Should you rent or sell materials
When it comes to materials-based industries, most businesses operate on a buy-and-sell model. You want consumers to pay for the product, then you use a portion of the profit to replace the product and sell it to another consumer, generating income. But what if there was another way to do business that retained customers for longer? Here’s the lowdown on the renting versus selling business model.
Renting: the pros
Renting equipment and materials to consumers has several benefits, and it’s becoming a popular way of doing business. Construction companies like Mabey Hire have used the rental model with great success, allowing them to grow and diversify.
A key pro of renting equipment is that you maintain ownership of a valuable product, so your assets remain quite stable. Replacement costs are lower, so even when factoring in maintenance and repair costs, you are still likely to operate with lower overall costs. This means you can stay competitive with your pricing and attract more customers. It also means customers have a greater likelihood of using your services again, as they may have need of the same equipment in the future.
Renting: the cons
Renting out products means that you are reliant on them being returned in good condition. When this doesn’t happen, you may face expensive repair or even replacement costs. As a result, it is necessary to have customers pay a rental bond in order to cover any potential damage. You will also probably be unable to charge as much for renting equipment as you would for selling it, so your overall income may initially look lower than general sales.
Selling: the pros
Selling products can be a more efficient and less complex process, as it simply requires you to provide the products your customers need. There’s less paperwork, and the customer service aspect isn’t as complex as you are usually dealing with the customer for a shorter period of time. You can also measure in very clear terms your income and expenses, without ongoing rental sales and expenses blurring the numbers.
Selling: the cons
If you’re selling a high quality product, it could be a while before you see your customer ever again, as they may not have need to purchase anything from you a second time. This means that not only do you miss out on repeat income, it also makes it harder to build up much customer loyalty. One-time sales can make it difficult to predict future income, leading to uncertainty regarding your business’s future.
There’s a lot to consider when weighing up renting or selling. Always remember to consider your industry, check out the competition, and never forget the value of customer service.