Editorial: June 2010

I don’t think I’m going to draw a lot of criticism when I say that 2009 was a bit of a lean year for the rental business in Canada. The global financial meltdown has had far-reaching effects. Although economists say that Canada is no longer officially in recession, there’s a good chance that some of the knock-on effects will continue to make themselves felt as we go forward into 2010.

Even if 2009 wasn’t totally dismal, chances are your revenue fell from 2008. For example, Canadian Equipment Rental Fund (CERF) Limited Partnership posted full-year earnings of around $3.3 million in 2008. Contrast that with CERF’s posted earnings for 2009 of less than $500,000. Revenue was $13.1 million, a drop of 23 per cent from $17.1 million in 2008. Looking at the numbers, you might be excused for thinking that things are definitely looking grim.

In CERF’s case, though, there is a silver lining. The company put some cost-cutting measures into place, but decided early in the recession not to make deep cuts to either staff or equipment.

“Canadian Equipment Rental Fund LP was affected but survived, thanks in large part to our product and customer diversity, our conservative fiscal policies and the growth we have delivered over the past four years,” said Wayne Wadley, president of CERF GP Corp, the general partner of Canadian Equipment Rental LP. “Our experience has taught us that all recessions end…when the recession finally ended we would be in good position to benefit.”

I would like to concentrate on just a few words from Wadley’s statement, specifically “our product and customer diversity.” Right there, we have the beginnings of a formula for how any business can survive even a major recession relatively intact.

Diversification is a key component of a long-term survival strategy. It can help to protect you by making sure that events outside your control have a minimal effect. A catastrophic decline in one industry won’t necessarily mean a revenue decrease in the other parts of your business.

This isn’t a new idea by any means. We all know the old saying about putting all your eggs in one basket.

Product diversity is definitely useful. However, you may not have the space or the resources to add a lot of new lines. That’s not a problem. Diversification goes way beyond simply carrying a lot of different stuff.

The ideal would be to diversify your customer base. There may be a few industries in your region that you’re not serving yet, even though you have what they need.

The real question is how to attract those new customers. You might try a mail-out, or other form of direct marketing. Advertising is also an option. The best way to go might simply be to make some sales calls. If you’ve noticed that, for example, millwrights aren’t renting equipment, you can contact all the millwrights in town. The personal touch might be what’s needed.

Making all those calls is going to eat up a lot of time. But you might end up with new customers, and they might be the sort who stick around for life and take every opportunity to promote your business. If that happens, you’ll look back on the time spent as a very wise investment.