The Working Road

Nov. 1, 2007
If Marty Underwood wants to analyze how the economy is, he only has to look at his credit card machine. When times are good, people are spending cash

If Marty Underwood wants to analyze how the economy is, he only has to look at his credit card machine.

“When times are good, people are spending cash or writing checks, because they have money,” says Underwood, owner of Proline Rentals in Baltimore. “When times are bad as they are now, we burn that credit card machine up. Customers say ‘try this card, try this card,’ because they are maxxed. And it's becoming more prevalent.”

Economists all over the country are scratching their heads to come up with predictions about which way the business is going to turn, but at least for the moment, Underwood's credit-card processor seems an accurate reflection of many U.S. cities. A friend of Underwood's, an economist for a federal agency in Washington, D.C., told him he is consistently more accurate than government reports. In a city like Baltimore, where the housing construction market is almost non-existent with a few exceptions, nobody sees quicker than the independent rental center just how much business has slackened.

“It's the homeowner and the light contractor, the little guy that maybe goes in and puts in a couple of walls in a storefront or something,” says Underwood in describing his customers. “He's a commercial contractor, a reputable guy, but that kind of work is not as prevalent.”

Fortunately, commercial construction is continuing to track strongly.

“The big builders are still building buildings,” Underwood adds. “That particular area within the industry here in Maryland, they are all spending money. Big universities here in Maryland are constantly spending money because they have to maintain.”

But for smaller rental companies, the smaller contractors are the engines of their business flow. For Underwood's Proline Rentals, for three-location ABC Rental Center, and for Mike Wist's Bay Country Rentals (to be profiled in a later issue), these are, in some ways, uneasy times.

The independent rental center constantly has to concern itself with simple issues. Putting up a sign or putting in a concrete plant or building on to a building all require permits and dealing with bureaucracy and red tape that can eat up an owner's time. Of course larger rental companies have to deal with the same issues, but the challenge is greater when there are fewer management staff to delegate to. Owners of smaller businesses often must focus on matters that affect the very survival of their companies.

Challenging times? Maybe. But in Baltimore, they don't back down from fights.

Not as Easy as ABC

Lee Lightner is excited. His brand-new full-color electronic reader board is sitting right on Joppa Road, 4 foot by 8 foot flashing: “Rent….Rent….Rent….Tree Chippers” and then “Rent …. Rent …. Rent…. Stump grinders.” He can program the board to broadcast any message or image he wants in any color to 35,000 cars a day going by. And because the area is usually congested, often cars are stopped and looking right at it.

“So now when people want to rent something, they're going to be in their sleep thinking ‘Rent….Rent…. Rent’ and they are going to think of our business,” Lightner says with evident excitement.

One of Lightner's great strengths is that he loves the rental business. Not everybody loves getting out of bed every day and going to work the way Lightner does. And even though the current rental environment is challenging and considerably slower than the past few years, ABC Rental Centers finds itself in a strong market position with three locations covering the north side of Baltimore (the spanking clean, modern, new store in Towson in a converted bowling alley), the west side (Catonsville) and the south side (Columbia). The company has been able to invest in new equipment, in service trucks and delivery trucks, concentrating on an 82-percent contractor clientele.

ABC has a strong presence in the downtown commercial building renaissance in Baltimore. “We're down there quite a bit,” says general manager Tom Ward. “We concentrate a lot on the plumbers who are doing a lot of residential dig-ups and service work. We do a lot of sewer and water-related work. We have a number of electricians' accounts, and some of them are working downtown on large projects.”

But the growth of the business hasn't blinded ABC to the challenges of the current business cycle.

“Homebuilding has just stopped,” Lightner says. “There is no homebuilding whatsoever, although construction in general is good and commercial construction is good. But the housing market in our area is bad.”

“A lot of people were riding [the recent boom] and it's taken some re-adjustments,” says Ward. “In some ways, that's better, it gives everybody a new perspective. You have to tighten your belts.”

While ABC is still a major player with the small contractor, increasingly the company is working with the larger contractors and construction companies. With a growing fleet of delivery trucks on hand, a growing stable of scissors and booms, backhoes, excavators and other earthmoving equipment, and the wide-angle coverage of the metropolitan area, ABC is able to hold its own on the middle level of the rental market.

“A lot of the pickup-truck contractors like ABC Rentals,” says Ward. “But the bigger-name contractors have also been finding us and we do a lot of deliveries.”

While rental companies are often reluctant to expand when business is down, ABC had the plans in motion during the earlier boom portion of the business cycle. The expansion has enabled ABC to grow during a year when same-store growth would not likely be very high.

ABC Rental Center acquired a bowling alley that, as Ward says, had been closed for a while and had become something of an eyesore. The company converted the 30,000-square-foot bowling alley into a sparkling clean showroom with a large shop and warehouse area. A grand opening brought an outpouring of community support.

“It was surprising how many people came by who had bowled in this bowling alley and they said things like, ‘Wow, what a difference!’” says Ward. “I think it's a big improvement for the community.”

The neighborhood's response during the new branch's first year of existence supports the notion, with solid new business. Ward and branch manager Dan Devereaux are still waiting for permits to put up a good size sign in the front, depending on a banner during the regulatory process in addition to large lettering on the front of the building, although set back a good distance from the street makes it hard to attract the attention of passing traffic.

“They had a huge bowling alley sign here at one time, it was just enormous,” says Ward. “It was from back in the 1960s or '70s, when you could have signs as big as you wanted. “It would be nice if we could keep that, but they wouldn't let us.”

While the current business environment is challenging — and revenue would be slightly down in 2007 if not for adding a branch — ABC is internally strong, with a lot of long-term employees and a well-established company culture and procedures. “Most of our guys have been with us for five years or more,” says Ward. “Some of the guys have been here longer than I have, 20 years.”

The presence of many long-term core employees makes the ABC staff choosy when it looks for employees, which is not easy in a city with low unemployment. “You go through a lot of trouble training somebody and trusting them and you want to think they're going to stay for a while,” says Devereaux.

Choosing the right location is an important part of an expansion, particularly for smaller rental companies for which the decision is critical because opening a new branch is a significant capital expenditure. ABC's Towson branch, now a year old, has the positives of being in a densely populated area, less than a mile from the beltway, and conveniently located between the growing northern suburbs and the core city itself.

Now that ABC has three branches, it is benefiting by improved utilization and coordination between the stores, and is trying to develop a unified look and procedure between the three locations.

Riders on the Storm

As Marty Underwood says, it's his credit-card machine that lets him know how the economy is doing. And right now people are using a lot of credit, which causes him concern. So what can he do?

“Ride out the storm,” he says. “That's all you can do. You know the hurricane is coming, so batten down the hatches.”

The economic slowdown hasn't reached anything close to hurricane proportions yet. It isn't crisis time, but the economic flow is more like a trickle than a raging river. But Underwood is also one of the fortunate ones who enjoys his work and his commitment to his customer base keeps him focused. Underwood, with a strong workingman's work ethic, doesn't expect prosperity to be handed to him and knows a small business requires a nose-to-the-grindstone approach.

With a small, five-employee staff, Underwood is owner but also part of the work force.

“When I'm done doing accounting or [other necessary paperwork], I'll go in the back and tinker in the shop and fix something,” Underwood says. “During busy times, we normally have one or two guys on the counter, usually myself or Walt Bryan, the manager. Sometimes I have a guy out on the road. Four people is the maximum running this store.”

Proline Rentals is on a busy street in a working class area of Baltimore. It caters to independent contractors who typically work on smaller projects and like going to a locally owned rental center, staffed by Baltimore people who know them personally. A concrete plant is the dominant structure at Proline's 1/3-acre yard. He had to go through the typical bureaucratic struggle to permit the concrete plant, which Underwood says has been a lifesaver for his business.

“Contractors don't want to have to drive a long way to get fresh concrete,” Underwood says. The nearest competitor that pours fresh concrete is ABC's Catonsville store, about eight-and-a-half miles away.

Underwood has to pick and choose carefully where he'll invest in inventory because he is severely limited by a lack of space.

“We rent everything from a small 3/8-inch drill to skid-steers and mini-excavators,” says Underwood. “That's where we stop, we don't go beyond that, we're not set up for it; we don't have room for it. We carry one 36-foot boomlift if a guy wants to trim trees in the backyard or paint the high part on his house, if they don't want to do it with ladders. That's a section of the business we could grow if we had the room. Lifts take up a lot of space when they're not rented. So I try to utilize fast movers, things I know are going to rent.”

Here is where modern software enables a small business such as Proline to stay competitive.

“A year or two ago we went over our ROI reports and we picked anything that sat on the shelf three or four months and didn't move,” says Underwood. “We turned around and sold it or got rid of it. We cut back on our inventory, but now everything that we rent is what we rent.”

Proline has a small building — 3,000 square feet. A few years back Underwood was able to acquire the lot next door. If he could acquire the lot on the corner, he'd have the property he'd need to build up the business. Otherwise, Underwood would have to consider moving the business, including the concrete plant, and risk losing part of an established repeat customer base, located on a busy street.

“I need more room, a bigger building, but with the economy the way it is, and business off, now is not the time to be moving,” he says. “I'd like to move closer up to the Beltway so I could catch that early morning contractor. They don't like to come down through Pikesville, it's a lot of traffic coming down here; we're two miles inside the Beltway. If we could get closer to the Beltway, but the property values are so high. I've been praying this sub shop next door would do less than good and maybe that property would come up for sale, but it hasn't happened.” So Underwood has to sit tight for now. He had considered knocking out the current showroom to enlarge it and move it closer to the street, but with business still questionable and the very future of his property uncertain, it's not the time for Underwood to spend money on remodeling.

Although the business slowed down suddenly around September of '06 — “Like someone turned the water valve off,” Underwood says — he knows rental is cyclical. “We have steady customers coming in here, and we see some newer customers and we're just starting to see people who are doing projects again.”

Tinkerer, carpenter, rentalman

Underwood's rental career started around 1990. He had had a small construction company, and had always been “a tinkerer and a carpenter” working with tools and equipment. Working as a scuba-diving instructor, he had students in the rental business who then hired him to teach a private class for a group of rental people. “I got to know these guys, went out to lunch with a few of them and saw their businesses, and liked what I saw.”

Underwood later went to work for a rental owner, Pat Rooney, who wanted to open a new branch and had bought a building but didn't have anybody to set up the business for him. Underwood built out the building, installed the counter, the wiring, the shop and the showroom in exchange for an opportunity to learn the rental business. “He asked me to build the showroom and counter but in return I said, ‘I'm not starting out at the counter, I'm starting as manager of the store or I'm not interested.’ He said ‘You got a deal,’” and an on-the-job rental management program began. A few years later Underwood decided to go on his own and with the backing of a partner he later bought out, founded Proline Rentals in the mid-'90s.

After more than a decade, Underwood has learned a lot of the lessons a small businessman needs to learn to compete in a business environment that doesn't particularly favor the small guys. He has to try to grow a business without access to a lot of growth capital. He has to stay on top of regulations and permitting issues that take time and energy needed to run the business. He has to deal with the competition from chains such as Home Depot — there's one just a few blocks up the street — that have, as Underwood puts it, eaten up a lot of the gravy.

But those obstacles and others can't kill the spirit of an entrepreneur who still loves the business, who comes to work looking for ways to respond to the needs of his customers. There is still a will and a way.