Contractors 101

Aug. 1, 2003
Though the economy has seemingly been in a slump for the past two years, steadily declining interest rates have helped maintain a stable construction

Though the economy has seemingly been in a slump for the past two years, steadily declining interest rates have helped maintain a stable construction market. The good news is that contractors are staying busy. The bad news is that, in some cases, the same contractors have to lower their bids to keep the work.

Since many contractors depend on rental to get their jobs done, many rental businesses are making adjustments accordingly to meet the needs of their contractor customer base.

“Contractors are facing the same things we are,” says Paul Schlerf, sales manager, EquipRent, Azusa, Calif. “Every dollar counts. They can just give their best projections on a bid; sometimes they get turned upside down in a job. That's when they call in the rental company to help them. When their circumstances change we have to change our circumstances for them. We have to be aware of their situations and what they're going through.”

Nathan Hyde, general manager, Hayden Rental & Sales, Kendallville, Ind., observed that many of the contractors he encounters do business with state and local government. These contractors, he says, are in need of increasingly longer terms of payment since often they don't get paid by the government agency in less than 90 days. And being flexible with his customer base has paid off. The slower economy has led many government agencies that Hyde and his customers work with to opt to rent equipment rather than purchase it.

Schlerf, too, has a clear understanding of his contractor customers. They are only asking of their rental company what the developer and the general contractor have asked of them. If your business isn't willing to work with them to devise a solution, then you can expect that they will go down the street to one competitor after another until they find the rental company that will meet their needs.

“Service and availability are equally important when it comes to choosing a rental company,” says Frank Pavlik, regional manager, Simon Contractors, North Platte, Neb. “If the equipment breaks down on the job and we can't get it serviced, then it's just like not having it.”

Being sensitive to the cost of downtime to contractors is another important element in the rental relationship. Doug Raney, owner of San Antonio-based Aztec Rental, says the most demanding contractors expect good service. Aztec works hard to get equipment serviced and back on the job in a reasonable amount of time. “We have three stores and four service reps,” says Raney. “Our service has been unbelievable — it's cost us a lot of money because of that, but in the long run we think it will help us now and when things do start to get better. We have the equipment, but it's the service behind it that's important.”

Larry Workman, president of Lemont, Ill.-based Illini Hi-Reach agrees that dependable service is critical for contractor customers. “[Contractors] are all feeling increased pressure in controlling overhead and improving productivity,” he says. “Thus, a contractor may jump at low rental rates yet may suffer from costly lack of support when their project is in ‘crunch time,’ which is usually an incalcuable cost to their job.”

True, this approach to service may be costly, but ultimately, what is more costly than customers lost as a result of poor service? Having the equipment available your customers are looking for is important, but without a commitment to service, those customers may soon go elsewhere.

“Service is a constant that has always been a factor,” says Schlerf. “Your ability to maintain your equipment before it goes to a jobsite must be there. Broken down equipment on a jobsite is a cost issue.”

Maintaining your equipment on the front end of a rental transaction will save contractors from valuable downtime on the job and can prevent damaged relationships caused by unreliable equipment. The benefit carries over to the rental company as well in the form of cost savings. If you have to send someone into the field to service a broken backhoe, there's one less person in the shop servicing fleet to go back on rent. And if it can't be fixed at the jobsite you may have to send another one from your fleet to replace it, taking a unit away from your available fleet and possibly costing you a rental.

“Today's rental company has minimal room for error in supporting today's contractors,” says Workman. “Getting it right the first time/at the start of the project makes life a whole lot easier. Your best effort for your customer is a great daily rule to follow.”

Along with service, the rental businesses RER interviewed reported that contractors are seeking the same things they've always sought in a rental partner — reliable equipment, competent staff and competitive rates. The difference now, when the economy is challenged, is that these things take on an even greater significance.

According to Schlerf, each transaction is monitored from both sides more acutely than it was before. The pricing, delivery, usage of the equipment and whether both parties are satisfied is important and noted. Relationships, Schlerf says, are more important than ever, and price is as important if not more important than it was before. “If you want to keep the relationship, you have to meet their needs,” adds Schlerf.

According to Workman, declining rental rates have put more pressure on rental companies' abilities to provide top-notch service support for their customers. Even the consolidators are pressed to provide proper product support at the rates of return the industry is experiencing. “Being ‘lean and mean’ is now not just a catch phrase in the rental industry; it is the absolute bottom line,” Workman says.

Because rental continues to be such a relationship-driven business, most rental managers aren't worried about loyal customers abandoning them for the local big box rental shop. “In small town, rural Indiana, we find that long-standing business relationships matter more than the one-stop shop notion,” says Hyde. “Our contractors have always purchased nails and fasteners from Broadview Lumber, so they (probably) always will. On the other hand, they've developed a strong relationship with us as a rental yard and continue to do business with us in that way. One-stop shopping is often paired with big, unfriendly environments in our local culture — think Wal-Mart. Sometimes handy, often over-rated.”

If you are serving your customers correctly, Schlerf says, they won't stray to Home Depot or Lowe's. If you don't have the equipment or materials they need, tell them where they can find those supplies or send them to a competitor if you know that's where they can find something to better meet their needs. Provide service on all levels. As a result, your store will be the one that customer remembers the next time he needs to rent, not necessarily the competitor you refer him to.

Workman admits that Home Depot and Lowe's can be an option, but points out that they are not as regularly dependable as a full service rental store that knows its product lines, marketplace and customer base. “You cannot beat veteran experience and prompt service in any industry,” he says.

Besides equipment rental and service, consider other ways you can service your contractor customers. Pavlik's company, Simon Contractors, for example, has an in-house shop that services most of its equipment, from the lawnmower that mows the lawn out front to the rollers it owns. Though it doesn't depend on the rental company it works with for service, Simon does use it as a parts source. If you can serve on a regular basis as a parts source for a contractor, then they will be more likely to call on your company when the need arises to rent equipment.

“When you try to understand your customers you can service them in the best way,” says Schlerf.