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CROSSHIRE: PROFITS OF DOOM You must have noticed the number of organisations who make their living from flogging financial statistics and comments about our industry, usually for a fee equivalent to the week’s earnings on a 5-ton excavator. They release a few headline grabbing comments to the press in the hope that we will all send off our postal orders to find out if we feature favourably in their report. A recent pronouncement from one of these outfits suggested that one in six hire companies is losing money. Crosshire was just wondering what sort of outfits these might be, when Big Fred informed me that we had run out of diesel site concrete mixers and a good customer was in need. Our usually reliable supplier had to grovel and admit that he was waiting for new stock to arrive, so I reluctantly rang a competitor to hire one. I did not say who I was, nor was I asked, but my request was greeted with the news that I could have one at “fifteen quid a week”! I was about to identify myself and say that I would send a vehicle over, when I was also offered free transport! Now, I knew this hirer ran machines of acceptable standard, not heaps of junk. I ordered the mixer and when it arrived at our yard it was a modern, electric start, industry standard machine from a known manufacturer. Even assuming it was bought a couple of years ago with a good discount, it would have cost our competitor around £1,700 - and he was putting it out at the rate we were getting 20 years ago. Our current rate is £48/week and I asked my staff to calculate our fleet average rate achieved for the past six months for this item. It came out at £41.60/week, at a time when we were out of stock and our local competitor had got machines standing. He could have charged thirty quid a week and still undercut us. While stories like this can be told, it is no wonder one in six of us is losing money. My rants about revenue, or the lack of it, often arouse comment and a couple of months back I suggested that hour meter readings could be used to monitor unauthorised use, or to form the basis of charging. A regular prophet of doom challenged me, saying that the UK market would not stand hire rates based on hours worked. I agree that it might not work in all circumstances, but we must consider any innovation that will increase revenue. I have put my suggestion to a modest test and can report that, since mid-July, we have stated that all hires of mini excavators under 1-ton capacity are subject to a surcharge if the hour meter reading averages more than eight hours a day, or 12 hours for a weekend. Each customer is given a clear, written explanation of this policy and how it will apply. No one has refused to hire from us and 30% of hires have fallen into the surcharge. Most have only been a couple of hours over, but four hirers ran up significant excess hours due to using the kit long into the light summer evenings. In the first four weeks we effectively raised income by 7%. The only negative comments have been from known moaners who periodically feature on the stop lists of all local hirers and merchants. So why not try it? Charging according to use is a fair basis that even consumer groups would find hard to fault, provided you explain all charges fully in advance. Maybe with innovations like this, fewer hirers will fall into the ‘one in six’ category. Your feedback via EHN would be welcomed. Executive Hire News › Archives › September 2006 › Crosshire › Profits of doom
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