In the spirit of CROSSHIRE


He might be a bit forgetful, but Rental Rate Roy remembers the importance of maintaining sound profitability in the pursuit of turnover.


MENTAL CONSTIPATION - OR JUST GOING ‘SEA LION’?


I realise as I grow older that I am tending to forget more, but I believe it will be a while before I become senile - or, as my young nephew once asked, “Uncle Roy, are you going sea lion?” However, sometimes I do wonder if it is solely me, or is our industry suffering as well by forgetting commercial logic in the pursuit of turnover?


It was extremely sad to hear of the demise of one of our major plant hirers early this year and the inevitable trail of destruction that such an event causes to so many lives and suppliers. Unless you are a direct competitor, it is chastening to watch such a thing happen from a distance - although I was visited by a manufacturer the week after the company’s collapse to be told that they had been caught for a sizeable amount of money. Furthermore, and somewhat incredibly, they had only been contacted as recently as November by the company in question asking for pricing on new equipment!


Also, just prior to Christmas, another long-standing truck rental business fell into administration with sizeable debts and a fleet of vehicles which were also very young. It was heart-wrenching to view posts of sympathy on LinkedIn to loyal employees who were resigned to the inevitability of pending unemployment prior to what should have been a joyous festive period.


So how did this happen? One has to wonder at the financial strategy and logic of such businesses. Why, when you as a company are not performing and clearly have sizeable debts, do you not stop buying assets and, in fact, start quickly disposing of equipment which is not providing the necessary returns? Is it pride? Is it image? Or is it what I call ‘mental constipation’?


Many good companies have been caught by the Carillion fiasco, but one has to wonder, in this modern day and age of computers, when well-run businesses have information at their fingertips, why do firms allow turnover to be the


panacea of all and allow their organisations to be dictated to by these customers - to the extent that their exposure is at too great a level and the risk to the business is significant?


Is it a vicious circle that the major client demands more equipment, so it is purchased and put on hire, and then more and more kit is needed and the fleet is increased; but, more importantly, the debt and associated demands of the infrastructure such as engineers, logistics and facilities are increased as well? A fog of mental constipation seems to set in and the vanity of turnover eradicates all commercial logic and good practice.


My little ‘Mom and Pop’ rental company has no interest in dealing with the big construction firms. However, I have the upmost respect for those who do. We pride ourselves on the fact that no single customer represents more than 5% of our turnover. Therefore, if one were to fail, whilst painful it would not be terminal.


I truly hope that all of the hard-working and dedicated employees of these failed businesses find gainful employment quickly, but also that any senior executive of a hire company reading this does some analysis of their organisation’s exposure, both in terms of returns on capital expenditure, finance and also to any potential risk to their business from their major customer base.


Maybe I’m not as ‘sea lion’ as my nephew observed. And on that note, has anyone got a nice fresh mackerel I could swallow whole whilst I balance the stresses and pressures of running a hire business on my nose? May I wish you all profitable - and sustainable - hiring.


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