Running a rental business involves a lot of decisions.  Whether you’re starting a new rental business or you’re looking to add more profit to your company’s results, below we outline some pivotal decisions that you need to make to optimize earnings.  

In this guide, we share some of the choices your business can make to simplify your business while keeping hard-earned money in your pocket.

Below are the five typical mistakes we see rental companies make that cost them money unnecessarily.

Charging Deposits.  The conventional wisdom in rental businesses is “charge a deposit so that I’m sure to get my things back in good condition”.  This approach made sense in the past, but nowadays, there are technologies to protect your rental business in the (rare) event that there’s an issue (and believe us, the number of true issues are vastly overestimated by those starting a rental company).  

Thanks to the new options for credit card “vaulting”, your Customer’s credit card can be saved (in a secure manner) to allow you to add late and/or damage fees without requiring your Customer to give your credit card number again (and Customers that mistreat your items or don’t honor the rental return date/time are unlikely to give you their card again, anyway).  Be sure to clearly state the reasons why additional charges & fees may be collected, and once Customers accept those terms, you are well within your right to use the card on file to collect those fees.

Even modest deposits can force a Customer to second-guess renting from you.  Take an example of a golf cart rentals.  Let’s say the daily rate for your cart is $200.  When your Customer is ready to book for $200, but they are presented with a $100 “refundable” deposit, they may reconsider the booking.  We mentioned above that rental businesses overestimate the number of times are deposit is really needed, but so do Customers.  Customers may want the added protection against damage, but the added cost may be too much for their budget.  If you calculate the number of times deposits are really refunded (i.e., no issue with the rental) compared to the number of rentals you could be losing due to the booking price, you’ll likely find the benefit of the deposit outweighs the lost rentals.

Merchant processing fees can also add up for the deposits you’re collecting, especially if most of them are refunded.  Merchant processing companies will charge you for the initially authorization & capture of the deposit, but they will also charge you to refund the deposit to the Customer.   Do the math for your business before deciding if charging a deposit is really worth it. 

No Demand-Based Pricing Pricing.  Most rental businesses experience seasonal or day-of-week demand spikes.  Just like movie theaters charge more for evening showtimes compared to matinees (for the same movie, in the same seat), you, too, should charge more (or less) based on expected demand.  This is especially true for businesses that cater to events like “milestone” parties (birthdays, graduations, weddings) or those that serve vacation/holiday crowds.  Dynamic pricing controls allow you to not only smooth out demand for your items, but can help you fill otherwise empty days/times with more attractive “off peak” pricing.  For price-insensitive Customers who don’t mind paying a little more to rent your equipment when they want it, dynamic pricing offers you more revenue for the same equipment.

No Upsells.  There’s a reason that amazon.com and other retailers show Customers “Others who ordered this product also purchased…” items.  They know that Customers are not always totally educated on the items they’re buying (or renting).  If your business is not offering relevant suggestions to your Customer, you’re missing out on an easy way to grow the average order value.    We have found that Clients who create upsell suggestions will increase the average order value by 18% compared to those clients who don’t offer upsell suggestions. That means that for every 5 orders, you’re effectively getting a sixth rental (in terms of revenue).

Losing Chargeback disputes.  Chargebacks are awful, right?  You provide a service to your Customer, but for some reason he or she is unhappy with the experience. They file a chargeback request with their credit card company, and the rental funds are immediately withdrawn from your account for weeks or months while they arbitrate the claim.  Wouldn’t it be great to win those chargeback decisions?

In the rental industry, most of the chargebacks are related to the “you never told me” items, like “you never told me I would be charged a cleaning fee” or “you never told me the item had to be back by 6pm).  Rentals are different from simple purchases, because there are terms that must be accepted in order to form the contract.  If you don’t have actual proof that your Customer understood and agreed to your rental terms, you would very well lose a chargeback (even if you were in the right).

Having a digital signature on the rental contract)makes it easy to prove your Customer not only read but agreed to your rental terms, and that signature satisfied the Electronic Signature Act (which makes the agreement binding).  

Driving unnecessary costs out of your rental business creates new opportunities, like the ability to invest in new inventory or more staff.  We hope these tips will help you think about the expenses in your business and how you can reduce or remove them.

Hiring Employees For Tasks That Can Be Automated.  Labor is one of the biggest expenses in running your business.  And for the things that absolutely require extra hands, hiring makes sense.  But what about the labor costs associated with things that aren’t directly associated with new revenue generation?  We’re talking about things like answering phone calls from Customers (“Do you still have my reservation for Monday?”, “How much is the X product for a 2 day rental?”, “What time are you dropping off my rental?”, and “When is my rental due back?”).  Find a way to automate these services (while still providing the personal experience you want for your Customers and you and your Customer will both be happier).  The problem with hiring on an hourly (or salaried) basis for these types of inquiries is that you never know when a call/email will come in (so you end up paying for a lot of down time).  Again, if you can assign other tasks to the employee, you may need the help, but he or she is spending a majority of their time answering questions related to the rental, better options to hiring are available.  

Rental businesses can offer a nice return on your investment, and the tips above can help you keep more of the money your business makes without negatively impacting the Customer experience.