Rental Solution: Hidden value in diesel fuel tanks
High ROI makes fuels storage attractive for rental centers.
by John Cleary
Easy money is hard to come by for most businesses. Yet, in the equipment rental industry, many companies pass up easy money by not offering a product that a majority of their customers need. One of those products is portable fuel tanks.
 |
| Approximately 98 percent of energy consumed at construction sites comes from diesel, making fuel tanks an easy rental upsell for equipment rental companies. |
 |
| The sturdy steel frames of Western Global’s TransCube allow the tanks to be stacked, so they take up considerably less space at a rental yard when compared to round tanks of the same capacity. |
Regardless of the equipment, if it runs on diesel, it will eventually require refueling. Since 98 percent of energy consumed at construction sites comes from diesel, offering customers a convenient, cost-effective solution for refueling should be a no-brainer, especially if there’s an opportunity to earn easy money in the process. However, tanks are not always perceived as a core rental product, so this opportunity is often overlooked. Before investing in a fleet of fuel tanks, here are a few things to consider.
Deceptively high ROI
Fuel tanks have ROI potential that exceeds most other construction rental equipment. They have a low purchase price, minimal cost to own and typically experience high rental rates. Plus, fuel tanks require little maintenance outside of statutory two-and-a-half- and five-year inspections. They have no moving parts such as gearboxes, hydraulics or engines.
To prove the ROI potential for rental tanks, here’s a scenario using data from a large rental company.
Rental Company X purchased 25 tanks of varying capacities at about $5,500 each. The parts, labor, maintenance and inspection costs per tank, on average, was $129 per year. That brings the 10-year cost to own to about $6,790. Considering a 10-year-old tank retains about 40 percent of its original value when sold at auction — a $2,200 value — the total yearly investment per tank is $459. Meanwhile, the company rents the tanks for $500 per month with a 70-percent utilization rate, generating average annual revenue of $3,741 per tank — about 800 percent more than the cost to own. Multiply that by 25 tanks rented over 10 years before being resold, and the potential revenue easily exceeds $930,000.
Returns like this are unheard of with other rental equipment. Considering the value and convenience that rental tanks provide customers, offering them should be an easy decision.
Develop a plan
While many rental companies already embrace the high ROI of tank rentals, those looking to add fuel tanks should start by doing some homework. A good place to start is by having conversations with existing clients about their current refueling methods and any frustrations they face. Also, speak with local fuel vendors to explore opportunities for business partnerships and options for getting set up to sell fuel onsite — another complementary revenue source.
Once the decision is made to add rental tanks, it’s important to determine rental prices, as well as rates for pumps, fuel and any other services. Also be sure that all appropriate legal, licensing and regulatory steps are in order for handling and transporting tanks as well as selling fuel.
Finally, create a strategic marketing and sales plan and ensure employees are trained and fully understand the benefits, features and value of tank rentals. To help employees determine whether to suggest a fuel tank, make it simple. Some companies incorporate reminders in their ordering system that prompts associates to recommend a tank when a customer rents certain equipment.
If a customer rents two or more pieces of equipment for two or more weeks, a fuel tank should be suggested as part of the rental. Adding reminder decals near the fueling points on diesel equipment can help get customers thinking about the benefits of a tank early in the rental process.
Once a business plan is set, find tanks that will make rentals as easy and profitable as possible.
Choose tanks designed for rental
Not all tanks are designed for rental. Choosing tanks that are can be the difference between revenue and regret. While round tanks are common and have low manufacturing costs, they’re not as rental-friendly as newer cube-tank designs.
Cube-shaped rental tanks are often approved for being transported while full. Round tanks, meanwhile, need to be emptied and cleaned before moving. Transporting full tanks also eliminates the need for the initial fuel delivery once tanks arrive at a customer’s site. Then, when the rental is complete, tanks can be collected with fuel still on board, which can often be reclaimed by the rental center.
Tanks designed for rental should be easy to load and secure on a truck bed or trailer. Some tanks feature four-way forklift pockets for simple loading and unloading as well as crane hooks built into the tank frame. The sturdy steel frames on some cube tanks allow them to be stacked so they take up considerably less space at the rental yard than round tanks of the same holding capacity.
Another tip to ensure success is to work with a tank manufacturer that simplifies the buying and renting process for rental centers. Some leading manufacturers deliver tanks rental-ready with all meters, pumps, vents and other accessories installed, reducing labor and setup costs for rental centers. Some manufacturers will even work with rental companies to develop successful promotional strategies, including marketing ideas and proven solutions for increasing rental rates. For example, the manufacturer might customize a tank to prominently display the rental company’s name and logo or even powder-coat it in branded colors, which turns each tank into a mobile billboard that will spend a majority of its time at job sites in front of potential customers.
To gauge customer interest, start with a small inventory of tanks. More often than not, rental managers end up wondering why they left easy money on the table for so many years.
If you’re in the business of renting diesel-powered equipment and are not taking advantage of the additional revenue available with tank rentals, it may be time to consider making fuel tanks one of your company’s core rental products.
John Cleary is key accounts manager - Rental at Western Global. Reach him at john.cleary@western-global.com.
This article originally appeared in the July August 2018 issue of Pro Contractor Rentals magazine. All rights reserved,
PRO CONTRACTOR RENTALS MAGAZINE
Pro Contractor Rentals provides information of value to rental centers who focus time, resources and attention on meeting the demands of construction contractors and other equipment rental customers.
