Tackling a turnaround
Equipment Rental Source examined its rental market and retooled its inventory to carve out a fast-growing niche.
When Bill Delbaugh, founder of Equipment Rental Source started the company with his son, Todd, 13 years ago, the rental landscape in Colorado looked much different than it does today. While both had experience working at large equipment rental operations, their entrepreneurial drive was stronger than their devotion to the steady paycheck and comfort of their multi-branch employers.
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From left to right, Jordan Delbaugh, Mac Delbaugh, Bill Delbaugh, Jake Hutt, Lyndsay Hutt. |
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| “Our goal for the next two or three years is to focus on staying the course and end up with a fully owned fleet while continuing to grow. We started out as equipment brokers and are now in a spot to have the fleet of niche equipment we need,” says Mac Delbaugh, Equipment Rental Source director of operations. |
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| “I am still involved but am not involved with all day-to-day operations,” says Bill Delbaugh, Equipment Rental Source founder. “That’s helped us because if you’re here every day, you get too close to it. I think it allows me to have a better pulse on the operation and I can point out things that are easy to miss in this fast-paced business.” |
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| “Customers seem to prefer to work with family operations,” says Lyndsay Hutt, operations manager. “A large sum of the calls I take say they were looking for a more personal experience and that’s what we offer. They will tell us we are unlike anyone they have ever worked with before. We do it how it should be done.” |
So, they split off and started Equipment Rental Source, LLC (ERS). “The job was turning into procedure that didn’t allow me to do what I do best, to take care of the customer. I was getting older and thought, ‘Why not?’ We started out as brokers and slowly transformed it into a fully fleeted rental operation,” recalls Bill.
Starting as a family-owned and -operated equipment brokerage firm, Equipment Rental Source brokered deals for all types of equipment, from skid steers to front-end loaders; anything they could to achieve a 20 to 30 percent profit margin.
Business was going well in 2006 and 2007; then the Great Recession of 2008 hit and construction in the Denver area, much like almost everywhere in the United States, crawled to a standstill.
Management shift
Fast forward to 2012, when Mac Delbaugh, Bill’s other son, took over for Todd. The company completely flipped its business model on its head. “In the past, we had larger iron for rent. When we had a change in management, we adjusted our business model and replaced all large equipment with smaller homeowner friendly equipment. There has been tremendous growth in this area and have found our own niche in Castle Rock.”
Today, the firm has more than 250 pieces of equipment in its inventory and at busy times of the year, enjoys greater than 95 percent utilization and a year-around utilization rate of 75 percent. “Our customer base is roughly 70 percent do-it-yourself homeowners and 30 percent contractors. The median annual income in the South Metro Denver area is roughly $100,000, nearly double the national average. That is the market niche we are carving out,” says Mac.
The real key to Equipment Rental Source success is its focus on equipment and customers.
“Customers seem to prefer to work with family operations,” says Lyndsay Hutt, operations manager and Bill’s daughter, who has been with the operation since 2015. “A large sum of the calls I take say they were looking for a more personal experience and that’s what we offer. We get it all the time, whether from homeowners who are renting their first piece of equipment, or contractors who rent from many places. They will tell us we are unlike anyone they have ever worked with before. We do it how it should be done.”
From its beginning, Bill has made service a point of difference for Equipment Rental Source customers. The company operates based on one simple idea: satisfy the customer. “People do business with people because they choose to, not because they have to. They can always find others doing the same thing or selling the same product; it’s the personal connection that makes the difference,” he says.
Daily operation
Bill, who is semi-retired, says the staff of five core employees are extensively cross-trained to make sure any of them can answer questions or fill the needs of customers. “They run this place like clockwork. All of them can cross over on tasks. They do whatever it takes, answer the phone, turn a wrench or clean equipment. I am still involved but am not involved with all day-to-day operations. That’s helped us because if you’re here every day, you get too close to it. I think it allows me to have a better pulse on the operation and I can point out things that are easy to miss in this fast-paced business.”
The key employees are all family. Lyndsay’s husband, Jake Hutt, is the sales manager and Jordan Delbaugh, Bill’s nephew, is also in sales.
Lyndsay handles the marketing efforts while taking phone calls. She works closely with keeping the company’s name in the top searches on Google for equipment rentals in the Denver area.
“We have multiple new customers every day that we attribute to effective marketing campaigns, specifically Google. We have a great online presence thanks to our great customer reviews. Our guys also are doing door-to-door sales, just introducing themselves. The main thing is having people know that we’re here,” Lyndsay says.
They work hard to get customers to offer feedback on Google. “When people tell us they’re happy with our service, we want them to voice that. Getting good reviews on Google helps with our online ranking and helps build our reputation.” Lyndsay says.
Equipment Rental Source also invests heavily in Google Ads. “A considerable portion of our marketing budget includes Google advertising. Experts at Google say it also bases ranking on the positive reviews that we’re getting and the traffic that we get from our website,” says Lyndsay.
Technology and growth
In the beginning, Equipment Rental Source relied on QuickBooks to handle its accounting, but soon realized that the popular accounting package didn’t have enough features to best manage the rental operation. “We took on Point of Rental software in 2014 after looking at a handful of software programs. Our primary need was its fleet-management capabilities. We know where our equipment is and when it’s likely to be coming back. We’ve used it for five years now and we’ve not had any problems. We constantly know what’s available and can maximize utilization while eliminating idle time,” Mac says.
One of the most helpful reports that the system produces is the missed rental log. “Point of Rental documents everything that we input from inventory, what inventory goes out, our missed rentals and why. If we get 15 calls on an item that we don’t have, then maybe it’s time to consider adding it to the fleet. When we couple that list with what we know would work with the landscapers, painters and other customers, we get a good idea how that piece of equipment will perform,” Bill says.
One surprising example was the purchase of a metal detector, which kept popping up in the missed rentals log. “It turns out the metal detector has a 650 percent ROI,” says Lyndsay.
Look to the future
Unlike other rental operations that started with deep pockets to acquire inventory, Equipment Rental Source has grown using predominantly its own resources. “We were at $800,000 in revenue in 2018; before our change in how we operate in 2012, we were losing $70,000 a year. In 2019, we have moved to $1.5 million in sales and $500,000 a year gross profit. Our growth rate is on track to hit 22 percent in 2019, which we see the revenue jump in correlation with adding equipment,” Mac says.
“Our goal for the next two or three years is to focus on staying the course and end up with a fully owned fleet while continuing to grow. We started out as equipment brokers and are now in a spot to have the fleet of niche equipment we need,” Mac concludes.
Photos by Marvelous Photography
This article appeared in the November-December 2019 issue of Pro Contractor Rentals magazine.
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