Contractors Feasting on Portable Leasing
Contractors Benefit from Building Units In-house
About 15 years ago, Steve Harvey bought a portable cooling unit so a long-time customer could rent it.
For Harvey, general manager of Soefker Services LLC, Memphis, Tennessee, that one unit multiplied into a whole rental business.
“When I found out the unit was rented out all the time, I bought two, and then I kept buying them,” Harvey said. “We don’t have more than we need, but we pretty much keep them all rented.”
Over time, his fleet of portable equipment has grown to 45 units.
“When I first bought a rental unit, I was wondering if I did the right thing, or if I had just lost money,” Harvey said. “As it turns out, there are a lot of contractors in town who will call us to rent them. We’ll rent to them just like anyone else. We have a preventive maintenance program on them so they’re kept up, then we sell the old ones and replace them with new ones.”
Harvey is one of many mechanical contractors turning to renting portable heating and cooling units as a way to easily increase profit.
Fred Robanser Jr., president, ABCO Mechanical Contractors Inc., San Francisco, has rented units for a few decades. His operation now includes more than 100 units, and he noted how, when it all started, he never thought it would grow to this size.
“All my equipment is paid for, so I’m able to keep my pricing basically the same as it was back in the ‘80s,” Robanser said. “If I was still paying off the cost of that equipment, then I’d obviously have to raise my prices, but I paid cash for everything over the years as I bought these units, so I’m able to keep my prices down.”
Harvey said all it takes for Soefker to make its money back on a unit is about 10-12 weeks of rental. For Robanser, it’s about four to five months. Either way, these units, which stay in service for a number of years, depending on maintenance and use, are nearly guaranteed money makers for the contractors who use them.
“It’s kind of fallen into place for us,” Harvey said. “We didn’t have this huge plan, but we just tried to keep up with the market for the first seven to eight years. I kept buying three or four more each year until it caught up.”
In fact, Robanser said he’s had rentals out for years at a time, with the user paying the same rental fee the whole time. Harvey said he’s had many instances where companies using the portable units have called in asking to buy the unit outright.
Harvey also noted having an in-house rental division has helped the company secure more jobs.
“If we were bidding a computer room job, and we could throw in the rental equipment, then it helped us get more jobs,” Harvey said. “It’s enhanced our business.”
Make Your Own
That’s not the only way contractors are getting involved with portable heating and cooling, though. Down in Houston, Custom Air Products & Services Inc. (CAPS), not only offers full service mechanical contracting, but it also manufactures its own portable units. Taylor Norris, CEO, came up through the rental business, serving as CEO of the company that eventually became Carrier Rentals. After leaving Carrier Rentals, he made his way to CAPS and started manufacturing rental equipment.
“We do not rent them ourselves,” Norris said. “We have a commitment to all our customers that we will not compete. Our rental opportunities, which are many, are shared amongst our customers. We may handle the rental, we may put it on our contractor, but we share the business with all the players. We build our equipment, sell it to the rental guys, and offer support if it’s needed.”
In addition to the company’s own line, Norris offers private label rentals, too. If mechanical contractors are interested in manufacturing their own units, he cautioned them to make sure they have ample space.
“You have to have a lot of re-
sources,” Norris said. “We have 15 acres here. You have to have a lot of concrete because it takes a lot of space to handle 15 truckloads of equipment at a time. You also need to staff a lot of people — versatile people that can do anything, start to finish — and you have to have a lot of wheels moving at the same time to handle this kind of business.”
Norris’s company has global customers. It also offers training for companies buying from them who don’t have air conditioning backgrounds, which has opened up many new opportunities, he said. As a result, the company’s support staff is logging its fair share of frequent-flyer miles.
“We have a group of guys who live on airplanes. No questions asked, they get on an airplane and go where they’re called,” Norris said. “Then, in the summer, we don’t see them. We have guys in Saudi Arabia, Russia, Latin America, and Columbia right now. We also have guys all over the U.S. Whether it’s setting up rental equipment, maybe troubleshooting a broken unit, and helping the on-site tech, or helping them design layout, they’re doing it.”
What to Watch For
For contractors showing interest in adding portable rentals, Robanser said he highly recommends owning the units outright from the start, which begins the profit process sooner.
“The best way is to have your inventory paid for,” he said. “Borrowing money to purchase equipment could be a little costly. Just pay cash and rent them out as much as you can.”
Harvey said Soefker has invested $150,000-$200,000 in rental equipment, and he feels the company is profiting off that. He said the key is starting slow and not getting too far ahead of demand. On top of that, he said, don’t include the installation and recovery in your rental price because no two places are the same for setup.
Oh, and always make sure you have the space for each and every unit.
“One of the things we did not think about when we started, because the units were all rented out, is what do we do if and when they all come back in? In the winter time, we have a lot of covered storage, we have a full 40-by-30-foot space full of portable rental units, along with the temporary wiring and temporary ducting,” Harvey said. “So, if you don’t have the room, you might not want to get into it. “Thankfully, we have the room. That never crossed my mind until one day we got eight of them back at once. Luckily, we’ve had one that’s been out for five years. The renter just keeps paying the rental charge. It’s crazy, but we’re not complaining.”
Publication date: 6/30/2014