A Business Field Of Tool and Equipment Rentals

Do you need to own a high-powered brush cutter for a one-time clearing of a patch of ground on your property? Does it make sense to purchase an electronic testing device for a one-time installation or modification of a new feature for an automobile you are working on in your driveway? Can you justify purchasing an extra computer and monitor for a weeklong special project? The answer in each case, and many others, is that it often does not make sense to make a capital expenditure for a one-time or occasional use of an expensive piece of equipment. That’s the rationale behind equipment rental companies; they spread the cost of a unit over many users. If the rental unit is managed and maintained properly, the owner may write off the depreciation over time and then sell the used equipment to recover some of its original cost.

Your business plan should include a realistic estimate of the demand for each item and its life expectancy. Calculate a price based on the expected revenues an item will generate over a reasonable period of time, taking into account the cost of the equipment, its possible resale value, and the cost to you for the money you have invested in inventory. As an example, consider a $500 tool that you think will be rented once a month and that should have a value of $200 at the end of two years of use. Your real cost for the item is perhaps $350; rented 24 times in two years, your breakeven price for the equipment alone is about $15. You’ll also want to add in a portion of the cost of operating your business and paying for repair or replacement of items that break, and you should make a profit for your time and effort. In this example, you could justify charging about $50 for short-term rental of the tool.

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