Tom Bennett has worked in the rental industry since 1964, having performed almost every conceivable job from yard assistant to CEO of the industry's second largest rental company. Still a vital industry player, Bennett retired from Rental Service Corp. at the end of 2001 to devote more time to family and personal interests. RER was able to capture Bennett's attention before he left his office last month.
RER: What do you plan to do in your retirement?
Tom Bennett: People have asked me what are the real reasons I'm retiring. The real deal is after 38 years in this industry, it's time to turn it over to some of the younger people, time for me to ride my horse and care for my cattle and spend some more time with my grandkids. I have cattle operations, I run about 1000 head of cattle. My wife has a western cowboy supply business in Bellville, Texas. Hopefully I can help her in that business.
RER: What has been most satisfying to you about your rental career? What have you enjoyed most about the rental industry?
Bennett: That's a hard question, because I've enjoyed so many things. It's always been challenging, you never know what tomorrow will bring, what the next call is going to be, what the next challenge will be. I enjoy getting out of bed at 4 in the morning, I enjoy going to work. I haven't felt any burnout, this is still a very viable solid growth industry, and there are a lot of career path opportunities. The industry is hungry for good solid individuals who are well-trained and eager to be trained, who want knowledge and are ready to go forward. I've greatly enjoyed the people, the customers, the suppliers, the employees. After 38 years, I can't think of a thing I would change about my career.
Life was a lot simpler when I was young in this industry. If you had good service, if you had a good location, if you were a problem solver, you could succeed. The customer would describe his problems and you had to have well-trained employees who could provide answers about what kind of equipment would solve the problem. You had to have educated employees, because you had customers who didn't know a water pump from a trencher. You were charging for the product, but you had to explain to the customer when the rental starts, when the machine was expected back in, the whole concept of rental was new to them.
RER: You've been with Prime for a long time. How do you view the company's evolution?
Bennett: Prior to being W.R. Grace, we were an independently owned company, Rent-It and Kinco, two separate brands, and when W.R. Grace acquired the company, they brought capital to grow the business, so we discovered a new business environment, with board meetings and reporting, and it was new and different to us. We got up to 60 or 70 stores.
Then we had foreign investment with Pinault-Printemps, the French company. That was different, they taught us a lot about managing on the balance sheet side of business as opposed to just P/L statements. They taught us a lot about how to manage cash flow. Under Investcorp, we went through taking the company public, going around the world on roadshows, searching for investors, ringing the bell on Wall Street, and all of that was a fantastic learning experience.
Today under Atlas Copco, I can't think of a better place for the company to be. Atlas has had a stabilizing effect on our organization, it has more than 130 years in business, it has a good focus on the customer care elements of the business.
Each step along the way has been a good learning experience, I can't think of any negatives. I've learned from each of the various owners, and we're operating in a much more sophisticated environment today than in the past.
RER: As you recall, about 16 months ago, you and I participated in that industry roundtable sponsored by RER and Credit Suisse First Boston, and we talked about the possibility of an economic downturn. It's pretty clear now that we're into the downturn we talked about back then. What are some of the keys for a rental company to manage through a downturn and prosper on the other side of it?
Bennett: As we discussed in Chicago, the economy is the economy and this cycle we're in — although the economy is softening and conditions are not as good — is purely a business cycle. This is a normal condition, we go through peaks and valleys like this in all businesses. We don't need to react negatively to it, we have to understand it and to deal with it. Within RSC, within the competition, within the suppliers, we all have to make adjustments and it makes us perform at a better level. We have to address issues as opposed to covering them up. We'll be wiser, better-run organizations when the business cycle starts to improve.
Downturns make us focus on real issues that are the drivers of our businesses. We have to focus on removing fat and nonproductive practices from our organizations.
In good times, people don't manage their balance sheets as they should. Their working capital, their receivables, their inventories often remain unaddressed, because revenue and growth collect all the interest in a growth environment. There are so many ways to become more efficient. For example, many times we pay our suppliers faster than we collect from our customers. If we are paying suppliers in 21 days and the average collectible is 50 days, that's not a very good use of funds. Those are the kinds of issues we need to look at.
We need to look at our fleets, at our mix of equipment and analyze which are performing at high levels and which are ugly babies. Many pieces are sitting unnoticed against the fence, and we need to become more efficient in our management of that inventory. We need to become more selective in the way we take our products to market, in our advertising campaigns. Often we lose focus on customer care, on the support of customer, which is the essence of our business, and concentrate too much on the back office side, worrying about expenses, but losing sight of revenue streams and where they come from.
RER: Isn't there a risk that rental companies might cut too many good people, endangering their organizations in the process?
Bennett: There is always a danger in losing good people. Here at RSC, we merged two very large companies, so we had a lot of duplicates and we had to pare down. We tried to keep the best and strongest. Then in the beginning of the second quarter, we restructured our organization and took out a lot of tiered management, and we're actually down about 14 percent fewer people than we had on Jan. 1, 2001. Did we lose some good people? Sure. And there were some people we didn't communicate well with and they went elsewhere. You spend hundreds of hours training people so that they become value-added to the organization and that's a loss to lose some of those people.
On the other hand, people tend to stick more so because they become cautious and unsure about the economy, they are less likely to just leave and want to go elsewhere.
RER: One of the points we discussed at that roundtable was the fact that during a recession, contractors are also faced with capital constraints and therefore are more likely to use rental for a higher percentage of their equipment needs. Do you feel that will be a significant factor in the coming year or two?
Bennett: Contractors, like anybody on the planet, become more cautious in a down economy. There are a lot of unknowns out there, and we're all dealing with these issues. So that caution helps our industry, because the contractor is more likely to ask questions. Should he buy or lease? Or he'll rent maybe with an option to buy. The fact that customers are more concerned about their capital makes them look at the rental option more seriously.
There's still a lot of construction in place right now, more than $400 billion out there, which is more than in 1996, which was a very good year.
RER: Overall, what kind of advice would you give to managers of rental companies large and small, based on your vast experience?
Bennett: This is just Tom Bennett speaking, but I would request they stay focused on the customer care side of business, stay focused on customer needs, don't drastically reduce fixed or variable costs that affect the customer, don't reduce drivers and mechanics on the front line. Look for reductions on the balance sheet side. If they have to downsize, it's better to reduce management and corporate overhead, but reduce as little as possible the people touching the customers, because if you sacrifice that customer care, he'll find another source and you've lost him.
RER: What words of advice would you give to an entrepreneur starting out new in the rental industry in the current environment?
Bennett: First I'd say good luck. A new entrepreneur, needs to clearly understand that this is a labor intensive industry. There are no easy solutions, it's a lot of hard work and long hours. Coming into the business having an exit strategy in mind is a mistake in today's economy. But for a young person who is well-financed, who has access to capital, with fire in their belly to succeed, and a desire to really reach out to and serve customers, it's still a fine industry. So many people with other agendas come into the industry, and that's dangerous.
RER: How has the contractor changed over the years? How do they see the rental industry now compared to how they viewed it years ago?
Bennett: All through the period of consolidation, the Wall St. involvement, the press, all of this has had a positive impact, it has raised the level of awareness to a wider base of customers. People see us as a viable alternative to purchasing and borrowing equipment, we can supply solutions on a just-in-time basis. The negative is that with the rapid growth of so many competitors and ourselves, customers tend to see us more equally today. I can remember a time in this industry when we were deemed as having the best quality, the best availability. Now the customer assumes that everybody provides that, and we're having to deal more with price pressures.
The customer uses the big lever to drive prices down, he creates rate wars, he knows if he makes a few calls he can drop the price 10 to 15 percent and that becomes his way of doing business. In a softening environment, I'd like to see who can survive, and the customer will see some value in those companies, whereas now he has difficulty seeing that difference. Stability and availability is value.
RER: What about the rate situation?
Bennett: Everybody, every competitor is doing what it can to slow down the decline of rates. I would like to think it has bottomed out. There is some moderate improvement in certain parts of the country, it's holding its own in some, so I hope that rates will improve.
RER: Is capital going to be difficult or more difficult to obtain for rental companies in the coming downturn, and if so, what are some of the keys to obtaining and then managing that capital?
Bennett: That's a tough question. The investment community likes to do business with people they are comfortable with, who deliver results quarter after quarter. I think capital will be available to those companies. Companies that consistently miss expectations, when they decline and margins get squeezed, capital constraints come into play, whether it's a local bank or Wall Street. You offset that through customer care and efficiencies, how quick you can execute these actions, taking care of the customer in an efficient manner.
Customer care is more than a goal or mission; it's an obligation. If we're not obligated to take care of them through good and bad times, they have no reason to return to us. You have to build that into your organization and breed that awareness over and over again through time.
RER: During your illustrious rental career, you have worked with and dealt with many important figures in the rental industry. Who are some of the people that you have admired the most over the years and who have had a significant impact on you and your career?
Bennett: That's hard to answer because there have been so many and inevitably I'll leave some out. But first, some of the entrepreneurs I've known, people like Sam Greenberg, Jack Wanamaker, John Doran, and Dugan Hill who was my mentor for many years. They put everything at risk, they were willing to risk heavily into an industry that wasn't well formed, and had no operating standards. The bravery and commitment they made was exceptional. I learned so much from so many of those people.
I have great respect for many executives among our manufacturers and suppliers, the old entrepreneurs who built the industry. John Grove built such a unique product when there was nothing like it at the time. Joseph Bamford of JCB who recently passed away, I had so many wonderful visits and dinners with him. The Bob Wilkersons, the Irv Levines, people we've associated with for so many years. And Guilio Mazzalupi, my current boss is one of those people, he has a clear vision of where our organization is going, he has the commitment to make it happen.
I've learned so much from each of those people and the current executives such as Brad Jacobs, Kevin Rodgers, Gerry Plescia, Dan Kaplan, Gary Bagley, and Tom Hawthorne. I've always tried to stay networked with them, to pick up the phone to talk to them regularly, asking them how they see some of the market trends, ask what they're seeing and having an exchange with them. It's always very positive to have those associations and relationships, they have meant so much to me over the years.
RER: We've seen over the past few years, many manufacturers have looked for opportunities to get closer to the rental channel, i.e., Atlas Copco acquiring Prime and RSC, Deere's partial ownership of Sunstate, Caterpillar dealers starting rent-to-rent companies, Komatsu and now Volvo working with their dealers to develop a rent-to-rent presence. Do you feel this trend will continue in the coming years and do you have any idea of what forms we are likely to see?
Bennett: In a way, I'm amused by this. In the old days, distributors were just a filter for the manufacturer and manufacturers would dictate how we would run our business, how many units we'd buy, which models we'd buy and what margins we'd maintain. Now in many cases, our businesses are bigger than theirs and we have more leverage. It's more than just getting into the rental channel, they have to have a mechanism or conduit to reach out and touch that customer.
What we're seeing is manufacturers are trying to use the conduit to feel and touch the customer. When Atlas Copco bought Prime and two years later bought RSC, many people assumed it was to use the channel to get their products out to more customers, but we could never buy that quantity of product. What Atlas Copco wanted was a conduit to touch that customer. We helped them improve their products. Because of the customer care culture in our industry, we took comments of customers back to the manufacturer. Can you imagine how valuable that is to the manufacturer? Creating communication outgoing and incoming on that product, the customer coming back and saying here's what we like about that product, here's what we don't like, here's how it should be improved.
That's what the industry has to do to become more efficient and more competitive. That's the whole issue. Sure, rental companies buy a lot, but when that portal dries up in softer times, the manufacturer better have good relationships with customers, and be attuned to what the customer is saying.
RER: Speaking in general terms, not specifically about RSC, I would guess that rental companies are going to be very cost-conscious over the next couple of years and therefore likely to age their fleets. Might they therefore incur more maintenance expense and are they prepared to handle that?
Bennett: The aging of fleet has always been our ace in the hole as rental companies. We had modern fleets, and we told investors and analysts that if business softens, we'll age our fleets and conserve capital and that's exactly what we're doing. If we took air compressors, big earthmoving equipment, aerial equipment, where the big dollars are invested, you can age it easily without a big ramp-up on maintenance. But you have to be more selective on higher maintenance items such as skid-steer loaders, compaction equipment and trenchers. If you ramp up maintenance, you lose residual value. So you have to be selective. You can age fleet, but not the high-maintenance products.
RER: We certainly hope we haven't seen the last of Tom Bennett.
Bennett: I'll be on the board of Atlas Copco's Rental Service Business Area and I'll participate in special projects, so I won't be totally out of touch. I'm really fond of the industry, I have no bad feelings about it.
Michael Roth can be reached at [email protected].