase was December 2016 but there are rumblings about more increases as the U.S. economy continues to gather steam. While the increase, if any, may not be major, this is something to consider for companies relying heavily on equipment or facility financing. This may also cause the cancellation of client projects.
There have been some suggestions that the Trump administration will remove or restrict interest deductibility but that is even more uncertain at this point. Keep your ear to the ground.