CROSSHIRE NOW IS THE TIME TO INNOVATE
There is little doubt that 2011 was a satisfactory year for many of us. Indeed, I know of a number of hire outfits that are quietly very pleased with their results for the past 12 months. There is an understandable reluctance to shout about good fortune, and trying to budget or forecast into the near future is a somewhat black art to say the least.
One of the most important indicators that hold the key to our future well-being is undoubtedly return on investment (ROI). In my contribution for EHN’s November/December 40th anniversary issue, I commented that the 1980s was the time during which our industry enjoyed the most favourable ROI it has ever seen. Good margins allowed hirers to diversify and experiment with new ideas. For all sorts of reasons, some hire companies do well with certain types of equipment where others struggle. Marketing, customer profile and many other factors can account for this, but if we don’t get that essential return on a certain product it is best to kick it into touch and move on.
However, over the past 20 years or so, that all important ROI has shrunk dramatically on nearly every item in our hire fleets. In view of the costs and legislative burdens on our suppliers, they are to be congratulated that the capital cost of most machinery has not risen at anything like the rate it might have done. More than one supplier has commented to me in the past that the UK market might offer volume, but the profit needed for sustained development is somewhat lacking! At last there are real signs that the larger hire groups are hardening their rates, and I know that many independents have made significant rate increases recently.
Customers increasingly demand kit that is modern, quiet, low in emissions, fuel efficient and vibration free. Where we are able to satisfy these requirements, we should ask for a fair price - which in today’s market probably means an increase of at least 10% on many items. The sheer diversity of kit that will be on display at the enlarged Executive Hire Show in February offers an opportunity to consider adding new items to our inventories, many of which will not be tainted by low market perception of rates.
In addition, those of us who have been sweating older assets will, by now, have added urgency to replace them. Staple items like mini excavators, skip loaders and concrete saws have moved forward in most aspects of their specification, and no
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forward looking hire company can afford not to update such kit without risking being overtaken by competitors. The good news is that competitive finance is still around, with some suppliers offering subsidised introductions that look very attractive.
In this year of the Olympics, and with our pathetic politicians now trying to stimulate employment by bringing forward some infrastructure projects, 2012 promises to be a good year for those hire businesses that are adaptable and have an eye for new innovation. Indeed, the Innovation Zone at the Show should be an essential port of call. There are already murmurings that more than one large operation in our industry is preparing to enter the business acquisition trail to plug gaps in depot networks damaged by hasty retreats in the recent past. The most encouraging fact to emerge from the past year is the number of new start ups by entrepreneurs who possess a firm belief that tool and equipment hire has a solid future. I have spoken to a few of these newcomers and they have their eyes very firmly on ROI. We should all seize the chance to push this important ratio back to the level of the 1980s!
Remember, too, that it’s no good sweating your body parts off making a fair profit if it is being thieved from under you by assorted lowlife. Crosshire and EHN support the efforts being made to stop the alarming trade in stolen metal. If you missed last month’s missive, please catch up and register your name on the petition at
http://epetitions.direct.gov.uk/petitions/406. At the time of writing, the figure had reached 53,025 - already past the halfway stage needed to ensure that the unwilling and unwashed of Westminster must debate it. In the meantime I can report that our colleagues in the utility and railway industries are pushing like mad from a number of angles to get this matter in front of as many MPs as possible.
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