Prepare Your Recession Strategy in Advance

Sept. 1, 2000
Last month RER participated in a lively roundtable in the offices of Credit Suisse First Boston in Chicago covering the prospects for the rental industry

Last month RER participated in a lively roundtable in the offices of Credit Suisse First Boston in Chicago covering the prospects for the rental industry in the event of an economic downturn over the next few years. Although most participants - representatives of many of the top companies in the rental industry - felt optimistic that we won't see a severe recession, the consensus was that the possibility of a measurable downturn should not be taken lightly.

Cover story. RentaCentro has done extremely well, but Siman was on a larger mission, looking for ways to enhance El Salvador's awareness of the benefits of rentals.

Panelists expressed concern that a construction slump could cause serious supply-and-demand imbalances, with larger, better-capitalized rental companies doing more business with larger, newer fleets in more markets, and a lot of recent-vintage usedequipment on the market at low prices. The consensus was, however, that the next downturn probably would be shorter than some past recessions and more likely would hit regionally rather than all at once on a national or international scale.

Still, let's not forget that past economic crises often were caused by unforeseen events such as oil shortages - real or contrived - rather than easily predicted occurrences. You can respond when you can see a hurricane coming and minimize the damage. The disasters that catch you unaware are likely to hurt the most.

One of the differences in this era is the amount of information at our fingertips. Most rental companies can chart performances on an immediate real-time basis. Whereas in the past companies often wouldn't know their results for weeks or even months, which would mean the damage already had hit them hard before they were aware of it, accounting systems today enable rental executives to spot trends quickly.

Business savvy and the ability to react quickly are still important. A good computer system will never guarantee fundamental business knowledge. But we are living in an information age. The ability to sift through numbers and understand and process data is key to success in an era when people are bombarded daily by information and impressions. Make sure you choose which information is most important and develop systems that enable you to understand your costs, your return on investment and your utilization.

Rental companies today are far more efficient than they were even 10 years ago. They are operating more professionally, based on more carefully thought-out and developed systems, principles and procedures. Those that still depend on instinct rather than systems are less likely to survive challenging times.

Rental companies have used different strategies during past recessions. Some became more cautious, conservatively cutting back on expenditures and downsizing judiciously. Other companies became more aggressive, positioning themselves to grab market share when conditions improved. But ultimately it all comes down to the ability to manage people, machines and capital. Finding the right balance will determine the winners and losers in tumultuous times.

In the coming months, RER will present the roundtable discussion. As for how your company is equipped to fare in the coming years and how it might handle a downturn, I hope you've been preparing that strategy for some time now.