EQUIPMENT: The Rent-Buy Balance

Versatility is crucial to the growth of a landscape company. Starting out with a niche in residential lawn maintenance is a good way to establish a company in a specific market. But after establishing an initial customer base, many firms grow by offering more services, which requires more hardware.
 
But resist the urge to buy every tool and piece of equipment you need for a job, and investigate the rental market instead. Landscape contractors who smartly negotiate the rent-vs.-buy decision-making process can cut down on costs, test various pieces of equipment and purchase equipment when it makes solid business sense. Success is based on understanding the benefits to renting vs. owning, knowing what types of hardware to rent, establishing beneficial relationships with suppliers and having a plan for making the shift from renting to buying (For more information, see “When to Buy” on page 108).

RENTAL PROS. Renting gives landscape contractors more options than buying a piece of equipment. “Renting allows customers to control their own inventory,” says Johnny Campos, corporate trade press relations with Caterpillar’s Rental Group, Peoria, Ill. “Rental companies hold the construction equipment assets rather than the contractor. Second, there is less down time. If a piece of equipment fails, rental companies replace the equipment so the customer is continuing their work instead of waiting for their equipment to be fixed.”
 
Knowing when to rent and what to rent requires having an intimate knowledge of your business. What kind of jobs will you do on a regular basis (providing regular cash flow and necessitating constant access to equipment) and what jobs will you do only a few times a season (resulting in irregular revenue and occasional use of hardware)? Buy the hardware you use on a regular basis, and rent the equipment you use sporadically.
 
Hurbert Roberts, president of Lawn Keepers in Tallahassee, Fla., is as familiar with his business as a father would be with his own child. “We consider ourselves a full-service lawn care and landscape company,” he says. “We may have five jobs a year where we’re going to prune some tall trees. For big jobs like that, the equipment is going to sit around 90 percent of the year [if we buy it].”
 
Aerators, root grinders, heavy tillers and cherry pickers are examples of rental options for Roberts. “The heavy tiller would only come in handy when we have the big jobs,” he says.
 
But as your company grows and you offer more services, it’s important to stay on top of your equipment inventory and shift from renting to buying when the time is right. When Roberts heard from his employees that customers’ home exteriors and patios could use a scrubbing, he leapt into action. Lawn Keepers distributed a newsletter to clients pointing out that new-home construction and rainy Florida winters left a lot of crud caking their walls.
 
“It generated enough business,” Roberts says. “We rented pressure washers for three months, and then bought them. Now, coming out of the winter, everybody wants a cleaning.”
 
Jon Kuyers, utility products segment manager for Vermeer, Pella, Iowa, says he’s noticed landscape contractors looking to rent more versatile pieces of equipment. “If you have a more versatile tool, you can use different attachments,” he says, which offers contractors more utility over a rental period.
 
That said, contractors might want to look at the versatility within their own inventories before renting, Roberts says. If he figures he can adapt one of his edgers and use it as an auger, he’ll do that rather than rent an auger. “Take an inventory of the tools you have on hand,” he says.

EQUIPMENT OVERLOAD. The most common mistake Stephen Hillenmeyer has seen landscape contractors make is to buy too much equipment. “We’re all iron jockeys,” says the president of Hillenmeyer Landscape Services in Lexington, Ky. “We like to have lots of equipment. We like to say, ‘Yeah, I have that one up in the shed.’”
 
But there is such a thing as over-renting, when, after a little investigation, you might find it’s a better idea to buy. “It’s more convenient to rent something when you need it against planning out whether you can buy it,” says Todd Dilley, president of Outdoor Environments in Savage, Minn.

This happens often when renting smaller pieces of equipment that seem like innocuous expenses on their own. “You rent it by the week, and maybe the rental cost is a third of the value of the machine,” Dilley says. “Then it lies around for a few days, you keep it another week, do the same thing, and pretty soon renting it costs more than buying it.”
 
Hillenmeyer had this happen during a job that entailed rearranging plant material in the company’s yard. The company rented a skid-steer loader for the project, even though it already owned a front-end loader that would have been sufficient. After the yard reorganization was complete, Hillenmeyer’s employees had gotten used to operating the skid-steer. “And next thing you know the loader that we owned was sitting there and the skid-steer was being used,” he says.
 
Like Dilley, Hillenmeyer advises having a policy of using rental equipment for its intended job and then returning it the moment you don’t need it anymore. “If you’re renting something specifically for a job, that’s a lot less risk.”
FEEL IT OUT. There are two schools of thought about judging rental dealers: going on relationship and going on price. If you value flexibility from your dealer, find one who will work with you and understand the unpredictable nature of the landscape business. If you have your eye on the bottom line, find the dealer who will offer you the best rates.
 
Hillenmeyer looks for that flexibility. “Look not at the paperwork but at the people you’re dealing with,” he says. “We’ve worked very hard to establish a network of suppliers.”
 
If inclement weather prevents you from using a piece of equipment you’ve rented for the day, a flexible dealer will understand and may charge you a reduced or no fee. When Hillenmeyer has to hold on to a piece of equipment longer than he originally planned because weather knocks him off schedule, his dealer will often charge him based on how many hours he uses the equipment, and not how long he has it in his possession. “You have to have communication with the rental people,” he says. “Tell them what you’re doing and why. It won’t work every time, but there are certain times and situations [when it will].”
 
Roberts will rent from local dealers when he can, but he shops around. “Familiarity [with a dealer] starts me off and price is the deal breaker,” he says. “If I can save 80 bucks on a root grinder … from Home Depot, I’ll go to them in a heartbeat.”
 
Dilley has another piece of advice: Know the terms before you rent. “We might need it for a day, but might keep it for two,” he says. “If we keep it for a few days, it might be more expensive than a weekly rental. I always negotiate that up front.” LL