Still Standing in Seattle

Jan. 3, 2020
Smaller companies still have their niches in rental.

As the rental business becomes more high-tech and sophisticated and more large national corporations and big builders discover the benefits and efficiencies of renting,

large rental companies are leading the charge with massive fleets, up-to-date telematics capabilities, state of the art ecommerce portals and lightning-fast virtual communications. However, contrary to popular opinion, the small “mom-and-pop” rental company is still alive and well.

Not only are they in small, off-the-beaten-track communities where the national players aren’t close by, but they are still around in in big cities including Seattle, better known as the home of Boeing, Starbucks and Amazon. They may not be doing business with such well-known giants of the 21th century economy, nor are they pulling in as much revenue per square foot as the likes of United Rentals, Sunbelt Rentals or Home Depot, and they may be doing business in small, hardly noticeable yards. But they have niches and they take care of customers such as small contractors who work out of pickup trucks and rent small machines and tools, working on jobs of all sizes, keeping the economy rolling in unglamorous but necessary ways.

One such rental company is R&R Rentals in Seattle. Like so many of the smaller rental companies that built this industry, it has a party rentals store as well as three tool rental facilities. The owners are a married couple, Troy and Kate Roper. They started the business by buying a small existing company, Bellevue Rentals, in 2002, and without much capital added on to the fleet, piece by piece. They won’t likely become millionaires, but they pay the bills and have raised five children, all of whom have worked in the business at some point, and one of whom is the current warehouse manager and operations manager of the company’s party store.

R&R expanded to North Bend in 2003 with the purchase of Crystal Rentals, and took over a former Sunbelt Rentals location. It opened its Renton store, building it from the ground up, in 2004. And it opened its party store, R&R Party Rentals, the same year.

And what enables R&R to be successful in such a competitive market? It’s pretty simple, as Troy Roper explains: “We’re a pretty boring company! Basically, the way we grow is we’re very careful about what we say we’re going to do. And we do what we say we’re going to do. It’s no magic special sauce. We work very hard. If we promise something, we do it. And we’re careful about saying yes to something unless we know we’re going to be able to do it. We don’t overpromise and under deliver. It’s way too stressful!”

         And while R&R does some simple key word marketing, and some community-based advertising, the basic way customers find out about the company is word of mouth. “Our reputation is very good,” Roper says. “And if we make mistakes, we own up to them. We don’t pretend that we don’t make mistakes. And we fix what we do wrong.”

         While R&R is not particularly a “high-tech” rental company, Roper, somewhat typical for a Seattle person, was in business as an Internet service provider before getting into the equipment rental business. Roper sold his business in 1999, getting out before the “dotcom crash” of the early 2000’s. It was a small business, so Roper was not one of those high-tech billionaires that one hears about acquiring NBA franchises. He took some time off, but, as Roper says, he found that retirement was very expensive, and he didn’t have as much money as he thought. He needed to figure out what would be the next phase of his business career.

Roper took some good advice from his father-in-law who told him that if he was going to run his own business, he needed to learn accounting.

“I went to the local community college and I took accounting classes,” Roper says. “And the cool thing about your local college is the people who teach you are out there practicing what they teach. Somebody else in the class asked, ‘What kind of business do you like?’ [The teacher] said, ‘I’ve seen a lot of things, but I kind of like the rental business because you sell it and you get it back,’ and I always remembered that.”

Roper acquired an existing rental business on a small lot. Roper recalls that in the Internet business getting bank financing was difficult because whatever Roper bought depreciated very quickly.

“When I got into this business, I thought ‘I want to go into something you can touch, and you can borrow against,’” Roper says. Still, he proceeded cautiously.

“In reality, it’s very easy to get in trouble borrowing too much in this business,” he says.

That cautious approach enabled Roper to be one of the survivors of the fierce recession that raged through the rental industry and the economy as a whole in the latter part of the 2000s.

Roper recalls how in 2008, everything was going as well as in 2007, which was a very strong year. The nosedive suddenly hit in September and in October suddenly his cash flow cut in half.

“A 50-percent cut in revenue, that is a real number,” he says. “I couldn’t get my banks to work with me, but suppliers, especially Kubota, were really good. I was very upfront, I didn’t bullshit them. I didn’t say ‘the check’s in the mail’ when it wasn’t. I called [suppliers] ahead of time and said, ‘I don’t know what’s going on, but my revenue is cut in half. I’ll give you something, but it’s not going to be the full amount.’ And some of them said, ‘don’t do that, we’ll just delay you.’ And that worked.” 

Short-term specialists

          Like many small rental companies, R&R does not spend a lot of money on marketing and advertising. Roper says the company primarily does key word advertising, focusing on Google. It does a bit of community-based marketing, sponsoring school teams, sports fields and so on.

While most tool and equipment rental companies have outside sales staff as their primarily marketing method, R&R Rentals does not. “We had an outside salesman during the recession, but we are not a monthly rental place,” Roper says. “We don’t do a lot of monthly rental. Our fleet isn’t deep enough for monthly rentals. If I say yes to a monthly rental, I’m saying no to other customers. Our fleet is good, but it’s still not big enough really to have a large portion doing monthly rental.”

Although R&R will rent an item on a monthly basis if a customer wants, that’s not where the company makes its living.

“[Short-term rental] also helps us with diversification,” says Roper. “My biggest customer probably does less than 5 percent of our total revenue. So, if they go away it’s not going to hurt that much.”

Roper acknowledges that the primary emphasis on daily rentals has a downside. “The downside is that if somebody rents a machine only for a day, they rent it and use it the whole eight hours,” he says. “Whereas if they have something for a month, they might put on 16 hours. That took me a while to learn. We are putting plenty of hours on our units. So that is one of the advantages of monthly rentals.”

Roper does put out some machines, such as excavators, on monthly rental contracts. Excavators – primarily smaller units up to 20,000 pounds – are R&R’s most rented items as well as skid-steer loaders and tracked loaders, with Kubota being the company’s leading brand.

Also, not surprising in an area as green as the Pacific Northwest, chippers are a popular rental item for R&R.

“We have a very good reputation with chippers, there’s a lot of chipping in this area,” Roper says. “We do very well with our chippers. They are higher maintenance, there’s more labor, there are sharp trees and all that, but it’s all good for us. Landscapers are one of our biggest commercial groups. In Washington, we grow things and rent things that cut growing things, so we have a lot of chippers, a lot of stump grinders, that kind of thing.”

 R&R is a fairly large Stihl dealer and offers a wide range of Stihl equipment and other lawn & garden items.

R&R would not be known as one of the region’s top aerial players but it does have some booms and scissorlifts, as well as forklifts, trenchers, air compressors, a wide range of floorcare equipment, paint sprayers and accessories, lawn and garden items, small generators, compactors, pressure washers, drain-cleaners, concrete-working equipment, heating and ventilation machines, small pumps and other general rental items.

          R&R is limited as far as how much fleet it can have. It now has three tool rental locations – in Bellevue, North Bend and Renton, Wash., all in the Seattle metropolitan area -- as well as one party store in Issaquah, and none of the facilities are as large as an acre. And anybody who has ever attempted to buy property in the Seattle area would understand without even asking why, as real estate prices are comparable in price to such high-rent districts as San Francisco and the “Silicon Valley” between San Francisco and San Jose.

“I think about expanding all the time,” Roper says. “I’m constantly looking, but I haven’t found land at an affordable price. And I have very good employees right now. I’m not going to open another store without a good manager.”

Expansion has other costs, such as additional regulations. “I have friends who are builders and permitting fees here are very high,” Roper says. “When I built my house in 2006, the opportunity costs to hook up and pay for city water was $26,000. I had to pay $26,000 to pay somebody to dig a hole so I could connect it to the line, and that doesn’t include the connecting, or the pipe or any of the building. It was much cheaper to just repair the well!”

R&R had another store that came with the original acquisition, on a tiny lot, but had been a rental store for a long time and drew good traffic. But the store was so small, the company could hardly fit any equipment there. “We always had what customers wanted, but it was never at the store,” Roper recalls. “We were chasing our tail. I would never do that again. If I open a new location, it’s got to be full of equipment.”

With limited space and a need to keep a relatively recent fleet, R&R needs to turn over fleet by more than 10 percent a year, keeping average fleet age around five years old. R&R uses eBay’s bidadoo auction service, which is popular in the northwest, and turns over fleet quickly when called upon.

Roper had considered having a central location for all repairs, but determined it was impractical, for reasons of space as well as the dramatic increases in traffic in Seattle, which rivals larger west coast hubs such as Los Angeles and the San Francisco Bay Area when it comes to traffic.

“We’d have to be bigger to justify a dedicated location to do it because you’d have a lot of truck time moving stuff back and forth and in this area, you can’t plan on going anywhere in this region in less than 30 minutes. At all times. It really doesn’t matter what time of day, it’s gonna take 30 minutes to go from here to there at all times. It’s often more than 30 minutes.”

While R&R customers aren’t the biggest businesses in town, Roper is happy with the company’s relatively consistent customer base.

“We like our customer base to be guys who are more interested in us doing what we say we’re going to do than having somebody who’s just a purchasing agent and putting everything out to bid and all they care about is price,” he says. “Not to say we’re the most expensive. Like I say, we’re very boring. I don’t price it one way and give everybody a discount. Our pricing is based on what the realistic net price is that everybody is charging. When I run my reports, there’s no ‘off-book.’ Book is what we rent at. And customers are very happy with that price. The price on the website is what it is. And we change it all the time based on what’s going on out there. But I don’t have a guy who’s a spreadsheet geek sitting in the back, running math formulas to figure out what the highest utilization value is, where the price point has to be. We’re not that sophisticated.”

R&R is not, as Roper puts it, “the rock star of the business,” but the rental business is, after all, a blue-collar business where hard work can be rewarded. “We’re doing well, we’re up year over year, we’ll grow about 13 percent this year,” Roper says. “It’s not crazy growth, but it’s reasonable and we’re staying profitable, that’s what matters. It will keep us running.”