Did you know that your idle machinery could be a source of extra revenue? It can be rented out, with only a little bit of effort and know-how! This guide will help you calculate the rental cost of your machine. You will need to set the pricing at just the right level to entice the maximum number of clients interested in renting your equipment.
So, how exactly do you fix the right rental price for your machinery? Let's take a look!
Things to Consider When Setting the Rental Price for Your Machinery
When businesses are leasing out their equipment to other companies, certain factors need to be incorporated into the rental price, to ensure clients get their money's worth. Some of these include:
1. The unique value that your equipment offers to a wide range of customers
2. The absolute and relative cost positions of the company
3. Comparison with competitor pricing
These variables are not always easy to determine, and they change continually. Equipment-rental businesses with capital-intensive, long-lived assets are often faced with difficult decisions with regard to pricing. They are generally not prepared for the market forces that can drive the rental rates above or below the amount required to cover the capital costs spent to procure the equipment.
The 9 Best Ways to Set the Right Rental Price for Your Machinery
1. Determine How Much Your Customers Are Willing to Pay
Through the use of advanced technology, you can accurately research what customers are willing to pay for your product.
2. Set Lower Prices for Older Machines
You may have customers who might not be able to pay the higher lease rates you charge for brand new machines. By lowering prices on older equipment, you may be able to attract more clients.
3. Provide a Machine Operator in the Lease
Savvy customers will pay for experienced labor. If you can provide a machine operator along with the machine, you will find that you can command a higher price.
4. High Time/Low Dollar Utilization
If you find that equipment is being leased frequently and regularly, you may want to increase your rates need to maximize your potential income.
5. High Dollar/Low Time
Conversely, if your rate is too high, your equipment may stay put. Adjusting your prices may help you move your inventory.
6. Additional Support
If your facility can provide a client with additional manufacturing support that can help complete a job more efficiently (e.g. tooling, measuring instruments, or lifting equipment), it will allow you to justify an increase in pricing.
7. Keep Maintenance Costs in Mind
When pricing your machinery, make sure to build unexpected maintenance costs into your pricing formula.
8. Look at Competitor Pricing Last
Decide upon a price before comparing it to those of your competitors. Reconsider only if there is a large discrepancy.
9. Aim to Recover Acquisition Costs Within a Few Rentals
This should ideally be accomplished within 10-12 rentals. Look at fixed costs, labor and equipment costs, competitive pricing, and the cost of customer service.
If you follow all the tips provided above, you will be on the right path to making your machinery work for you, even when you’re not!