t h e r e ’ s n o d e n y i n g we’re in the midst of a healthy rental

equipment boom. And there’s no sign of it slowing. In fact, the

American Rental Association (ARA) projects the industry’s revenue
growth rate will continue to expand 4.9 percent year over year, to
reach $57.3 billion by 2020.

“This forecast shows the strength of the industry and the ability of
those in equipment rental to quickly react to market changes to
maintain growth and reinforce the value of renting to their customers,”
says Christine Wehrman, ARA’s CEO and executive vice president.

As the equipment rental industry continues to grow, so do its

challenges and opportunities. There are a number of trends that
have strengthened or emerged in recent years that equipment rental
companies must now face.

TREND 1 T H E N E E D F O R R E N TA L S
C O N T I N U E S TO G R OW

The construction industry is booming. In particular, the rental market’s

growth will be driven by higher prices for equipment that meets the
new U.S. emission standards. Companies must find a way to keep up.

TREND 2 T H E T E C H N I C I A N S H O R TAG E I S
WO R S E N I N G .

Blame it on retiring baby boomers, competition among other technical

industries, changes in the industry, or the type of education young
people are pursuing today. With the continued predicted growth for
the construction industry, equipment dealers will soon be pressured
to raise wages and benefits for technicians and invest in training to
advance the skills of more mid-level technicians. Because of this,
purse strings may need to be tightened elsewhere to maintain growth.

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 T H E I N D U S T R Y I S N OW E M B R AC I N G T H E

TREND 3 I M P O R TA N C E O F DATA M A N AG E M E N T A N D
A N A LYS E S F O R I N S I G H T O N B E T T E R WAYS TO
DO BUSINESS.

The growth of the Internet of Things (IoT) in rental machinery and the
need to capture and understand customer data could bury companies.
Creating a strategy to leverage this influx of data is paramount.

How can equipment rental

companies successfully ride
the trends?
Prior, much of fleet management and business decisions may have
relied on little more than gut instincts and past experience. But a modern
business cannot run on the strategy of “that’s how it’s always been
done.”

A modern business cannot run on the strategy

of “that’s how it’s always been done.”

The answer to better decisions lies in analytics. An all-encompassing

business analytics strategy will touch every department of the
organization to streamline processes and reveal the insight needed to
operate profitably. It will improve the customer experience and offer
transparency, flexibility, and freedom from complexity that has plagued
the industry in the past.

Harnessing and analyzing data will also address the most critical daily

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 challenges equipment rental companies face today, including managing
complex billing and scheduling, balancing asset portfolios and cash flow,
delivering full insight into fleet utilization, improving customer service,
and managing the equipment lifecycle.

The trick to harnessing the increasing flow of data is knowing which

metrics monitor most closely. To help, we’ve created a list of the most
important KPIs for the equipment rental industry and why they matter.

Best KPIs for rental fleet

management

01 F I N A N C I A L U T I L I Z AT I O N : A N N UA L I Z E D R E N TA L
R E V E N U E / TOTA L AC Q U I S I T I O N C O S T

Financial Utilization, also called Dollar Utilization, measures the true

amount of revenue earned by each individual piece of equipment. It
can be a very simple calculation of taking the annualized rental revenue
divided by the total cost of acquisition. This metric can also be expanded
to include revenue from other services or products, such as fuel and
delivery fees.

Benchmarking the Financial Utilization percentage helps compare the

pieces of equipment that are making the most money for your company.
Potentially, this number will help you determine what new pieces you
should be adding to the fleet and whether those pieces should be new
or used. The potentially significant variances of acquisition cost between
new and used equipment will highly affect the Financial Utilization
percent.

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 02 T I M E U T I L I Z AT I O N :
DAYS R E N T E D / DAYS AVA I L A B L E

It’s not good business sense to carry equipment with low utilization rates.
By tracking Time Utilization by machine and time period, you can make
quicker, more accurate decisions on what equipment or parts to keep on
hand. This KPI shows you increasing or decreasing utilization trends so
you can make decisions about now and the future.

The right analytics for an equipment rental solution will alert you
immediately when your fleet falls below a certain utilization percentage.
Sub-par utilization is an easy determinate for removing machines from
your fleet instead of holding onto equipment that is not making money.

03 R E N TA L R AT E : R E N TA L R E V E N U E / N U M B E R O F
C O N T R AC T S

The rental rate KPI measures the average change in rental rates from
period to period. It is one of the easiest metrics to capture, but also one
of the most important. Rates can be broken down by daily, weekly, or
monthly contracts. Calculating regular payments for your equipment
signifies the minimum rental amount you can set to maintain revenue
goals and benchmarks, while ensuring you still meet short-term needs.

Equipment rental companies that do not properly track rental rates may
lose the chance to recoup the substantial money they have spent to rent
or own their machines in the first place.

It also helps your company stay competitive by easily comparing the cost
of brands, operators, and divisions.

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 With the right information at hand, you’ll
be able to eliminate problem machines and
replace them with more reliable equipment.

04 WA S H O U T P E R C E N T: TOTA L I N C O M E / TOTA L
EXPENSES

The Washout Percentage is used as a final calculation upon disposal of

an asset or to more accurately predict the future disposal of an existing
asset. This metric is the measurement of profitability over the life of a
machine.
There are variations of this metric, but the simplest way to look at it is
cash in versus cash out. The formula is total expenses (purchase price,
prep, carrying costs, maintenance) versus total income (rental income,
sale price).

Different plans or scenarios can be created for machines still in the fleet
“what-if” phase. For example, what is the sale price required to reach a
desired return on a piece of equipment?

05 M A I N T E N A N C E -TO - I N C O M E R AT I O

It’s obviously not good business to carry machines that consistently

need maintenance and are often out of commission. Revenue is lost, but
-- more importantly -- customer satisfaction is highly affected and the
6 potential for that customer to go elsewhere is increased.
 Get on the front-end of these potential issues by tracking your fleet’s
maintenance costs, history, and age in comparison to revenue. With the
right information at hand, you’ll be able to eliminate problem machines
and replace them with more reliable equipment.

06 P H YS I C A L U T I L I Z AT I O N : R E N TA L DAY S C O M M I T T E D
TO C U S TO M E R / P OT E N T I A L R E N TA L DAY S

Physical Utilization differs from traditional Time Utilization because it

measures the time a piece of equipment was committed to a customer
and not available to other customers. That may or may not align with the
time for which a customer was billed (breakdowns, weather issues, and
compensation for previous issues come in to play here).

The industry standard for Physical Utilization is that 72 percent of your

fleet should be out on rent at any given time, 20 percent of the fleet
should be in the yard and rental-ready, and no more than 8 percent of
the fleet should be non-rental ready. Non-rental ready includes pieces
that are in transit, in need of maintenance, or entirely out of commission.

This metric will tell you precisely when to acquire new equipment and
when to sell off equipment. If your Physical Utilization is below 72
percent, you likely have too many pieces of that equipment. If it is below
72 percent, you likely should purchase more.

Don’t overlook your non-rental ready benchmark. If there is one or more

machines within your fleet that consistently hit 8 percent or above in
their time as non-rental ready, that unit is a problem. No machine should
ever be non-rental ready for more than two weeks. If fixing it doesn’t
reliably keep it off the hard-down list, it’s time to sell it.

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 07 F L E E T AG E : AV E R AG E N U M B E R O F M O N T H S
A FLEET HAS BEEN IN USE

This KPI measures the general age of your fleet in relation to when its
equipment units were put in service for the first time. Knowledge of
fleet age is most important when measuring degradation of equipment.
This is important insight for regular maintenance of used or refurbished
equipment, as well as determining value.

08 F L E E T A P P O R T I O N M E N T: PA R T I T I O N O F “ B A S E
F L E E T ” A N D “ OT H E R F L E E T ”

The division of the fleet helps users more closely examine any changes
in rates, utilizations, and fleet mix from one period to the next. Any
equipment with rental activity across multiple time periods being
analyzed should be considered the “base fleet.” Base fleet can be
defined by either unit or class.

The “other fleet” includes changes in the fleet from period to period that
result from adding to or eliminating pieces of equipment from the fleet.
Measuring the other fleet rental activity against the base fleet will signify
any meaningful changes in revenue. Additionally, by examining the
base fleet only, users will be able to clearly determine the effect of rate
changes and utilization on revenue from period to period.

Over time, the base fleet revenue should stay relatively consistent, as it
reflect continuing operations versus any significant changes to the fleet.

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 Best KPIs for Equipment
Rental Finance Departments

01 D E B T TO E Q U I T Y:
TOTA L L I A B I L I T I E S / TOTA L E Q U I T Y

This KPI focuses on a company’s financial leverage. Debt to Equity

indicates how much debt a company is using to finance it assets relative
to the amount of value represented in equity. This is an indication of
current or long-term liabilities.

It is industry standard that equipment rental dealerships aim for a Debt

to Equity ratio of 3 percent or lower. That often limits the amount that
can be borrowed to finance equipment. The industry, in particular, has
a tendency to far surpass the recommended 3 percent, with some
companies reporting ratios of up to 50 to 70 percent.

If you find yourself consistently above 20 percent, it might be time to re-

think your financial strategy and the level of risk you’re willing to take. A
more aggressive approach for financing growth with debt opens up the
greater potential for financial troubles.

02 AG I N G AC C O U N T S R E C E I VA B L E S

These are the accounts with the longest payment times. Keeping this
metric low is an important step in ensuring continued growth of the
business. That’s why it’s critical to have a reliable invoicing solution to
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 ensure timely payment on invoices. The payment process should be
simple for customers, with all forms of payment accepted. User-friendly
online portals offer instant payment options for you.

Additionally, there are a number of other ways to keep this metric low,
including instituting late payment fees, strict financing terms, offering a
discount for early payments, and writing off bad debts and moving on
from slow-to-pay clients.

03 R E N TA L R AT E S & R E V E N U E G E N E R AT E D :
E Q U I P M E N T R E V E N U E / PA I D E Q U I P M E N T R E N T E D

It’s important to know your current revenue at the close of each business
day. Rental Rates and Revenue Generated assesses the total equipment
revenue for a specific time period versus the total amount of equipment
revenue paid and rented or sold within the same timeframe.

This is an important metric for benchmarking against results from

previous months and years. This also makes it easier to predict, plan for,
and compare quarterly results and year-to-date results.

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F I N A N C I A L U T I L I Z AT I O N :
Y E A R LY R E N TA L R E V E N U E / O R I G I N A L
AC Q U I S I T I O N C O S T

This KPI was mentioned above for the Fleet department, but this metric
is so financially important, it’s worth expanding upon. Achieving optimal
financial utilization is a challenge for many rental companies. It’s critical
to keep equipment out on rent enough to generate adequate revenue
and cover expenses and debt. But too much time in rental rotation
results in costly wear and tear.

A $25,000 machine that brings in $23,000 annually is achieving a 92

percent financial utilization rate. The standard rate across the industry
varies depending on the type of rentals in rotation and size of the
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 business, but an appropriate target should be 65 percent for national
enterprises and 100 percent for smaller rental centers.

As for time off the lot, aim for 60 to 70 percent of time utilization. This
allows for adequate revenue, while also ensuring regular preventative
maintenance. Low financial utilization rates can usually be attributed
to continuously problematic, older, or underperforming machines.
Conversely, it could also be a result of rental rates that have been set too
low. Keeping your financial utilization metrics high means high returns
and a faster ROI for each piece of equipment.

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 Best KPIs for Equipment
Rentals Parts and Inventory

01
T U R N OV E R P E R C E N T:
C O S T O F G O O D S / AV E R AG E
AG G R E G AT E I N V E N TO R Y VA LU E

Inventory Turnover Percent represents the number of times a part must

be replaced during a given period of time. This is perhaps the most
important KPI for parts and inventory because it reflects the overall
efficiency of the entire supply chain.

In this scenario, the cost of goods is the cost for a company to deliver
parts to customers, excluding administrative expenses. The average
aggregate inventory value is the cost of all items in inventory.

02
F I L L R AT E P E R C E N T:
N U M B E R O F C O R R E C T LY S E R V I C E D
R E Q U E S T S / TOTA L R E Q U E S T S

The Fill Rate is the percentage of customer needs that are met through
immediate stock availability, not including back orders or lost sales. This
is an important KPI because it represents that demand that is likely to be
recovered or better serviced with improved inventory performance.

This metric helps dealers understand how well they are servicing their
customers. Fill Rate Percent is a key indicator of customer service levels
and supply chain efficiency. The more backorders, the worse your fill
rate. If a customer needs a part for a project that you don’t have on hand,
that’s lost business. Time and supply chain efficiency is key to happy
customers with this metric.
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 03 PA R T S G R O S S P R O F I T P E R C E N T

Gross Profit represents the actual profitability of parts. This metric takes
into account several variables often difficult to attribute hard costs to,
such as inventory carrying costs, sales rep commissions, manufacturer
and dealer rebates, handling fees, and emergency service fees.

Keeping a finger on the Gross Profit percent of every piece of parts

inventory will make it clear what to continue carrying, what to cut, and
what to order more of. Rental dealers typically do a particularly poor job
of measuring this calculation, despite having the data at hand. That’s
why an analytics solution that delivers important KPIs in easily digestible
dashboards is critical.

That’s why an analytics solution that delivers

important KPIs in easily digestible dashboards is
critical.

04
R E PA I R S & M A I N T E N A N C E E X P E N S E :
R E PA I R A N D M A I N T E N A N C E C O S T / R E V E N U E
G E N E R AT E D

This KPI is the clearest indicator of which units should be removed from
inventory. Excessive repairs and high maintenance expense are the most
glaring red flag that a piece of your fleet is costing more than it’s worth.

Repairs and maintenance costs include preventative maintenance and

major repairs. These costs should be recorded at every service instance.
Each piece of equipment’s overall repairs and maintenance expense
should be between 6 and 8 percent of the total revenues. No machine
should exceed repairs and maintenance expense of 10 percent of the
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 rental revenue generated. Those above 10 percent should be reviewed
for the chopping block.

Better insight for a better

equipment rental business
The above KPIs reveal a new level of insight into your rental operations.
These are a great place to start, and with TARGIT’s business analytics
for equipment rentals, you get these and more ready to connect to your
data. Once you get going, you can easily add additional KPIs to meet any
of your specific needs.

TARGIT Decision Suite is tailored specifically to provide a continuous

overview of company data, internal systems, and external channels. Get
everything you need with complete, flexible, and integrated reporting,
analyses, dashboards, mobile, and more.

View all of your data in interactive dashboards delivered directly where

you work most with TARGIT Anywhere. And rest easy knowing only the
right people see the right data in data visualizations that are right for
them thanks to TARGIT’s robust data governance. Customize reports and
dashboards tailored to specific roles with personalized icons relevant to
the equipment rental industry.

C O M P L E T E O V E R V I E W O F E Q U I P M E N T DATA

TARGIT Decision Suite’s business analytics for the rental industry

combines data from every data source throughout the company for a
single, consolidated view from lot to customer job site and back. User-
friendly reports and analyses deliver answers instantly to your desktop,
tablet, or mobile device.

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 Effective Dashboards for
Equipment Rental Data
T H E DATA YO U N E E D D E L I V E R E D I N D I G E S T I B L E
DA S H B OA R D S .

DAYS R E N T E D
See how many days you’ve accumulated rentals of your machines by store,
customer, and model with the ability to dynamically drill by time period.

I N V E N TO R Y
Instant insight to inventory status by machine makes and models. See exactly
15 how many units are on-hand, their current status, book value, and sales price.
 OV E R V I E W
Get a quick overview on your key Fleet KPIs for the current year showing Days
Rented, Book Value, Gross Profit Percentage, and Rental Revenue. Want to
know more on any KPI? Simply click on the dashboard and drill into a more in-
depth analysis.

R E N TA L R E V. I N V O I C E D
Want to know how much revenue you’ve invoiced over time by customer,
store, and model? You get everything in a single dashboard. Drill further for
transactional level details of every number.

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 C U S TO M E R S
Get in-depth insight into your customer’s rental revenue, how much they have
been invoiced, and what is the Gross Profit Percentage. Compare company
locations for Gross Profit Percentage against a goal.

D E PA R T M E N T G R O S S P R O F I T
Get an in-depth look at sales by department (Rental, Parts, Services, and Sales)
and drill into each store to see how they are performing in each area.

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 U T I L I Z AT I O N & M A I N T E N A N C E
View key metrics of your machines such as Maintenance-to-Income ratios,
Time Utilization, Potential Rental Days, Rental Revenue Income, Rental
Revenue Invoiced, and Maintenance costs allocation (internal, customer,
warranty, etc.). This analysis is invaluable for both the Services and Rental
departments.

F I N A N C I A L R AT I O S
Instant insight into core financial ratios such as Current Ratio, Debt-to-Equity,
and ROA over time with trending. Set benchmarks with color agents to see
what is over-performing versus under-performing.

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 O P E R AT I N G S TAT E M E N T
A robust Operating Statement lets dealers to analyze performance over time,
by store, and across all departments – Sales, Parts, Services, and Rental. You
will also be able to expand your Account Levels down to five levels and drill
into the transactional-level details that make up any given number presented.

O P E R AT I O N A L BY S E A S O N A L I T Y
Analyze seasonal trends in the Operating Statements and filter by accounts,
store, account group, and many other dimensions.

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 R E C E I VA B L E S BY C U S TO M E R
Quickly analyze your customers by their current receivables balance and see
what salesperson is responsible for that particular customer. This analysis is a
great tool to determine if additional credit is available for customers and their
current balance.

B A L A N C E S H E E T BY S E A S O N A L I T Y
Similar to the Operating Statement Seasonality, track seasonal trends in the
Balance Sheet and filter by department, accounts, store, and many more. This
current example shows the Balance Sheet Seasonality filtered by Current
Assets under Inventory.

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 There is a tremendous amount of tradition enmeshed in the equipment
rental business. But in today’s rapidly evolving market, it’s easy to let
old ways stand in the way of progress. The digital landscape is forcing
businesses to take a more strategic approach to gathering and analyzing
data that gives them greater insight into the industry, customers, and
performance.

Don’t fall behind out of fear of new technologies or processes. Find

the solution that delivers an easy, seamless stream of insight without
handholding from an IT department. Better insight into your company,
your customers, and your potential is more accessible than you think.

Better insight into your company, your customers, and

your potential is more accessible than you think.

READY TO S E E WH AT A B US I N E S S
ANA LY TIC S S OLUT I O N CA N D O F O R YO U?

C O N TAC T U S

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 Courage to Act

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