In a recent article by Gary Stansberry in Rental Equipment Register (RER), he offered helpful insights into the essential steps rental business owners should take to maximize the value of the business before selling it.
It’s common wisdom that there are three primary ways to exit your business: sell it, go public, or pass it on to the next generation. Each option requires a different emphasis on your financial statements, possible changes in your operations, and considerations for immediate investments in the business. Regardless of the path you choose, it is smart to start at least two years ahead of any projected sale to ensure the maximum valuation.
For most Private Equity (PE) firms, their business model involves making an initial investment, streamlining facilities and technology to enhance operational efficiency and profitability, and selling at two to three times their investment.
Stansberry’s advice is correct about getting your physical house in order prior to a sale. However, I would add that getting your technology house in order is an equally important and often overlooked step.
From a technology perspective, if you are preparing to sell your rental company, you need to ensure that the systems you use to manage functions such as financials conform to three fundamental criteria:
- Centralized Data: When outside investors look at buying a business, they deep dig into financials — and everything will need to tie out before a sale can proceed. As such, centralized financials are essential. In fact, all systems and relevant data should be consolidated into one central database. Without this centralization, you will not be able to get accurate, immediate answers to questions that every investor and employee can ask during a sale.
- Asset-Centric Approach: Asset-centricity simply means that your business is tracking everything that happens during the usable life of a piece of equipment. This may sound like a simple concept, but it will require you and your technology to answer any question customers may have about a unit — in real-time and 24-7:
- Where is the unit?
- How is it performing?
- How has it historically performed?
- What types of maintenance does it currently need?
- What types of maintenance will it need soon?
- Web-Enabled Technology: When it comes to technology, connectivity is king. Modern, web-enabled capabilities help ensure that every person in your organization (as well as your customers) is connected in real-time. It also guarantees that decisions are made based on facts — not guesses. Because everyone has the information they need when they need it, it boosts your business’ operational efficiency.
If your technology does not meet the above criteria when you prepare to sell your business, your valuation will be significantly reduced. Making a strategic investment in technology long before you sell is simply one of the best things you can do to ensure a great return. Is it easy? No. Is it risk-free? No. If done correctly, is it worth it? Absolutely!
Fame Rental is the only truly modern asset-centric, web-enabled, comprehensive rental management software that is designed precisely for the needs of a rental business:
Fame tracks every aspect of each piece of equipment throughout its lifecycle, ensuring that your business hits the most profitable sweet spot for each step.
Fame manages every rental from reservation to return, which maximizes utilization and return on assets. Fame also handles sales, sales inventory, and post-sale services, making it ideal for supply and equipment sales.
The FameAir™ web application provides real-time information to anyone, anywhere, at any time. Everyone in your company – including your customers – can now make smarter, more informed decisions all the time.
