Rental Center: Bold Moves
If you were driving on I-75 just south of Dayton, Ohio, on June 6 and noticed some commotion at a building highlighted with vivid orange signage, you were witnessing a big step in the growth of a third-generation company. Vandalia Rental, headed by Kurt Barney, was holding the grand opening of its new facility.
It’s a $3 million investment and a bold move toward growth, a step taken in part, Barney says, because he and his leadership team recognized that “there are evolving economies of scale, essentially started in the 90s with consolidators. A few years back in our strategic planning process we were at a point where we had to choose to get bigger or get smaller.”
Becoming a multi-site equipment rental business was essential to this plan and, he says, the company was ready to take that step. “We’ve more than doubled our revenue since 2011 and have a great team of people in place who know the business. We’ve put ourselves into a position where we can invest to continue growing, developed our strategy, and we’re following through on it,” he emphasizes.
The newly-opened, 17,500 square foot facility on an eight acre lot in Franklin, Ohio, is a result of the company’s strategic plan. A 30-minute drive south of the Vandalia location, it’s what Barney believes can be the first of several new locations.
“Our goal is to be our customers’ premier equipment solutions provider. Adding branches puts us closer to our customers and supports growth. We have to establish that this (new location) works. Cash is king in this business. If we meet our revenue projections, meet our cash flows, and our reserves are in line, we hit the green button again.”
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| The ribbon cutting ceremony in Franklin, with ‘Team Orange’ and local dignitaries, was held June 6. The photo shows the wide and welcoming customer entrance. |
When Barney talks about Vandalia Rental, the terms “we” and “team” are constant – and concrete.
“Our leadership team has an internal goal for where we want our revenue to be by 2020. To get there, we’re going to continue to invest in people and we’re going to continue to invest in quality equipment,” Barney says. “Quality equipment and our objective of three-hour response time for customers gives our team the ability to deliver a service that exceeds others in our market. If we can be successful in those key elements, we can continually deliver long-term results.”
Those results are linked to having a corporate culture that lives and breathes an intense customer focus and recognizes that a profitable business comes from providing people with an opportunity to build a career in a good work environment. “From my standpoint, to get to where we want to be, it’s essential to build on our family-like culture because it helps provide successional opportunity for the people on the team. They need autonomy to make decisions, and the opportunity to improve their capacity and grow their incomes. Ultimately, this is how we move the business forward,” he says.
Deep roots
Vandalia Rental took root in 1961 when Barney’s grandfather and two partners launched a United Rent-All franchise and called it BND Rental, using the first letter of each partner’s last name. Early on in the venture, Barney’s grandfather bought the partners out and started doing business as Vandalia Rental. Kurt’s father, Randy, bought the business in 1986. From a former filling station on a one acre lot, he moved to a site on a frontage road off I-75. And, under his stewardship, business grew.
The structure on what the company refers to as Location 1, covers more than 30,000 square feet and includes a newer 7,500 square foot showroom and large, open counter area. The exterior lot has more than doubled since 1991 to accommodate the company’s $25 million fleet. Primary customers are contractors, industrial facilities and government. About 65 percent of the company’s revenue comes from rental, 20 percent from equipment/merchandise sales and the remainder from service, delivery, training and ancillary items.
As a kid, Kurt Barney was assigned tasks around the rental center, from emptying ash trays to pulling weeds. When he was old enough, his father made sure he spent time learning each piece of equipment and how it operated. He cleaned it when it came off rent, prepped it for rent, and opened and closed tickets.
“My dad gave me a great opportunity to learn. He wanted to make sure I understood the customer side of this business as well. So, one summer, I worked in residential construction with my uncle. I was very fortunate to have the background they provided,” he says.
After college, the rule was, you do something else before going back into the family business. Where Barney wanted to end up was never a question. Even his triple major in college – finance, marketing and business management – was selected with his end-game in mind. “I liked that diversity and I thought it fit what would be required in running a rental business,” he says.
After graduation he accepted a position with a finance organization, one that focused primarily on real estate. He appreciated learning something new, but, “when a job opened up in purchasing at Vandalia, my dad was kind enough to give me a significant pay cut and hire me,” Barney laughs.
Starting full time in December 2004, Barney continued diving into every aspect of the rental business. They weathered the recession and a 35 percent drop in revenue, in part because of the company’s focus on maintaining solid reserves. As the economy stabilized and improved, the company starting growing again. Having owned and operated Vandalia Rental for 25 years, his father was ready to sell, concluding the sale in 2011 to the third generation.
“I wouldn’t have had that opportunity if it weren’t for the blood, sweat, years and tears of all the people that helped build this business,” Barney says. “And now we’re laying out a road map for the future and engaging people to help us craft it.”
Along with his leadership team, Barney relies on a board of advisors to help develop and execute a growth strategy. He and his father worked with Aileron, a company that provides professional management and strategic planning and helped him find board members with a strong track record of business success.
“I thought this was all Wall Street stuff, but the same principles that apply to public businesses can apply to a family-owned business,” he says, with the board helping him “think more deeply and strategically about what we want to achieve and how we’ll get there. They urge us to dig deeper to know what we should or could do to outpace the market, to be a better competitor. And they help me be accountable for the business and overall business growth.”
Analysis guides strategy
To help craft an accurate “road map,” Barney relied on input from his board and team, plus his own innate curiosity and drive, to dig deep into the rental industry and local marketplace. On a macro basis, rental industry and construction projections were helpful for assessing trends and potential. But, “the best information came straight from customers.
We brought top customers in for informal discussions, with several team members in the room. We all had the opportunity to hear what we were doing well and where we were falling short. Everyone became more involved in offering ways to improve,” Barney says.
The company analyzed its customer data, finding that their top customers show five traits:
- They invest $10,000 or more per year in equipment rental.
- They typically rent for two or more days.
- They do 75 percent or more of their business within a one hour travel radius.
- They see rental as an element that helps them profit, not as a necessary evil.
- They use a diverse fleet mix.
“When they have these characteristics, we can be a strong fit as a partner in their business. We find that this lends itself to medium size customers who have evolving needs. We earn their trust and they reciprocate,” Barney explains. Targeting and supporting those types of customers became a priority.
Heat mapping provided insight, showing where Vandalia Rental equipment was being used. “Our key points of dissipation were a little closer than 30 minutes away. It showed where we had a strong presence, a medium presence and a weakening presence. We were amazed at how much of our revenue was being created within such a short footprint.” This information was key in selecting a location for the second rental center that
had “great visibility and moderate or better access” from the highway, Barney says.
Barney and his team also focused on securing a competitive point of difference. “A 24-hour response time seems to have become the industry norm. We find that unacceptable. We target to have any customer need or situation resolved within three hours if the customer is within a 30-minute drive time.
“My dad established that we would be known for quality and service. Our three-hour response objective has added a fanatical focus on customer uptime. We can’t just measure our business by our own P and L. We have to look at how we can
reduce the overall cost structure of our customers.”
From the analysis and the company’s objectives, Barney and team focused on five strategic steps. They decided to build a dedicated shipping/receiving/maintenance/training facility; they would streamline their rental rates; they instituted a review of their fleet to zero-in on what was profitable; decided to go a bit heavy on staffing and focus even more intensely on training; and add a location south of Vandalia.
Following through, gaining momentum
Efficient operations are essential to the company’s three-hour response objective. With its rapid growth following the recession, it was seeing congestion in its maintenance bays. “It was like playing Tetris,” Barney says. “We’d have to raise the boom on a lift so we could work on the trailer tucked underneath it!”
A separate facility – Location 2 – “was a core infrastructure investment to springboard us to faster growth,” Barney explains. It reduced congestion at Location 1 and provided an organized, open space that helped improve technician productivity. But it also will result in less strain on future locations by serving as a maintenance and receiving hub for
all facilities.
Located less than half a mile up the street from Location 1, the $1.3 million facility includes eight 20- by 40-foot bays, ample interior space for tools, maintenance equipment and storage, and a large lot for incoming equipment waiting to get prepped and have the company’s bright orange logo attached.
“Our technicians have more room to work, have all the tools they need right at-hand, so we’re seeing faster turn-around on our equipment. We have to keep our fleet in top
condition. When our orange logo goes on a piece of equipment, customers tell us that carries the promise of uptime. We can’t back off on that,” Barney says.
Has the investment helped deliver on the team’s three-hour commitment? “We don’t hit it every time. We create a ticket for each repair, each customer request, and follow-up so we know how we’re doing. Where we’ve missed, we don’t hide from it, we figure out what to do to improve.”
Analyzing the traits of top customers helped develop the strategy to change rates. “We decided to eliminate our hourly rates. The shortest rate we have is a day. We knew this would cause us to lose customers and that’s a bit fearful, right? But we lost unprofitable customers. We do significantly fewer transactions today than we did 10 years ago. Our margins, though, are greater. That, in turn, helps us create greater value for the customer.”
Such as a three-hour response time and a modern, well-maintained fleet. In analyzing profitability of their fleet, there were similar twinges of concern about selling equipment. “We look at everything not just from a category-class level, but from an individual unit level, looking at time utilization and ROI. We found we had some under-performing assets that we were holding onto almost from an emotional standpoint. We analyzed our equipment by putting it into a four-box quadrant – high utilization, low utilization, high ROI, low ROI – and did a scatter graph to help us see how it was performing.”
This helped identify where to make strategic investments: “For example, if we have a category-class with high utilization and high ROI, we’ll keep adding until we see utilization rate fall off.”
Conversely, it also showed what to divest. Three different classes of trenchers were pared to one, for instance. “Will we lose some rentals? Yes, but we’re not out there selling trencher rentals. We’re selling that we want to be our customers’ premier equipment solutions provider,” Barney reiterates. “So, if we can’t support it or it doesn’t meet our uptime goals, then we shouldn’t have it in our fleet mix.”
Streamlined service, fast customer response and a finely-tuned fleet are all important elements of the Vandalia Rental strategy. Barney is the first to say that those key aspects only deliver value when you have the right group of people guiding the process and taking care of customers.
Lead by example
Vandalia Rentals has 52 full-time employees, eight of whom are now at the new facility in Franklin. “Compared to industry norms, we’re over-labored. But that, too, was an investment we needed to make,” he points out.
Having people with the skills, talents and company culture in place supports the company’s commitment to the three-hour response time and the strategy of adding locations.
Derek Potter is branch manager of Location 1, taking on that role when Adam Virag became branch manager of the new location. With the company for about three years, Potter came in with 18 years of experience in manufacturing and HR. His key contributions, Barney says, are that Potter understands work process and has helped uncover areas where Vandalia Rental can improve. As important, his HR background is helping the company find the right people.
“The culture here is a vital part of being able to execute our strategy,” Potter says. “I’m here because of the excitement Kurt generated about the future here and the role I could play. We want our team to have that same sense.”
They look for people dedicated to giving 100 percent to the job, understand and exhibit the company’s customer focus, and can have a little fun at work. “In return, we provide them with the opportunity to earn a good living and have a good work/life balance. If they help the company take care of customers, and enjoy doing so, the company grows and they grow.”
This focus is working, Potter says, with employee turnover in the single digits. Plus, it is helping attract talent from competitors. As a relatively new team member and leader, Potter says he sees, and expresses to potential new hires, that the company diligently follows through on its vision for growth. One element that stands out to him: “We don’t skimp. We don’t cut costs that will ultimately reduce the quality service we provide to our customers. We ask what we need to do a job successfully, safely, competently, on time – and we follow through on it. The team really appreciates this.”
Potter also appreciates that the culture includes “the autonomy to make decisions.” Barney explains why this is critical to the Vandalia Rental culture. “I can’t give you a standard operating procedure on how to handle a customer. It will be out of date as soon as I draft it. What we can do is train on the values, on what we represent and stand for, and give people the autonomy to make decisions and give them support if they make a wrong one. If we get it wrong, we don’t pretend we got it right, but we always make it right for the customer.”
As one of the company’s three outside sales professionals, Bryan Devilbiss believes having autonomy adds value to his customers. “I appreciate and my customers appreciate that I can make a decision. Our leadership team backs all of us on that. If it’s a wrong one, we talk about it, but they still back me in the decision I made in that circumstance. That means the world to me. Others (competitors) I know don’t have that luxury,” he says.
Some responsibility comes with that. For his customers, he carries the responsibility of being a single point of contact. “They don’t have to call me for information on one thing, then the counter for this or parts for that. They call me. It’s my responsibility to make sure we get things done and take care of them.”
His responsibility to the company is to generate profitable revenue. “Service, delivery . . . our response time is a key selling point. We also have flexibility with price because it can become a factor. But Kurt goes through the numbers with us. We know what our costs are and where we need to be.”
Adam Virag, branch manager of Location 3, also carries through on the teamwork and customer-focus themes. A 16-year veteran of the company, with experience in the yard, in supervising Location 2, and as branch manager, he and seven other team members are tasked with ensuring a smooth start at the new facility.
“It really is all about teamwork, all of us working together and able to cross into different areas. Though we have new people, everyone has been trained and can handle a little bit of everything – from maintenance to dispatch to answering the phone. We will have a dedicated driver, dedicated road mechanic and dedicated PM mechanic at Location 3; we won’t back off on our quality focus. For my role, the people in the yard, answering the phone, we’ll help load a skid steer, we’ll do whatever it takes. It’s a challenge but it’s exciting, too. We’re all ready to get rolling.”
During the interview, the people at Location 1 and 2 were readying equipment to ship south. In one weekend, Virag explained, they would go from an empty lot and showroom to spaces showcasing an array of equipment. Due to a variety of hurdles, including various state and federal permits and approvals, the Franklin grand opening moved from a December 2015 target to the first Monday in June.
“It adds to the challenge,” Virag says, “because we’re opening during a very busy part of our year. But the buzz is out there. People have been calling since the phones went live (May 31), so I think we’ll have a good start. The unknown is how busy we’ll be with drive-ups, the foot traffic.”
He smiles, “At Location 1, we sometimes get up to 20 walk-in transactions in our first hour. For Location 3, I guess we don’t know what we don’t know, but, hey, let’s get it started!”
Potter, Devilbiss and Virag reflect the confidence of their experience, but also in the support system they have as part of a team. Whether they’ve been at Vandalia Rental
three, eight or 16 years, each speaks to the company’s culture, the excitement of driving growth, and appreciation of being involved in growing the company.
This is at the heart of the culture Barney and his leaders are cultivating, because it is essential to the organization’s future. “It’s never about ‘the one,’ it’s about the team. We would not be where we are today, I can say with strong confidence, if it wasn’t for the people we have on our team right now. And we won’t be where we’re going to be in three to five years without more people like that on this team.“
They’ve done the research, the board of advisors has pushed Barney to dig deep and think through every step, he’s received ongoing guidance from his leadership team. There’s much to prove in the coming months. But the tone, the pace and the focus they exhibit would suggest that, not too far down the road, they’ll push the green button again. It’s the button labeled “The Next Bold Move.”
This article originally appeared in the July/August 2016 issue of Pro Contractor Rentals magazine. Copyright 2016, Direct Business Media.
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