Equipment rental can be a great way to start a business, even with limited experience and capital. It’s a great way to turn extra capital into hard assets and then turn those assets into recurring revenue streams. This article will look at some of the major considerations you should undertake when attempting to build out such a business.

Find the Right Niche for Your Equipment Rental Business

A lot of the success you’ll see from your equipment rental business ideas is going to come down to what kind of equipment you choose to include in your inventory. Equipment rental is a very broad category and can mean a lot of things. Are you starting a tool rental business, renting out tractors, or providing AV equipment?

Making the right decision will depend on understanding what type of equipment is needed in your specific area. If you live in the middle of a big city, then you might not see much demand for off-road ATV rentals. However, you’d likely see more than enough demand for AV equipment and camera rentals, thanks to the density of the population.

You can also try to identify current trends. Is your area seeing a lot of new construction? Are people renovating a lot of homes? Based on this, you could decide to focus on construction equipment or tools for your equipment rental business start-up.

Understand Your Customers

When it comes to how to grow a tool rental business, it really comes down to how well you can provide effective customer service. While your business, of course, depends on the quality and reliability of the equipment you rent out, the quality of service and relationships you build often play a more important role in the end.

You should ensure that all of your rental policies and pricing are clear to your customers to avoid disagreements after the fact. Even if you manage to stick by your contract and get the money owed for that rental, the experience will leave customers dissatisfied and unlikely to return.

Communicating with your customers effectively is absolutely necessary. They need to know exactly what it is they’re getting, and it needs to be easy for them to find out what you have in your inventory.

Insure Your Equipment

The equipment rental business model is incredibly clear. Your equipment is your business. Especially with heavy equipment where your goal is not only keep it in great working order, but to keep it in shape that so that you can sell it further down the road. That requires both effective maintenance planning and having the right insurance.

Every business needs insurance to protect its assets. When it comes to equipment rental businesses, you’ll need both general liability and property and equipment insurance. This coverage means you’ll be protected both from what your equipment does to renters and what your renters do to your equipment.

You should note that the protection provided by liability waivers is often dubious and incomplete, and they shouldn’t be relied on as an alternative to proper insurance. Also, any vehicle or towed-equipment rental businesses will need auto insurance as well.

Understanding Your Business Model

A big part of how to start an equipment business is to work out exactly what your business model is going to be. You’ll have income and expenses like any other business, and keeping track of all that is an essential part of how to run a tool rental business.

Your revenue is going to be the money you make from renting out equipment. Your costs are going to include store rent, employee wages, utilities, maintenance, and other factors. Your profit will be the revenue minus the costs, and hopefully, it will be a positive number.

There’s another big thing to consider for rental businesses in particular, though. The equipment your business owns are assets that depreciate over time. 

You can’t directly claim the cost of a new tool as a cost for your business because your business still owns the tool. However, you instead apply depreciation, counting a different percentage of equipment value as a cost each year for a set period based on the type of equipment.

Identify the Road to Profitability

So are equipment rentals a profitable business? Well, there are certainly successful rental businesses out there, so there must be some way to do it right. Whether your equipment rental profitability holds steady is going to come down to how you manage your business.

Individual markets can vary widely as well, especially impacting how much a tool rental business makes. 

If you’re looking into how to start a tool rental business, consider if there’s room in your market for another profitable rental business, and if that profit is going to be enough to account for equipment and maintenance costs or if you’ll just barely be getting by.

If you intend to focus on heavy machinery, you will need to consider your exit strategy for your equipment. How long do you intend to rent out your bulldozers, skid steers, lifts, etc. until its time to sell?  If you sell too late, you may miss out on recouping a large part of your original investment.

Use Demand To Your Advantage

One of the most important ongoing factors is going to be tracking specific rentals. You need to know what equipment is being rented and when in order to develop an effective strategy. 

If some equipment is rarely rented out, maybe don’t replace it once it fails. Notice a big pickup around a certain time of the year? Ensure you’re fully stocked in that equipment type before that season rolls around.

By leveraging demand, you’ll be making the best use of your inventory and assets. When you start equipment rental businesses, you need to consider that a massive portion of construction and other outdoor equipment is almost entirely seasonal. You can’t rent a snowblower in the middle of the summer.

While some seasonal trends are very easy to pick up on and predict, many aren’t. You’ll need a reliable way to accurately track your rentals. Manually reviewing records would be incredibly time-consuming and likely to produce poor results anyway. Ideally, you should have effective software to support your business.

For example, if you live in an area that gets seasonal snowstorms – ensure you have snow blowers and other equipment ready for rent. In addition, you can use social media to advertise ahead of big storms so that customers have the opportunity to rent before others and ensure they have the tools they need. This also could lead to greater rental times for you meaning greater profitability.

Choose the Right Software

Software provides major advantages for those trying to find out how to start an equipment rental business. It can simplify many aspects of how to run an equipment rental business, providing a framework for inventory tracking, maintenance scheduling, and finances.

Of course, modern businesses need effective websites to succeed as well. Having a platform that provides a straightforward and easy-to-use website builder will make it easier for customers to find and use your services. Ideally, you want a website platform that connects with your inventory, rather than just a general overview.

Integrated rental business platforms are great, but you’ll probably want to keep some of your own accounting records as well. Finances are an important part of how to open a tool rental store, so look into using QuickBooks rental software or other accounting software to make sure you’re keeping track of all of your revenues and expenses.

Starting Your Equipment Rental Business With Quipli

Quipli lets your new equipment rental business hit the ground running with a comprehensive software platform that provides for all of your inventory and website needs. 

Professional presentation and easy access to your website will let customers find exactly what they’re looking for and make them more likely to visit your business. Integrated inventory management lets you control and analyze your rentals.

If you’re interested in finding out what Quipli can do for your rental business, book a 15-minute demo with our team today.

Build Your Business with Quipli’s Equipment Rental Software

One of the biggest questions that new business owners have is, “Do you charge tax on rentals?” It’s not always clear what the right move is, and failing to meet tax requirements can have serious consequences and penalties. It’s always best to thoroughly research what your company’s tax obligations are.

Quipli Can Adjust Your Sales Tax Automatically – Book a Demo Today

Is There Sales Tax on Rental Equipment?

You might think that there wouldn’t be any applicable sales tax on rental equipment because you aren’t really selling it. However, this generally isn’t the case.

Most rentals are subject to sales tax, just like any other goods or services. Finding out the right amount to collect can be difficult due to state, city, and county tax rates varying.

You’ll need to look up the exact tax regulations for your geographic area, which can vary substantially from place to place. Not only do tax codes vary substantially from state to state, but there may be additional taxes levied by your specific city or county.

While handling sales tax might seem like an additional burden when starting your equipment rental business, the process isn’t all that complicated. With effective software for managing your business, you shouldn’t have any trouble keeping up.

Sales Tax and Different Types of Equipment Rentals

When you’re considering if there is sales tax on rental equipment, you need to take a look at exactly what it is that you’re renting out. 

Different categories can have different requirements and exemptions, and knowing ahead of time will save you a lot of trouble in the long run. Vehicles are one of the most prominent categories that have major differences.

Vehicles and other types of heavy-duty machinery can often fall under other tax schemes. In many states, they face specific taxes called excise taxes. 

This tax can be on top of or in place of regular state, city, and county sales taxes. In general, vehicle rentals will have multiple taxes applied that will be very specific to individual jurisdictions.

Excise Tax & Equipment Rentals

Several states – including but not limited to Indiana, Michigan, and Washington – have additional excise taxes on heavy equipment rentals. An excise tax is an additional tax, imposed on certain kinds of goods, services, or activities – in this case, on equipment rentals.

A good example of an excise tax we all encounter every day is the federal gas tax.

Like a sales tax, an additional excise tax on equipment rentals will impact the final amount that you’ll need to charge each customer that rents from you. Excise taxes can be imposed at any of the following times, depending on state and context:

• Sale or use after something is imported from another country
• Sale or use by the manufacturer
• Sale or use by a retailer
• Sale or use by a customer

This tax can be on top of or in place of regular state, city, and county sales taxes. In general, vehicle rentals will have multiple taxes applied that will be very specific to individual jurisdictions.

Sales Tax in Different States

Of course, anything to do with taxes for your rental business is going to be affected by what state you’re in. Here’s a quick rundown of a few states with prominent differences or exceptions when it comes to sales taxes on equipment rentals.

If you’re not sure about your own state, it’s a good idea to consult with an accountant, attorney, or another professional with expertise in local tax code.

California

In California, there is a sales tax on essentially every type of tangible property rental. There are also taxes applied specifically to motor vehicle rentals. 

Along with sales tax, California also imposes a “use tax,” in some cases in which taxable items are purchased for use, storage, or consumption, but not for direct sale. This can sometimes apply if you purchase equipment out-of-state from an out-of-state vendor.

• Leases are taxed based on rental receipts or payments
• Use tax can apply if you remove a unit from your fleet for personal use (versus rental by a customer)
• Some districts may have their own additional taxes, with total sales tax exceeding the typical 7.5%. Check your local city or county tax code, or consult with an accountant in your area, to find out if this applies to your business.

Washington

In Washington, there is both the regular sales tax and the Business and Occupation tax to consider.

The Business and Occupation Tax is measured based on the total value of the products, gross proceeds of sale, or gross income of a business.

There are no exemptions available for the B&O tax for labor, materials, or other costs of doing business. However, there are several tax credits that are subtracted from the B&O tax on your business’s tax return:

• Rural County B&O Credit for New Employees
• High Technology B&O Credit
• Small Business B&O Tax Credit
• Multiple Activities Tax Credit
• Credit for Hiring Unemployed Veterans

Washington’s B&O tax is paid on your excise tax returns.

The specifics here can vary with tax classification, which depends on your type of business and what activities it engages in.

You can check out the tax classification details for rental businesses in Washington here: https://apps.leg.wa.gov/wac/default.aspx?cite=458-20-211 

Texas

Texas has a motor vehicle rental tax, which is applied to equipment rentals of heavy construction machinery and other types of vehicles, as well as to passenger car rentals.

Texas tax law handles motor vehicle rentals a bit differently than straightforward sales. They’re exempt from the general sales tax, but have another tax with different rates applying depending on the duration of the rental.

When you rent a vehicle to a consumer in Texas – including heavy construction equipment – you must also collect the motor vehicle rental tax from the customer, as part of their total payment. (In a very few cases, the customer may have some form of exemption, but this is relatively rare.)

This additional tax is calculated based on gross rental receipts – this means the total amount charged to the customer for the rental. So it functions similarly to a typical sales tax.

Texas has two different motor vehicle tax rates for rentals, depending on duration:

• Short-term contracts of 1 to 30 days: 10%
• Longer term rentals of 31 to 180 days: 6.5%
  

Individual cities and counties are also able to impose additional local taxes on short-term motor vehicle rentals – if this is the case in your jurisdiction, you’ll need to include that as well when invoicing customers. You may want to check your local city or county tax code, or consult with an accountant.

Both state and city/county motor vehicle rental taxes must be itemized in invoices and clearly delineated from the rest of the cost. So you’ll need to include a separate line item in each invoice to account for it.

Colorado

Colorado takes a different approach, considering the equipment rental business to be the end-user of the equipment. 

As such, there is no requirement for sales tax on rentals, except when the rental exceeds three years and the person renting is considered to be the end-user. There are applicable taxes on motor vehicle rentals, though.

New York

In New York, there are some considerations when taking a look at rental taxes. While a sales tax is applied to rentals, this doesn’t apply to rentals where an operator accompanies the equipment. In that case, it’s treated not as a sale or rental, but as a service performed. 

With that said, per New York State tax law, any purchase, rental, lease, or license to use construction equipment and motor vehicles by a contractor, is subject to both sales tax and use tax. It is the contractor renting from you who is liable for these taxes – that is, you’ll need to include them in your invoices when you bill your customers. 

New York also has specific taxes that apply to motor vehicle rentals, including requirements for paying in advance for extended rentals.

In the end, the responsibility is on business owners to find out whether you pay sales tax on leased equipment in your state. With strict reporting requirements, you can’t afford to leave this up to chance.

Manage Your Equipment Rentals With Quipli

Quipli provides comprehensive software for managing equipment rental inventory and presenting an attractive website to customers. With Quipli, you can easily manage orders, invoices, and inventory without the need for separate tools.

To find out more about Quipli and its integrations with quickbooks equipment rental software, please book a demo with us today.

Rental businesses of all kinds serve an essential purpose in markets everywhere, providing access to essential equipment and other goods for people who need them for their business to function, but do not have the storage facilities or funds to buy them outright. However, there’s a lot to consider when looking into starting a rental business.

What Is a Rental Business?

A rental business is quite simply a business that provides rentals. This concept can cover a wide range of different areas, renting everything from jet skis to jackhammers. While that’s the view from the outside, the business model has a bit more complexity to it than you may realize.

When starting a rental business from scratch, a business owner must acquire equipment to be rented out. This purchasing represents the initial investment needed to start the business. Ideally, the money brought in from rentals will grow over time to be more than the initial purchase cost of the equipment.

Because the rentals are the only revenue stream for the business, they also need to cover all of the other costs like maintenance and utilities. This amount may sound like a lot, but rental businesses can thrive by having the right inventory for the market they’re in.

Are Rentals Right for My Business?

If you’re looking into starting a business, there are many different options out there for you to consider. So why exactly is starting a rental company the right move for you? Well, it might not be. You need to consider how well the model meshes with you, your resources, and your market.

One point to consider is that the rental industry does have considerable profit margins. In the end, this means that there’s the potential to make significant income from your business and to continue to expand and build wealth over time.

You should also consider what running the business is actually going to entail. At its core, the rental business is heavily focused on customer interactions. You’ll have to be able to inform your customers and provide excellent service every time. If that sounds like something you can do, then a rental business may be right for you.

What Are the Costs of Starting a Rental Business?

Cost is an essential factor to consider when looking into how to build a rental business. Like essentially any other business idea, starting an equipment rental business is going to require money to get started. Because you can rent many different things, the cost can vary widely.

You’re going to need inventory to get started, and that means buying equipment to rent out. Established businesses aren’t buying equipment all at once but instead, rely on incoming revenue to replace and update equipment from time to time. This approach isn’t an option at the start, so you need another way.

Many small business owners seek out financing to get their business off the ground. Whether through your own networking or a financial institution, this capital can help you establish your inventory. Of course, you’re going to need a well-thought-out and developed business plan to convince investors.

How Can I Identify a Rental Niche?

Determining what specific kind of equipment you’re going to rent is essential to how to start a rental business. There are so many things to consider here such as:

1. What market you’re in
2. What’s the competition like
3. Is a niche underserved in your market
4. What you resources are
5. Do you have any contacts or connections that may help you in a specific niche
6. What just seems like the right fit for you

Ideally, you should be choosing something that you are interested in and know something about. This strategy gives you an upper hand when learning how to run a rental business and will make running it that much more enjoyable.

Rental business ideas can range from bounce house rentals to snowblowers, so there’s an incredibly wide range to consider. Always make sure that the area you’re choosing is something that’s going to have a reliable and steady market in your specific region.

How to Choose the Right Products to Rent?

Once you’ve secured financing and made your choice as to what kind of rental business you’re looking to start, you need to go about acquiring your equipment and products. What’s important here is to focus not on building the largest inventory but on building the most effective inventory in your niche and region.

You don’t want idle inventory – equipment that sits there and is never rented out. Instead of trying to cover all of the bases, focus on having enough of the fundamentals within your niche to meet demand. You can always broaden your inventory later.

So – ask yourself, what are the essential products my niche needs throughout the year? Are there certain jobs that require only a specific set of product rentals that I can easily supply? 

In fact, take a look at some of other rental businesses in your niche and see what products they offer. If they seem to be broadcasting certain products more than others, those may be some of their best sellers. 

If you are having a hard time, reach out to businesses in other regions that match your target customer and ask what equipment they rent most often. You may not always get an answer, but any feedback you get will be gold. Plus, since you are reaching out to other regions, you do not lose any credibility with potential customers.

Getting a good deal on equipment purchases is also essential. You should get to know how high-end and low-end purchases really matter for specific types of equipment. If low-cost equipment is just as good, that’s what you should be getting. Keep an eye out for used equipment for sale as well if you’re able to reliably judge its condition.

Will I Need My Own Facility?

You need somewhere to keep the equipment you rent out, somewhere for customers to pick it up and drop it off, and somewhere to do business in general. For some types of rental businesses, you might not need more than a small storefront rental on a busy street in town to make the most of it.

However, if you’re renting out larger equipment, or even vehicles, you might want to consider purchasing or building your own facility. Whether to purchase or rent commercial properties for any business is always a hot-button issue, so it will likely come down to the needs of your specific business.

How Can I Handle Maintenance?

Maintenance is incredibly important for rental businesses. Your equipment makes up the value of your business from which you derive revenue. If you don’t take care of that equipment, you’ll see replacement costs grow to exceed rental income and eventually start losing money.

The most important thing is to establish a maintenance schedule and follow it. Different types of equipment will have different maintenance needs, and you should take the time to find out what these are and plan well in advance. You’ll also need to make sure you’re actively monitoring this schedule to ensure it’s really getting done.

What do I need to know about an Inventory and Reservation System?

Any rental business needs an effective inventory and reservation system to compete in the modern retail landscape. You can’t afford to go without reliable tracking and accounting of your inventory. Ideally, your website should be fully integrated with your inventory system to ensure it’s always accurate and available to customers.

The systems you use should make it easy to add and manage inventory, along with enabling online reservations. Making the entire process easier for your customers will lead to more rentals and a thriving business. 

It also makes everything easier on the backend, as inventory management is one of the key challenges of running a rental business.

There are several different types of software solutions available for inventory and reservation management, however some can get away with using Excel and Google Sheets – it just takes a lot of time. Tools like Quipli bundle your inventory, reservations, payments and website experience into one and can simplify this entire process of your business.

How do I start getting customers?

Creating a marketing plan for your business will require you to exercise your creativity and knowledge of your customers and niche.  Some of the most essential ways to get customers interested in your business are:

1. Start a website. The first essential step is to have a basic website – however the better suited for handling orders, reservations, and accepting payment, the better your business will run in the long run.
2. Use digital marketing strategies to build visibility for your website. This can include SEO, paid search ads, social media advertising
3. Call your customers directly. Going direct to your potential customers – whether in person, telephone or over email, and telling them about your business and what you offer is a great way to get the momentum going when starting out from scratch
4. Purchase ads in local newspapers, magazines, or radio stations.

Quipli Provides an All-in-One Solution for Rental Businesses

If you’re starting an equipment rental business, you should consider Quipli for all of your website, inventory management, and reservation needs. Our fully integrated platform makes it easy to manage your inventory and have all changes follow through immediately on your website.

By running your website through Quipli, you’ll have the same tools and features as major companies. The sleek and intuitive presentation lets customers access your inventory 24/7 and drives more of them to make reservations with your business.

Reach out to Quipli today to book a demo and see what we can do for your new business.

Book a Demo with Quipli’s Rental Business Software