Industrial Rental Equipment in Seasonal Businesses
The seasonality of different material handling, construction, and other industrial businesses may not always be obvious, but it certainly presents itself in more than one way.
Many of these seasonal impacts result in widely varying operational peaks and valleys, driving significant disparity in a business’ staffing, costs, equipment, and sales demands.
In particular, businesses that rely on forklifts to handle their materials often find themselves needing to rapidly scale their fleet sizes to accommodate seasonal peaks, with the option to quickly shed units as demand subsides. Managing this demand curve can be a bit of a roller coaster ride, but with the right foresight and early preparation, businesses can smoothly transition through busy seasons with the help of rental forklifts.
Managing Operating Costs with Rental Solutions
There are plenty of reasons to prefer owned assets in a seasonal business, but all of these reasons are predicated on the financials penciling out.
When an equipment purchase can’t be financially justified, rental equipment naturally becomes the next best option towards positively managing a seasonal business’ operational costs in the following ways:
- Preserve Liquid Capital – seasonal businesses need to retain liquid capital earned during the busy season to subsist through the slow season, making large outlays such as forklift purchases a major risk to that liquidity. Opting for rental forklifts helps preserve liquid capital, replacing an outright purchase or monthly financing expense with a smaller rental charge. This rental charge can be terminated at any time, even early should the busy season slow down sooner than expected.
- No Depreciation Exposure – if a business were to buy and sell equipment for their busy seasons, the business would have to awkwardly juggle the capital asset gain and depreciation loss. This can make bookkeeping difficult, and create erratic changes in a company’s valuation. Instead, rental forklifts do not hit a business’ books as capital equipment, saving the effort needed to track depreciation while also maintaining consistent company valuation (which helps with stakeholder confidence and overall bankability).
- Predictable Periodic Outlays – short of a complete dud sales season, nothing hurts a seasonal business like large, surprise expenses. A single unexpected expense can wipe out an entire season’s margin in no time flat. Rental forklifts hedge against such surprises, offering a predetermined, expectant rental cost billed on a predictable cycle – often monthly. Another related benefit is that businesses can negotiate and receive discounts for longer rental windows, further cutting this expense down.
- Maintenance Cost Avoidance – except for rare situations, all maintenance costs associated with rental forklifts are the responsibility of the rental company, not the renting customer. Seasonal businesses should expect that rented units will be delivered in fully functioning condition, well maintained and up to date on service tasks. Should service be required during the rental period, the rental company will arrange to have work performed onsite, or will swap out a new rental unit while they return the original unit to their shop. For extended rentals, OEM-required replacement parts and preventative maintenance intervals are provided by the rental company.
- Insurance Cost Avoidance – most rental agencies include rental equipment insurance in their fees, allowing renting customers to avoid adding any rental equipment to their business’ insurance policy directly. Insurance can be a moderate cost, especially when the number of rented lifts needed to get through a busy season may substantially increase the company’s asset value or unit quantity limits. Each business should confirm details with their insurance carrier, as some still require a floating umbrella rider for rental equipment, as well as being added as a named insured beneficiary to the rental company’s policy.
- Deductible Service Expense – rental fees can often be counted as deductible expenses to a business, turning rental equipment into a tax advantage. Ideally, rental fees can be worked into the cost of goods sold and paid for by end customers as a function of a business’ product sale prices, but where revenue won’t entirely offset the expense, tax deductions may offer another angle. (Since nothing tax-related is ever simple, the IRS also has a separate program under Section 179 where purchased equipment can be 100% deducted in the first year of use, making the tax-driven side of the decision to rent or buy a bit more convoluted. Consult with your tax accountant for help in weighing these options.)
Finding the Optimum Balance of Rental and Owned Lifts in Your Fleet
Balancing rental versus owned lifts in a business’ fleet is a crucial detail involved when considering rental forklifts. Below we’ll share the four main motivators that drive our customers to renting lifts, and how each particular topic helps inform a decision on the right balance between rental and owned lifts.
- Volume & Throughput – peak seasons almost always mean heightened sales volumes shoved into a short amount of time. When a business’ need is purely volume-driven, rental forklifts are a direct way to add capacity to handle it. Renters should focus on establishing a rental agreement that reserves a fixed number of units, including delivery and pickup, as early as possible ahead of peak season start. The number of units to rent then is directly tied to how much labor can be added for the season.
- Functionality – some businesses’ peak seasons drive the need for mission-specialized forklift equipment to perform additional unique functions. Multi-pallet lifts for faster truck receiving, oversized lifts for larger materials, stand-up lifts for faster transit times, and clamp lift attachments for handling unique bulk containers are all examples of special functionality requirements that call for rental solutions. In these cases, managing unique volumes to a particular part of the day or week can help call for only a few rental units, as can renting attachments for existing lifts. (However for attachments, often their costs are low enough that purchasing attachments is a cheaper, safer way to go in the long run.)
- Operational Efficiency – quite often we see businesses with aging fleets tap into rental units solely to drive up the efficiency of their busy season. Typically this involves renting the latest rapid-charging electric lifts to speed up warehouse operations that are dragged down by their existing lifts’ slow charging times. In other cases, customers add lifts to expand into second and third working shifts, helping alleviate pressure waiting for lead-acid battery lifts to charge overnight. Here, businesses might look into lease-to-own or used purchase options in the long run, using rental dollars to contribute towards the cost of replacing their aging fleet which would increase their baseline efficiency at the same time.
- Margin Maximization – when the bottom line is the only line that matters, rental forklifts are often a great way to get there. Shopping for competitive rental pricing helps get expenses down to their bare minimum, as does negotiating long-term rental contracts. Further, a business can expand their forklift vendor’s engagement to cover aspects of their existing forklift fleet for even more savings, by way of fleetwide service agreements, fueling agreements, and multi-site master service agreements.
We hope that this discussion on material handling techniques and technologies proves useful to your manufacturing, construction, and distribution interests. Atlantic Forklift Services is your premiere material handling equipment resource, serving customers in the North and South Carolinas with professional equipment sales, rentals, service, repair, parts, training, and solution consulting.
As a Platinum award-winning dealership, Atlantic Forklifts Services partners with world-class equipment manufacturers including Bobcat Material Handling (formerly Doosan).
To learn more, please contact us by phone at (866) 243-0991, by email at info@atlanticforkliftservices.com, or on the web at https://www.atlanticforkliftservices.com/.