EQUIPMENT FOCUS SECTION Earthmoving Products & Machines
January/February 2022
E-COMMERCE: A RENTAL OPPORTUNITY HOW E-COMMERCE OPENS SALES POTENTIAL FOR RENTAL COMPANIES
SPECIAL SECTION
THE TOP 20 CHANGES IN LAWS, REGULATIONS THAT CAN PUT YOUR BUSINESS AT RISK Find the latest news at www.ForConstructionPros.com/RENTAL
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VOLUME 43 ISSUE 1
JANUARY/FEBRUARY 2022
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While e-commerce can initially seem challenging for construction equipment rental companies, dealers and others, it’s actually an opportunity.
COVER: HOW RENTAL COMPANIES, DEALERS CAN CASH IN ON E-COMMERCE BENEFITS
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BUSINESS MANAGEMENT Changes in Laws, Contracts Can Put Businesses at Risk
Find out if these law changes are applicable to your business.
IN EVERY ISSUE 04 Everybody’s Business Unsure of what hiccups lie ahead, it’s important to remain cautiously optimistic.
06 Online Exclusives 08 Market Watch 14 Industry Update 24 New Products 34 Eye on Rental Dick Detmer offers a few tips all rental business owners should consider for a successful year ahead.
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BUSINESS MANAGEMENT
The Future of Data and Privacy in Construction’s Digital Age As the construction industry wades further into a digitized future, it is imperative that companies exercise caution in regard to data.
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LIFT EQUIPMENT
Skyjack Lifts Industry With WE RISE Campaign Skyjack President Ken McDougall talks about the WE RISE campaign and Skyjack’s outlook for the rental industry.
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BUSINESS MANAGEMENT
The Art of Selling Your Business After 2020, you may be wondering if now is the right time to sell your business. First, you must understand the landscape of potential acquirers.
www.ForConstructionPros.com/RENTAL
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EVERYBODY’S BUSINESS // B y
Gigi Wood
gwood@ACBusinessMedia.com ™
A Game of Inches: OVERCOMING CHALLENGES IN 2022
I
t’s several weeks into 2022 and I find out life’s this game of inches. So still don’t know how to feel about is football. Because in either game, life this new year. At the start of 2021, or football, the margin for error is so I felt optimistic, and that turned small — I mean one-half a step too late, out to be a pretty wild ride. It’s diffior too early, and you don’t quite make cult to predict what lies it. One-half second too ahead during the next slow, too fast, you don’t several months. quite catch it.” Perhaps, with new He urges his team to medications available, win the game by taking COVID-19 will begin to it one inch at a time. dissipate, more workers “On this team, we will return to their jobs fight for that inch. and the economy will On this team, we tear become more robust ourselves and everyone (read about the future else around us to pieces of e-commerce on for that inch. We claw ON THIS TEAM, page 20). Or, if more with our fingernails challenges arise, we for that inch because WE FIGHT FOR might be left slogging we know when we add THAT INCH. ON up all those inches slowly through another cumbersome year. that’s gonna make the THIS TEAM, Although I’m unsure of (expletive) difference WE TEAR what hiccups lie ahead, between winning and I’m trying to remain OURSELVES AND losing,” Pacino says. cautiously optimistic. Basically, he’s telling EVERYONE ELSE his team Searching for ways to take the AROUND US TO game one play at a to maintain a positive outlook for the year PIECES FOR THAT time, one tackle at a ahead, I’m reminded of time and one down at a INCH. the 1999 football movie, time, as a team. That’s “Any Given Sunday.” In a something I saw a lot ~AL PACINO pivotal scene, the coach, of at tradeshows in played by Al Pacino, 2021; industry friends tells the team that the upcoming game reaching out to one another, helping will be the “biggest battle of their out, working together to push through professional lives.” He says they can these challenges. That’s a pretty either play as a team or continue with appropriate way to approach 2022, I their divisiveness, “Now either we heal think; one day at a time, rolling with as a team or we’re gonna crumble.” the punches, working as a team. Let’s While relevant to today’s world, keep that it’s not the “let’s get along” speech that going in sticks with me two decades later. It’s the 2022. part about inches. Pacino says, “You
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PRODUCT NEWS INSIGHT ■
■
www.ForConstructionPros.com/RENTAL Published by AC Business Media 201 N. Main Street, 5th Fl Fort Atkinson, WI 53538 (800) 538-5544 www.ACBusinessMedia.com
Publication Staff Publisher
Sean Dunphy sdunphy@ACbusinessMedia.com
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www.ForConstructionPros.com Editor
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Change of Address & Subscriptions — PO Box 3605, Northbrook, IL 60065-3605, Phone: (877) 201-3915 Fax: (847) 291-4816 • circ.rpn@omeda.com List Rental — Bart Piccirillo, Sr. Account Manager Infogroup Media Solutions (soon to be Data Axle) Phone: (518) 339 4511, E-mail: bart.piccirillo@infogroup.com Reprints — Megan Perleberg, mperleberg@ACBusinessMedia.com
AC Business Media Chief Executive Officer Chief Financial Officer Chief Digital Officer Chief Revenue Officer VP Audience Development VP of Operations Group Content Director
Ron Spink JoAnn Breuchel Kris Heineman Amy Schwandt Ronda Hughes Nick Raether Jon Minnick
Published and copyrighted 2022 by AC Business Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the U.S. to rental centers, equipment distributors, and other businesses with rental departments. To subscribe please visit www.ForConstructionPros.com. Publisher reserves the right to reject nonqualified subscribers. One year subscriptions for nonqualified individuals: U.S. $35.00; Canada and Mexico $60.00; and $85.00 all other countries (payable in U.S. funds, drawn on U.S. bank). Single issues available (prepaid only) $10.00 each. Rental (ISSN 2375-9925, Print | ISSN 2471-7657, online | USPS 686-370) is published eight times per year: January/February, March, April, May, June/July, August/September, October/November and December by AC Business Media, 201 N. Main Street, 5th Fl., Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, WI and additional entry offices. POSTMASTER: Please send change of address to Rental, PO Box 3605, Northbrook, IL 60065-3605. Printed in the USA. Vol. 44, Issue 1, January/February 2022
www.ForConstructionPros.com/RENTAL
1/27/22 2:58 PM
Built solid. Booked solid.
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KubotaUSA.com *According to 2020 data from Off-Highway Research including all Kubota Group brand sales. © Kubota Tractor Corporation, 2021. This material is for descriptive purposes only. Kubota disclaims all representations and warranties, express or implied, or any liability from the use of this material. For complete warranty, safety and product information, consult your local Kubota dealer. For the complete disclaimer, go to KubotaUSA.com/disclaimers and see the posted disclaimer.
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DIGITAL EXCLUSIVES //
THE LATEST ONLINE
LATEST PODCASTS E 29: SMARTEQUP FOUNDER TALKS ACQUISITION, FUTURE In this episode of Rental’s The Bottom Line, Editor Alexis Sheprak talks to Alex Schuessler, founder and president of International Group at SmartEquip about what its acquisition means to the rental industry at-large. forconstructionpros.com/21821430
ONLINE EXCLUSIVES THE RENTAL OWNER’S SURVIVAL GUIDE TO ONLINE BUSINESS
Rental Magazine has developed an essential guide that provides rental business owners access to valuable insights into the digital world. This guide will cover everything, including why your rental business needs an online presence, how to successfully bring your business online, what social media and business apps can improve your business and more. forconstructionpros.com/21627018
THE 10 BASIC PRINCIPLES OF ERGONOMICS
The field of ergonomics looks at how workers do their jobs and provides guidance on how they can accomplish tasks with more efficiency, safety and comfort. forconstructionpros.com/21415547
TIPS FOR SIMPLE MAINTENANCE OF DEEP CYCLE BATTERIES
There are many misconceptions and poor practices when it comes to maximizing deep cycle battery life. In this article, we discuss the four things that lead to these batteries failing or being replaced prematurely. forconstructionpros.com/21591230
VIDEO: HOW TO READ A TELEHANDLER LOAD CHART
Learn the importance of a telehandler load chart, the components and how the data shown combines to safely lift loads at any given point, as well as review examples using both the material weight/placement and the boom position. forconstructionpros.com/21980895
TRENDING NEWS
EMPOWERING A RENTAL FLEET BUSINESS WHEN TIME IS MONEY
The demand for rental equipment is steadily increasing, and so is the competitive landscape for rental fleet organizations. Now, more than ever, fleet owners need to empower their businesses to stay profitable in a time when margins are tight. forconstructionpros.com/21940895
73% OF CIVIL CONTRACTORS EXPECT HIRING DIFFICULTIES IN 2022 Civil contractors, while optimistic about 2022, expect difficulty meeting demands of infrastructure projects due to the skilled worker shortage. forconstructionpros.com/22018014
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MARKET WATCH TORO FOUNDATION SUPPORTS CONSTRUCTION WORKFORCE DEVELOPMENT WITH DONATION
2021 COMMERCIAL, MULTIFAMILY CONSTRUCTION STARTS UP 18% Commercial and multifamily construction starts regained lost ground in 2021 in most major metropolitan areas following the pandemic in 2020. According to Dodge Construction Network, the value of commercial and multifamily construction starts in the top 20 U.S. metro areas increased 18% from 2020 to 2021, compared to 16% on a national basis. In 2021, total U.S. commercial and multifamily building starts rose 16% to $236.6 billion from 2020 levels. Commercial starts were up 8% to $120.3 billion nationally, while multifamily starts were
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around the world to change the stigma surrounding careers in construction through education, conservation, events and advocacy. The Classroom Talks play a critical role in helping young people understand the many avenues available for a successful career in construction.
forconstructionpros.com/22005771 Crew Collaborative
Crew Collaborative, a nonprofit organization aimed at strengthening the construction workforce, has received a $15,000 grant from The Toro Company Foundation to support its efforts. The donation will exclusively sponsor Crew Collaborative’s Classroom Talks. “The Toro Company is committed to building the construction workforce and recognizes that successful construction careers start in the classroom,” says Judson McNeil, president of The Toro Company Foundation. “We’re proud to assist students as they begin their career planning by helping them understand all of the opportunities available in this critical field, including roles at TTC.” The Classroom Talks sponsored by TTC and facilitated through Crew Collaborative will take place routinely throughout the school year starting in fall 2021. Students will hear from industry representatives on the various career paths offered in construction, including those that require college degrees and those that can be started following high school graduation. Ninety percent of U.S. contractors have expressed concerns about the labor shortage, and 52% of construction workers were born before 1980, according to recent surveys. Crew Collaborative works to establish the construction community
25% higher at $116.4 billion. Out of the top 20 metro areas, the top 10 saw overall commercial and multifamily starts rise 18%, with only Washington, D.C., and Los Angeles posting declines. Commercial building starts were up 11% to $45.1 billion in 2021, while multifamily starts gained 25% to $48.0 billion. The top 10 accounted for 39% of all commercial and multifamily starts in the U.S., unchanged from 2020. The top three metro areas in 2021 were: New York with commercial and multifamily starts at $26.8 billion, a 14% increase from 2020; Dallas with $10.7 billion in starts, an impressive 45% gain over 2020 and Miami, with $8.4 billion in starts and a 65% increase from the prior year.
The remaining top 10 metro areas: • Washington, D.C., -9% ($8.4 billion) • Boston, +16% ($7.3 billion) • Los Angeles, -12% ($7.1 billion) • Atlanta, +49% ($6.6 billion) • Seattle, Wash., +48% ($6.2 billion) • Phoenix, +11% ($6.0 billion) • Houston, +5% ($5.5 billion).
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1/27/22 11:11 AM
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MARKET WATCH Economic activity in the services sector grew in November for the 18th month in a row — with the Services PMI setting a record for the fifth time in 2021 — say the nation’s purchasing and supply executives in the latest Services ISM Report on Business. The report was issued Dec. 3 by Anthony Nieves, chair of the Institute for Supply Management (ISM) Services Business Survey Committee. The ISM Services PMI index is a set of economic indicators based off surveys of private-sector companies in the services sector, which includes construction. In November, the Services PMI registered 69.1%, the highest reading since the inception of the index in 2008. The 12-month average is 62.1%, which reflects strong and sustained demand in the services sector, according to the report. The November reading indicates the services sector grew for the 18th consecutive month after two months of contraction and 122 months of growth before that. A reading above 50% indicates the services sector economy is generally expanding; below 50% indicates the services sector is generally contracting. “In November, the Services PMI registered another alltime high of 69.1%, 2.4 percentage points above October’s reading of 66.7 %, the former all-time high,” Nieves says. “Previous records were set in March (63.7%), May (64%) and
ISM
ECONOMY SETS RECORD AGAIN IN 2021
July (64.1%). The data quickly explains the elevated Services PMI reading, as two of the four equally weighted subindexes that directly factor into the composite index set or tied alltime highs. The Business Activity Index reached 74.6%, an increase of 4.8 percentage points compared to the reading of 69.8% in October, and the New Orders Index registered 69.7%, the same reading as last month’s figure. The other two subindexes are Employment and Supplier Deliveries; both also contributed positively to the Services PMI in November. “Construction material shortages and longer lead times continue to hamper operations. Significant cost increases from labor and freight are forecast for the start of next year,” a survey respondent in the construction sector reports.”
forconstructionpros.com/21928260
U.S. Environmental Protection Agency
EPA PROPOSES COMPREHENSIVE BIOFUELS PROGRAM UPDATES AND IMPROVEMENTS To strengthen the role of the Renewable Fuel Standard (RFS) in advancing greater use of low-carbon renewable fuels, the Environmental Protection Agency (EPA) proposed a package of actions setting biofuels volumes for years 2022, 2021 and 2020, and introducing regulatory changes intended to enhance the program’s objectives. In addition, EPA is seeking public comment on a proposed decision to deny petitions to exempt small refineries from their obligations under the RFS on the grounds that petitioners failed to show that EPA has a basis under the Clean Air Act (CAA) and recent federal case law to approve them.
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“Despite multiple challenging dynamics affecting the RFS program in recent years, EPA remains committed to the growth of biofuels in America as a critical strategy to secure a clean, zero-carbon energy future,” says EPA Administrator Michael S. Regan. “This package of actions will enable us to get the RFS program back in growth mode by setting ambitious levels for 2022.” The Clean Air Act requires EPA to set annual RFS volumes of biofuels that must be used for transportation fuel for four categories of biofuels: total, advanced, cellulosic and biomass-based diesel. EPA implements the RFS program in consultation with the U.S. Department of Agriculture, the U.S. Department of Energy and consistent with direction from Congress. For 2022, EPA is proposing the highest total volumes in history, putting the program on a stable trajectory that provides for significant growth. The proposed volumes for 2022 are more than 3.5 billion gallons higher than the volume of renewable fuel used in 2020. The proposed volume of advanced biofuel for 2022 is over one billion gallons greater than the volume used in 2020.
forconstructionpros.com/21964824 www.ForConstructionPros.com/RENTAL
1/27/22 2:53 PM
2022 ECONOMIC OUTLOOK FORECASTS 4.6% EXPANSION IN EQUIPMENT INVESTMENT Low financial stress, an expanding housing sector, and increased federal spending on infrastructure are expected to propel equipment and software investment growth of 4.6% for
The U.S. manufacturing sector should continue to expand at a healthy rate in 2022, although supply chain issues, hiring difficulties and high inflation could dampen industrial sector output, particularly during the first half of the year.
forconstructionpros.com/21965517
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2022. Annual U.S. GDP growth for 2022 is forecast at 3.5%, according to the 2022 Equipment Leasing & Finance U.S. Economic Outlook released by the Equipment Leasing & Finance Foundation. The Foundation’s report, which is focused on the nearly $1 trillion equipment leasing and finance industry, highlights key trends in equipment investment and places them in the context of the broader U.S. economic climate, providing the U.S. macroeconomic outlook, credit market conditions and key economic indicators. While equipment and software investment is forecast to grow 4.6% (annualized) in 2022, supply chain constraints, high inflation and tighter monetary policy are key headwinds to growth. The U.S. economy slowed in fall 2021, however, growth in Q4 likely rebounded, and the economy appears poised for an aboveaverage year in 2022. www.ForConstructionPros.com/RENTAL
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MARKET WATCH The Dodge Momentum Index fell 3% in December to 166.4 (2000=100), down from the revised November reading of 170.7. The Momentum Index, issued by Dodge Construction Network, is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. In December, commercial planning fell 4%, and institutional planning slipped 1%. Despite these declines, 2021 was a banner year for the Momentum Index, despite lingering risks of COVID-19 and low demand for some types of nonresidential buildings. The leading commercial projects were the $300 million OKANA Resort in Oklahoma City, and a $200 million Amazon distribution center in Daytona Beach, Fla. The leading institutional project was the $250 million University of Michigan Detroit Center for Innovation in Detroit, Mich.
JOHN DEERE TO ACQUIRE MAJORITY OWNERSHIP IN E-MOBILITY BATTERY TECHNOLOGY SUPPLIER Deere & Company has signed a definitive agreement to acquire majority ownership in Kreisel Electric, Inc. (“Kreisel”), a battery technology provider based in Rainbach im Mühlkreis, Austria. Kreisel develops high-density, highdurability electric battery modules and packs. Additionally, Kreisel has developed a charging infrastructure platform (CHIMERO) that uses this patented battery technology. Since 2014, Kreisel has been focused on the development of immersion-cooled electric battery modules and packs for high-performance and off-highway applications. The company has a differentiated battery technology and battery-buffered charging infrastructure offering and serves a global customer base across multiple end markets, including commercial vehicles, off-highway vehicles, marine, e-motorsports and other high-performance applications. John Deere sees demand growing for batteries as a sole- or hybrid-propulsion system for off-highway vehicles. Products in Deere’s portfolio such as turf equipment, compact utility tractors, small tractors, compact construction and some road
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Dodge Construction Network
DODGE CONSTRUCTION’S MOMENTUM INDEX DECLINES IN DECEMBER
The Dodge Momentum Index suggests construction activity will improve in 2022 and that this growth will be more balanced than what was seen in 2021. The ever-present risks of the pandemic and tight labor force will work to counter these trends, leading to moderate growth over the new year.
forconstructionpros.com/21992643 building equipment could rely solely on batteries as a primary power source. Deere intends to continue to invest in and develop technologies to innovate, deliver value to customers and work towards a future with zero emissions propulsion systems. The majority investment in Kreisel Electric will allow Deere to optimally integrate vehicle and powertrain designs around high-density battery packs while leveraging Kreisel’s charging technology to build out infrastructure required for customer adoption. Kreisel Electric will retain its employees, brand name and trademark and continue to operate from its location in Austria to serve its growing customer base. The company was founded by brothers Johann, Markus and Philipp Kreisel and has approximately 160 full-time employees. The transaction requires final regulatory approval in Austria, with closing expected to take place in approximately 60 days. Financial details are not being disclosed.
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1/27/22 11:11 AM
CANCELLED: AMERICAN RENTAL ASSOCIATION’S RENTAL INNOVATION CONFERENCE & EXHIBITS
deliver the education program portion of the conference at a future event. Those who had already registered for the Rental Innovation Conference & Exhibits will receive a full refund
The American Rental Association (ARA) has decided to cancel its Rental Innovation Conference & Exhibits event scheduled for March 9 and 10, 2022 in Grapevine, Texas. The decision was made due to a variety of factors. These include the continued spread of the Omicron variant of the coronavirus (COVID19), and both transmission and positivity rates in Dallas Country being categorized as “high.” Other factors in the decision were the return of essential-travelonly restrictions for many large organizations, equipment availability issues, as well as parts and staff shortages. The ARA is evaluating options to
forconstructionpros.com/22017981.
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INDUSTRY UPDATE HULING TO MANAGE TAKEUCHI’S TECHNICAL SERVICE TRAINING DEPARTMENT
Durante Rentals
Joseph Huling, the national service and warranty manager for Takeuchi-US, is now overseeing the company’s technical service training department. Huling joined Takeuchi in 2017 as a regional service manager before being promoted to national service and warranty manager in early 2020. In his expanded role, Huling will support the company’s corporate sales efforts by providing product, training and support for Takeuchi’s dealers, distributors and customers. Huling’s responsibilities include developing curriculums, improving training methods, scheduling training, managing the technical training team and ensuring that the new Takeuchi Global University continues to grow and improve. Before joining Takeuchi, Huling was general manager of Star Equipment and Rental in Mount Airy, Ga., where he gained experience selling, renting and servicing residential and small commercial equipment from national brands.
DURANTE RENTALS OPENS NY LOCATION
Takeuchi
Durante Rentals, a construction equipment rental company, is opening a new location in Queens, N.Y., to increase its capacity to serve the New York metro. The 68,000-square-foot property provides a central location for the company and improves its ability to serve the civil infrastructure, heavy highway work and high-rise construction contractors in New York City. “This new hub will be instrumental in providing us with greater operational efficiencies,” says Anthony Durante, CEO of Durante Rentals. “After a three-year search for the right location, the timing coincides with our unionization in June. In anticipation of infrastructure rebuilding, we are now poised to play a major role in the development of our great city and beyond.”
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LGMG North America is entering 2022 with a change in leadership. Eric Liner replaced Craig Paylor as president/CEO of the North American company effective Jan. 1, as Paylor has retired. Additionally, Rusty Kaylor, former senior vice president, retired effective Dec. 31. Paylor and Kaylor are known within the MEWP industry with careers that span decades. Paylor led multiple companies and has mentored many of the industries’ current leaders. Kaylor built numerous rental companies over his career. He went on to praise Mr. Kaylor, “Rusty has played an integral role in the growth of our North American business operations having drawn upon decades of success within the equipment rental industry. We greatly appreciate Rusty’s contribution to our success as well.” Paylor and Kaylor will consult for the company. Liner joined LGMG North America in August 2021 as
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LGMG
LGMG NA ANNOUNCES LEADERSHIP CHANGE
senior vice president of national accounts. He has spent more than 20 years in the construction equipment industry, mostly with access and material handling equipment manufacturers. His most recent position prior to LGMG was executive vice president, Skyjack Americas, responsible for all Skyjacks’ commercial business activities in North, Central, and South America. LGMG was founded in 2019.
forconstructionpros.com/21977628
www.ForConstructionPros.com/RENTAL
1/27/22 11:14 AM
TOYOTA MATERIAL HANDLING ANNOUNCES CEO RETIREMENT, SUCCESSION PLAN Toyota Material Handling (TMH) has announced that Jeff Rufener, who has served as president and CEO for 10 years, retired at the end of December. The company selected Bill Finerty, who most recently served as senior vice president of sales, to succeed Rufener. The appointment was effective Jan. 1. “On behalf of the entire Toyota family, we would like to thank Jeff for his leadership and impact during his 10 years with the company,” says Brett Wood, president and CEO of Toyota Material Handling North America and senior executive officer of Toyota Industries Corporation (TICO). “Jeff led TMH through some of the largest, most transformational challenges in history, and he did so with grace, with empathy, and with compassion. He embraced each challenge, and always saw the positive opportunity in change.” Rufener joined TMH in 2011 after more than 30 years with Mitsubishi Caterpillar Forklift America. During his tenure at TMH, Rufener oversaw the move of the company’s headquarters from California to Indiana and multiple expansions of TMH’s Indiana campus. Rufener also managed the integration of Toyota’s two Columbus-based companies — Toyota Material Handling USA (TMHU) and Toyota Industrial Equipment Manufacturing (TIEM) — into a single company in 2020. During Rufener’s tenure, TICO made key strategic
ALTORFER RENTS AND SULLAIR CONTINUE PARTNERSHIP AMID EXPANSION
acquisitions such as Bastian Solutions and Vanderlande to enter the automation sector; Toyota Commercial Finance, and Hoist to expand Toyota’s heavy-duty lift truck offering. Rufener also helped TMH round out its product offering with the launch of many new electric models to ensure the organization continues to lead for decades to come. Rufener has always been a respected leader in the material handling industry, previously serving as the president of the Industrial Truck Association (ITA) and as the first chairman of the National Forklift Safety Day taskforce. Finerty takes over for Rufener after more than five years leading the company’s sales teams. As senior vice president of sales, Finerty also oversaw the TMH customer network and dealer network development, and he chairs the board of directors for TMH’s equityowned dealerships and the company’s Toyota Material Handling Heavy Duty Division. Under Finerty’s leadership, TMH has reached records in sales, profit and market share. He has more than 30 years of industry involvement, and previously held several executive leadership roles at Caterpillar, Inc. Jaksa Pejnovic succeeds Finerty to become TMH’s vice president of sales and marketing, also effective Jan. 1. Pejnovic has been with Toyota since 2013 and joined the TMH executive team in 2016 as the director of finance, pricing and strategic planning. Prior to joining TMH, Pejnovic spent 12 years at CNO Financial Group in a number of finance and accounting positions.
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UNITED RENTALS NAMED ONE OF AMERICA’S MOST RESPONSIBLE COMPANIES BY NEWSWEEK
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Newsweek
United Rentals was recently named one of America’s Most Responsible Companies 2022 by Newsweek. United Rentals has been selected three consecutive years for the list, which was founded in 2020 and acknowledges the top 500 most responsible companies in the United States. The award recognizes United Rentals for its ongoing commitment to corporate social responsibility. United Rentals ranked 85th on the top 500 list, up 98 places from 2021. The company was the highest ranking equipment rental company on list.
Sullair
Sullair is expanding its partnership with Altorfer Rents in supplying portable air compressors to various markets. Altorfer Rents has seen recent rapid growth in the Chicagoland and northwest Indiana regions and plans to add two new rental stores in Oglesby and Quincy, Ill. Sullair air compressors will be available for rent and sale, and Altorfer will install Sullair industrial compressors for use in its in-house service shops at the new locations. Sullair supplies Altorfer Rents with several air solutions, including portable compressors from 185 to 1,600 cfm and pneumatic air tools.
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BUSINESS MANAGEMENT //
There have been many important changes to laws applicable to construction industry equipment manufacturers, dealers and lessors in recent years.
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©makibestphoto – stock.adobe.com
CHANGES IN LAWS, CONTRACTS CAN PUT RENTAL BUSINESSES AT RISK
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fair question: I received the following question recently, thought it merited some thought: “I keep hearing that laws and contracts have changed, and that my business is at risk if I don’t do something to deal with it. But, honestly, I don’t know what changes everyone is talking about or why I should be concerned about them. Maybe you can tell me the short version of what they are and why I should care?”
James Waite’s Answer: What you heard was correct. Having been in the equipment industry for almost 30 years myself, I can tell you I have never seen as many important changes to the laws applicable to equipment manufacturers, dealers and lessors as I have in the past five years. Adding to that, judicial interpretations (court rulings) have been changing the landscape considerably, especially since the onset of COVID-19-generated business crisis.
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So, although “short” probably isn’t in the cards (dozens of major changes have impacted equipment industry participants recently), here is a list of my “Top 10 and 10” along with some brief explanations:
1. Arbitration/Class Actions: In 2019, the U.S. Supreme Court ruled that, by including an arbitration clause in a contract, many businesses could avoid “class-action” lawsuits (suits filed by hundreds or thousands of plaintiffs in a single consolidated action seeking one, often enormous, sum, rather than pursuing tiny individual claims). Ultimately, although this won’t be applicable to every business operator (think of those who want to pursue Small Claims Court actions and/or mechanics’ liens), it should prompt many equipment sellers and lessors to include arbitration clauses in their contracts going forward.
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2. Damage Waiver and Refueling Claims: One of the most extreme examples of this was the infamous Hertz Damage Waiver suit (“Miguel V. Pro., et al. v. Hertz Equipment Rental Corporation”), where over 746,000 class action plaintiffs sued Hertz for allegedly mishandling its damage waiver. Recently, another large national rental company reportedly settled a multi-million-dollar class action alleging it overcharged for both refueling and for transportation. The suit alleged that the rental operator had “breached its own rental contract” which only allowed it to recover “its own costs” for refueling and transportation, rather than the higher amounts it had been charging. In both of these cases, the rental contract could have eliminated the problem but didn’t.
3. Right to Repair Laws: With Executive Order No. 14,036, the Biden Administration effectively expanded equipment owners’ rights to “repair their own equipment how they like” (White House Press Secretary, Jen Psaki, July 6, 2021), generating a flurry of controversy regarding the potential legal, mechanical and technological ramifications of doing so; among them: Does a customer who negligently repairs equipment waive legal claims against a seller or manufacturer if the customer’s repairs create safety issues that ultimately cause injury to the customer or others? (Note: Surprisingly enough, the answer appears to be “no” at least for some courts — see below).
4. Expansion of Products Liability: With its ruling in Sullivan v. Werner Co. and Lowe’s (J-A04035-21, PA. Super. Ct. 2021), the Pennsylvania Superior Court appears to have said that a customer who deals negligently with a piece of equipment (in this
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case, by improperly constructing a scaffold) can still sue the manufacturer and have his own negligence excluded from the jury based on the court’s finding that such negligence “would not preclude the possibility that a product defect contributed to the accident.” This ruling, in combination with the newly expanded right-to-repair, poses a potential hazard for everyone in the chain of distribution.
5. Force Majeure Clauses: A force majeure clause permits a party to escape, or at least delay, contract obligations it would otherwise be deemed to have breached, based on the existence of a circumstance beyond its control, such as an “Act of God” (fire, flood, storm, earthquake, etc.). Generally, courts have been limiting the application of such clauses more rigidly of late, saying that one cannot escape a contract obligation unless its force majeure clause “specifically identifies the potential hazard” which gave rise to the delay. So, if you can’t deliver a piece of equipment because it was buried in a landslide or fell into a sinkhole, your contract’s force majeure provision had better include references to “landslides and sinkholes” or you’re going to be out of luck in most jurisdictions. In the past, only a few contracts would have gone so far as to include these more obscure references, to say nothing of other events now coming to the fore, such as strikes, COVID-19 (though some referenced “epidemics”) and more. Note: For most lessors, a “one-way” force majeure clause is the preferred option. Make certain your contract entitles you to cancel or delay performance of your contractual obligations as a result of force majeure events, but given the practical impossibility of proving a customer does not have COVID (remember HIPAA), why give your customers a blanket cancellation right?
6. Supply Chain Issues: Surprising to no one, the cost of a shipping container has risen by between 500% and 700% in the past 18 months, due largely to a spike in commercial traffic and congestion at ports. Prior to 2021, few equipment industry contracts included “supply chain delays” in their force majeure clauses. That is now changing as suppliers zero in on transportation as a significant issue with respect to both timing and cost. Not to be forgotten, Incoterms (the set of eleven International Commercial Terms for shippers) were updated in 2020, among other things, increasing the levels of security and insurance shippers are responsible for in some cases.
7. Cyber-Liability Claims: Cyber-liability claims have skyrocketed since 2020, due largely to cybersecurity lapses coupled with an increased use of ransomware, and the enormous growth in the value of data being stored, the cost of business interruptions and the apparent willingness of many companies to pay ransoms. This has driven an increase of roughly 50% in cyber-security premiums over the past year, with more projected. Given the expanding levels of technology installed in/on equipment, not to mention the value of the data they now generate, cyberliability insurance is becoming an important cost component for equipment providers at all levels. Requiring cyber-liability insurance of customers and lessees has gone from an oddity to the “new normal.”
8. Loss of Use: The value of the time required to repair and/or replace equipment has now been recognized by some courts. This is good news for equipment lessors, who in prior years, were often forced to shoulder this indirect cost without compensation from recalcitrant lessees. In some states, lessors are now able to
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recover for lost time in many cases. Nonetheless, including in your contract a right to recover for “loss of use” is now important in all states.
9. Telematics: In December 2017, Oklahoma State Rep. Mark McBride found a tracking device was installed on his vehicle without his knowledge. He suspected the device was installed by an industry group that sought to discredit him after he criticized the group’s tax incentives. He filed a lawsuit and introduced new privacy legislation making “using GPS or [any] other monitoring device to track a person’s movement without the person’s consent” a criminal offense. The bill was signed into law in May 2018. The law excludes dealers and lenders who obtain a customer’s
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consent to have a GPS tracker installed. Predictably, states have begun enacting similar laws prohibiting the use of geolocation, monitoring and other devices without the consent of customers. Therefore, if you rent equipment with installed GPS and/or other telematics devices, make sure your contract includes this consent, or you may be surprised to learn that you have actually committed a crime.
10. AWPs/MEWPs: New rules for aerial work platforms (now called “Mobile Elevating Work Platforms,” or “MEWPs”) went into effect on June 1, 2020, after extensive delays. The new rules address a wide range of issues, including design, safe use and training requirements. These replaced the old ANSI standards and
changed everything from equipment classifications to how, when, where and by whom they can be used. For manufacturers, the new rules require important modifications to designs and manufacturing processes and manuals. For dealers and rental operators, new safe-use and training requirements now make provision (whether by the lessor or a referred third party, such as a manufacturer) of proper familiarization, training and warnings, as well as other safety enhancements, critical. Read another 10 tips at forconstructionpros.com/21940164.
James Waite Corporate Lawyer Robinson, Waters, & O’Dorisio, P.C.
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HOW RENTAL COMPANIES, DEALERS CAN CASH IN ON E-COMMERCE BENEFITS
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ere’s a dose of reality for anyone who still thinks e-commerce in the construction equipment industry is unnecessary: Contractors today do not shop the way they used to. And it’s not that it’s changing; it has already changed. Since 2016, millennials have made up the majority of the workforce. Why does that matter? Two main reasons: 1) As digital natives, millennials start their B2B procurement process differently. They begin with an online search, no matter the product or industry. 2) Millennials, the oldest of whom are turning 40 this year, are increasingly the decision makers in their organizations. According to a Merit study, up to 73% of all B2B buyers are now millennials. While that can initially seem threatening for construction equipment rental companies, dealers, OEMs and aftermarket supplier partners, it’s actually a major opportunity to meet their customers where they’re at, says Jimmy Mansker, global director of e-commerce for CNH Industrial.
“It is really important for us to think about the end customer and how we can help them become more efficient when dealing with equipment repairs and speed up the time to get them back to the jobsite,” Mansker says. Construction e-commerce opens up the potential for rental companies and dealers to add value, at a time when supply chain disruptions have compounded costly downtime and fleet manager views about their dealers’ abilities to help them have diminished in the past two years. Offering online services won’t diminish a distributor’s relationship with their contractor customers, Mansker says. It will enhance it. “The way we look at e-commerce is changing,” he says. “It’s a service that the customer has come to expect.”
Speeding Up Procurement The widespread digital shift in B2B buying habits is not only affecting millennials. According to Google, almost three-quarters of all B2B buyers begin their buying process with a generic search for
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a type of product. In fact, by the time they reach out to their rental company or dealer, they already have a pretty good idea of what they need. Research shows that in today’s world of online research, an estimated 70% of the buying decision is made before a customer ever contacts a vendor, regardless of whether it results in an online or an offline purchase. But this does not mean that contractors do not want their rental companies or dealers involved, Mansker says. “They’re better educated to talk to the dealer,” he says. “The customer still wants the dealer to lead the process — they want the dealer engaged.” Mansker says contractor customers also want to know pricing, availability and the time it will take to get their parts or equipment, including whether their order can be shipped or picked up at their nearest location on the same day. The more information the rental company or dealer can provide online, the faster the contractor can get to the point of purchase. “I think everyone’s getting used to faster transactions in your everyday life, whether I’m buying on Amazon, and it takes me three seconds to buy something, or I go to McDonald’s, and they have three different drive-thru lanes,” Mansker says. “Everything that’s being done in retail from a technology perspective is driving that faster transaction expectation.” The equipment distributor is also in a prime position to provide that information based on their experience and knowledge, because contractors would rather turn to them over one of the industry-agnostic e-commerce giants, such as Amazon and eBay. “Our advantage over Amazon
is related to returns,” Mansker says. “That’s because when a buyer looks up a part, you need the assembly and build information to be able to make a decision. Amazon doesn’t have that — they have whatever some supplier has told them.” This is a key area where distributors can differentiate themselves online, he says. “We are making sure that when we create online experiences for customers, we’re getting them to the equipment or part that they’re looking for and making sure that we’re giving good information,” Mansker says. “But we’re tying it to the dealer, so they always know that their dealer is the ultimate expert and the ultimate solution driver.”
Creating Flexibility The other major benefit is that e-commerce offers contractors more options. “It provides OEMs and dealers the opportunity to continue to connect with their end users in the way they want to shop,” Mansker says. “Some contractors prefer the self-service method, and e-commerce gives them that flexibility, while allowing them to still engage with their dealer to ensure they get the correct parts and equipment.” Having an e-commerce presence on multiple online channels, including both brand sites and marketplaces is also important, because it provides a more comprehensive service for customers. Earlier this year, CNH Industrial partnered with Gearflow, the largest parts marketplace built for the
E-commerce can provide deeper insights into customer buying behavior and fleet maintenance needs, allowing rental companies and dealers to assist contractors more proactively.
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construction equipment industry. This partnership will allow CNH and its dealers to better address the needs of their mixed fleet customers, making it easier for them to shop for parts on one platform, while still maintaining the relationships they’ve developed. “Marketplaces give the end users the ability to simplify purchasing for a jobsite,” Mansker says. “We are very interested in ways that simplify customers doing business with our dealers and supporting our dealers in doing this.” Daniele Maggiolini, global head of business development for CNH Industrial, says marketplace participation can help contractors fulfill orders that their dealers may not be able to, due to age of the machine or availability of inventory. This demonstrates that they care about their customers’ productivity and success, he says. “We’re focusing on what really matters for our customers, which is their uptime, convenience and experience,” Maggiolini says. “So we’re trying to shift our focus from purely being product-based to offering solutions.” E-commerce can also provide deeper insights into customer buying behavior and fleet maintenance needs,
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allowing rental companies and dealers to assist contractors more proactively, he says. “When we look at the value that we bring to our customers and how we want to build a customer-centric
approach, first we need to develop a better understanding of our customers,” Maggiolini says. This includes offering communication and purchasing tools based on customer preference, such as the
capability for contractors to text orders or ask questions via instant message. “These are big pieces on the horizon that can allow dealers to support the end users directly from a website,” Mansker says. “The ability to understand new technology and how it can increase efficiencies on the jobsite is another huge opportunity.” Ultimately, e-commerce strengthens the symbiotic relationship between the equipment distributor and the contractor — the rental company or dealer reinforces its position as an integral partner that the contractor will continue to rely on for years to come. “Part of the vision for e-commerce is that this is one way we can help dealers keep their service bays full,” Mansker says. “Over time, we can then use e-commerce to create tools to connect end users to the full suite of offerings that dealers have in their locations.” This article was adapted from its original version, “Construction E-commerce Growth Results in Major Opportunity for Dealers,” on the Gearflow.com blog.
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Karen Scally Content Director Gear Flow
Gearflow
need jobsi expe that p main on sc
About three-quarters of all B2B buyers begin their buying process with a generic search for a type of product.
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BUSINESS MANAGEMENT //
By: Association of Equipment Manufacturers
metamorworks at stock.adobe.com
THE FUTURE OF DATA AND PRIVACY IN CONSTRUCTION’S DIGITAL AGE As the construction industry wades further into a digitized future, it is imperative that companies exercise caution in regard to data.
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he value of data has proven its importance in our increasingly digital world. While the construction industry hasn’t digitalized as quickly as others, momentum is gaining. Using data, like the information provided by off-highway telematics systems, can provide many benefits. However, as noted by Tom Valbak Aardestrup, vice president of business development and strategic programs at AEM member company Trackunit, during a recent AEM Product Safety & Compliance Seminar, data must be collected and used with the utmost responsibility, particularly when it comes to personal data. “There’s an enormous amount of data that is being collected and created, and the world is just connecting even more,” says Valbak Aardestrup.
Embracing the Use of Data The ways that companies use data is crucial for success, and Valbak
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Aardestrup warns those who do not embrace the use of data may find their businesses obsolete. “The world is changing by connecting digitally, but it definitely also brings in some challenging situations,” he says. According to Valbak Aardestrup, by 2025 we will have 175 zettabytes (ZB) of data being generated by systems supported by the Internet of Things (IoT). Of that vast amount of data, it is estimated that 90% of it will be less than two years old. In order to gain insights from that much data, machine learning and artificial intelligence will be required, putting greater emphasis on cybersecurity. “It also needs to, of course, be something that can be utilized in a format that is sharable and standardized,” says Valbak Aardestrup. “And then again, of course, it needs to be in a safe and secure environment.” As a result, companies doing business in the European Union (EU),
like Denmark-based Trackunit, must comply with the EU’s General Data Protection Regulation (GDPR). It’s important to note that the GDPR affects those in the United States, as well. The regulation has extraterritorial scope, which means that websites outside of the EU(like in the U.S.) that process data of people inside the EU are obligated to comply with the GDPR. The GDPR was created for the protection of individuals living in Europe. It applies to all enterprises and governmental bodies, so OEMs selling or offering products within the EU must comply with the regulation. “It ensures that companies only gather information that they need. It’s definitely a trust issue, and the aim is for me, as an individual person in the European Union, to control who has access to see and use my data,” Valbak Aardestrup explains. The GDPR also provides an individual with the power to have
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personal data removed, and it ensures data is not exported out of the EU without the individual knowing. What’s more, the GDPR ensures companies using data have a legitimate interest to do so. As mentioned, the U.S. does have data privacy laws, though there isn’t one federal-level privacy law like the GDPR. There are several verticallyfocused federal privacy laws, as well as a new generation of consumer-oriented privacy laws. According to Varonis, a cybersecurity company, the U.S. has implemented these strategies state-bystate, with the Californian Consumer Privacy Act (CCPA) coming the closest to addressing consumer data privacy. With no clear direction or insight from Washington, other states have taken a cue from California and have drafted their own privacy laws. “If you’re active in the EU, I would suggest that you, first, focus on being compliant with GDPR and then, second, if need be, be compliant with CCPA,” he says.
Data Compliance Valbak Aardestrup notes the importance of understanding what the GDPR is and how the construction industry in Europe has had to navigate this “blanketed regulation” designed to protect consumers. The regulation created a number of challenges, especially within the industry. For example, heavy equipment rentals are a primary segment for tracking, which makes it vital to comply with GDPR as data must be kept secure to remain compliant. The digitalization of the construction industry provides increased efficiency, better documentation, automation of jobsites, improved maintenance practices, less downtime and safer working
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environments. Understanding what is To avoid challenges, Valbak considered personal data, and how it Aardestrup recommends that datacan be used properly, is critical. handling becomes an integrated part Examples of personal data within of a company’s culture so that data is the construction industry can include secure and used within the confines of CCTV monitoring of premises and the GDPR. Protecting an individual’s jobsites, databases of email addresses, data must begin when a company is the GPS location of equipment when starting to design and develop new an operator is logged-in, weight solutions that will be introduced to the sensors on a driver’s seat, and more. market. Further, any biometric information Read More: at forconstruction— like fingerprints — is considered pros.com/21207026. sensitive information and regarded This article was adapted from with additional protections. its original version, “Data and While compliance is required, there Privacy in Construction’s Digital are proper ways to utilize personal Age: What Does the Future Hold?” data, provided a company has a on the AEM website with exclusive legitimate interest for using the data. “It permission from the author. has to be fair and transparent,” Valbak Aardestrup says. For example, if someone wanted to find out how a machine is being Fastest Travel Speed operated, Up To 15 mph only the Switch Easily data coming From 2WD to 4WD through for that specific time can be used to solve that challenge. “You have to ensure consent is actively submitted,” he adds, noting this can be included contractually in an See our full range of employment forklifts and more at letter. manitou.com
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BUSINESS MANAGEMENT //
By Alexis Sheprak
SKYJACK LIFTS INDUSTRY WITH WE RISE CAMPAIGN
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t comes as no surprise that the world could use a little more positivity right now. And Skyjack, a Canadian access and material handling equipment manufacturer, has come to the rescue. In July 2020, the company unveiled their WE RISE global campaign. Its focus is to build upon the company’s core values and the steps the rental industry has taken to become stronger and more connected with communities and employees during COVID-19 and its aftermath. They aim to do that by recognizing the positivity in the rental industry by highlighting the steps people are taking to get back to growth. They’re encouraging rental companies and business owners to share their stories of things like community donations, volunteering, customer care and protection, staff care and new approaches or practices for the “new normal.” In a press release, Skyjack President Ken McDougall says, “In the past few months, we have seen how COVID-19 and other social issues have changed the way our customers and we see the world. These have been serious and worrying times. However, out of adversity comes strength. We aim to support the rental industry during the good times and the bad, and we have been heartened by the positive attitude of the rental industry.” Rental spoke with McDougall to find out how the campaign was started, its lessons for the industry and
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Skyjack’s outlook for the future of the rental industry. Q. How did the idea of the WE RISE campaign come to fruition? A. The last six or more months have been disruptive for everyone. Skyjack, like many other businesses, were meeting daily to manage the crisis. As you can imagine, the mood was negative at times. Yet from time-totime, our mood was lightened by reports of community spirit, and many of these stories involved rental companies. Therefore, we thought about what we can do that celebrates human nature and the extent to which our own rental community has rallied around the communities where they are located. That led us to WE RISE. Specifically, WE RISE refers to a quote from Robert R Ingersoll, a 19th century writer and orator, that says, “We rise by lifting others.”
Q. Skyjack has an extensive history of community outreach and support. What makes the WE RISE campaign stand out? A. I think the one thing that stands out is the scale of the global campaign. So far, we have stories from China, New Zealand and Europe, as well as North America. Equally, it does not have to be about our equipment; many stories are about people and what they have done within their community and with their own time and resources. Q. What do you foresee the WE RISE campaign teaching the rental industry? What are some lessons that can be taken away from this campaign? A. I am not sure we are looking to “teach” anyone, but more to learn by what others have done and to inform the rest of the rental community and focus on the positive. The takeaway so far is that “tough times do not last, but tough teams do,” and the rental industry is a great example of that.
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Also, for all of us to see the good in humanity and that the stories of support and giving back may provide a sense of hope or at least bring a smile in a time where we aren’t seeing enough “feel good” stories. Q. Are you seeing a lot of positive stories and reactions for the campaign? What has been one of your favorite stories so far? A. Yes, that is what it is all about. Each month, we highlight the one that has appealed to us most. The latest is a husband who rented a Skyjack scissor lift to visit his wife in a long-term care facility. Q. In such a difficult time, how can lifting others within the rental industry benefit the industry as a whole? A. The stories we have heard so far have one thing in common, community. Whether it be the community within a rental company or the wider community supporting healthcare workers and charities. Sharing stories like this with a wider audience can draw the attention globally to the great things that are being done within the rental industry, thereby raising the positive profile of rental. Q. What do you think is the best way rental businesses can approach COVID, and get back into growth and opportunity? A. First, by remaining positive. COVID has taught us about flexibility and responsiveness, so a culture of agility is going to be important. Increasingly, that agility is going to require quick decision making and that, in turn, demands live data from business systems, telematics, and the like. The other important item is that
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we remain calm and controlled, as the entire industry and the entire world is going through the same issues with COVID. Making short-term and uncontrolled decisions will only harm the market and industry for the longer term, and this would outweigh any perceived short-term gains. Q. What is your outlook for the future of the rental industry post-COVID? A. At a high level, the fact remains that the fundamentals that drive rental penetration are unchanged. The demand remains in major markets for infrastructure development. It’s probably more about how the rental industry does things that will change. Q. I think one of the most important facets of this challenging time we’re living in is innovation. What are you seeing come out of the rental industry in this regard? A. Ironically, we have had more interest in our telematics, ELEVATE, that allows more effective fleet management. This allows not only more effective fleet management
but also feeds into some of the needs for social distancing as many items can be diagnosed and/or predicted using ELEVATE rather than a direct service call. Other innovations will continue to become paramount as we collectively look for ways to increase ROI in rental fleets and with the OEMs. Stories can be submitted to: skyjack. com/we-rise. As McDougall says, “As we say at Skyjack: ‘Tough times don’t last, but tough teams do.’ This is true of Skyjack, but importantly, it is clearly evidenced in the rental industry as a whole.”
RENTAL Designed to Reach Heights of
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BUSINESS MANAGEMENT //
By Alexis Sheprak
THE ART OF SELLING YOUR BUSINESS: AN EXCERPT After 2020, you may be wondering if now is the right time to sell your business. The first step is to understand the landscape of potential acquirers.
S
mall business owners are a cornerstone of our society. But what COVID-19 and 2020 showed us is that small business owners are also the backbone of our economy. Though filled with both good and bad, business owners saw a huge shift in how they must run their business. And under such challenging circumstances, with trials and tribulations aplenty, many rental business owners made the difficult decision to close their doors or leave their company in someone else’s hands. The act of retiring or selling your
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business is an impassioned decision in and of itself, but many fall prey to ulterior business motives in the closing processes. Financial predators and corporate giants eagerly wait to pounce, using sleazy tactics to take advantage of owners who lack of experience when it comes to mergers and acquisitions. However, there’s a way for rental business owners to level the playing field. John Warrillow, an author who specializes in business books and business selling know-how, wrote a book called, “The Art of Selling your Business: Winning Strategies and Secret Hacks for Exiting on Top.” With plenty of tips, tricks, and insight, the book offers real-life examples of how cashed-out business owners and founders monetized their businesses. Here is a brief intro from Warrillow himself, followed by an excerpt from Chapter 6, titled Playing the Field: Understanding the Three Types of Acquirers: “If you’re in the construction business, 2020 might have been a pretty good year for your company. You may be wondering if now is time to sell. The first step is to understand the landscape of potential acquirers for your
business. In the following excerpt, you’ll discover two types of acquirers, and the pros and cons of selling to each.” ACQUIRER TYPE 1: INDIVIDUAL INVESTOR
If your business is on the smaller side, less than a few million dollars in annual revenue, it might be intriguing to an individual looking for an investment or seeking to replace a job they have recently lost or left. People who are downsized or who leave a company midcareer often bristle at the idea of going back to work for someone again and look at acquiring a business as a way to be their own boss. They are usually somewhat established financially and have some experience, so if your business is relatively small and consistently profitable, an individual may be able to borrow the money to buy it. Individual investors are generally less sophisticated than strategic acquirers or financial buyers, such as private equity groups (PEGs), which means you may be able to drive a better deal with less scrutiny over the details of your business than you might endure when selling to a strategic investor. It’s rare that an individual investor pays cash for an acquisition. Typically, in order to gather most of the money to buy your business, individual investors
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borrow from two places: a bank and you. Instead of taking all of your proceeds in cash, when you agree to finance some of the sale, you offer to accept some of your money over time while the buyer uses your business as collateral for your loan. When it goes well, the buyer takes some of the profits from running your company and pays you back, often with interest. If the buyer fails to pay you, you are almost always second in line behind the bank, which will ensure they get paid before you see any of your money. THE ART OF NEGOTIATING WITH AN INDIVIDUAL INVESTOR
Along with typically being less sophisticated buyers, individual investors are also usually the least well financed. In some countries, the government will guarantee a bank loan to an individual investor to buy a business (e.g., an SBA loan), provided the deal meets a set of criteria. Some individual investors are trying entrepreneurship for the first time, so they might end up being hopeless at running your business. Others may fail when they try to graft their business strategies onto a company like yours. Strive to get as much cash up front as you can, and be clear on what you’re willing to do to help the new buyer learn your business. Plan to stay involved for a while to show them the ropes. Aim for a deal where you consider the portion of your proceeds from a sale that are being paid overtime as “gravy,” so if the buyer fails, you’re still satisfied with the transaction. ACQUIRER TYPE 2: PRIVATE EQUITY GROUP
Another possible acquirer for your
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business is a PEG. This category can be with a small deposit, the leverage further divided into three types: allows the buyer to amplify their 1. A fund, usually with multiple returns for shareholders if things go as shareholders, that is set up to buy, planned. To borrow money using your improve, and flip companies (typically business as collateral, your business within five to seven years). has to be what industry insiders call 2. A family office interested in “bankable,” meaning it is a business investing money in a sector, usually on that consistently generates profits behalf of a wealthy family, and often that would allow a bank loan to be with no immediate plans to sell. paid back with some wiggle room if 3. A fundless sponsor is an things go south. That’s why PEGs are individual who thinks they can raise usually looking for larger, more mature the money to buy a business. This is businesses that have a consistent track usually someone who wants to own a record of making money.” business, thinks they can add value by operating it better than it’s being run John Warrillow today, and has contacts to back them. Author & Founder PEGs are generally run by people The Value Builder System who have already sold a business or have gone to a fancy business school. Their game is to find a business that is scalable or is underperforming and could benefit from additional capital and better management. Designed to Reach Heights The idea is 51 - 114 ft usually to bring Equipped to Lift Over some business 15,000 lbs school rigor to running your company, maximize its value, and turn around and sell it for much more than they paid. One of the tricks PEGs use is to apply a lot of debt to See our full maximize their range of rotating telehandlers return. Similar to and more at manitou.com buying a house
NEEDS
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EYE ON RENTAL // B y
Dick Detmer
SET YOURSELF UP FOR a Good, Successful YEAR AHEAD
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gustavofrazao @ adobe.stock.com
T
o begin with, I believe that the equipment rental industry is poised for another phenomenal year of growth. Some of the reasons for that belief include construction activity remaining strong, the infrastructure law being enacted and pandemic-related restrictions starting to finally ease. Some rental equipment companies are going to capitalize on this potential more than others. It isn’t simply a matter of what part of the country your company is in. Maximizing potential gain this year will be influenced by your company’s level of complacency. Some companies are going to invest more into researching, planning and implementing strategies designed to make optimal use of their resources. Other companies may opt to “ride the wave” instead of pushing forward. There is nothing wrong with either approach, as it’s under the umbrella of the “owner’s prerogative.” There have been some lean years for many rental companies in the more than 40 years I have been tracking the results. So, when the opportunity of prosperous times comes along, it’s wise to be ready to reap bigger returns. Here are just a few things rental business owners should consider for a successful year ahead: ■ Instead of just filing your taxes at the deadline, consider setting up one or two tax planning meetings with your accountant. There are options that may help reduce your company’s tax exposure, including when would be the best time to take certain deductions. ■ Consider getting additional expert tax advice from a qualified
local tax attorney. Tax regulations seem to be changing faster than ever, which means you need to get the latest information so you can plan accordingly. ■ When considering the purchase of equipment, remember the importance of making your best business decision based on need and have the tax consequence of your purchase be of secondary importance. For example, it’s not wise to purchase rental equipment exclusively for the benefits of depreciation. ■ Likewise, try not to hold on to equipment too long because of taxes. As you know, having a reputation for having a “fresh fleet” is critically important to success. Again, get expert advice from your local accountant on the tax consequences, but be sure
to use what you know to make the ultimate decisions of what is best for the future viability, growth and profitability of your rental company. ■ Remember to be efficiency focused in your year-end and early new year planning. Even though things are changing rapidly, it’s still very important to have a formal, comprehensive strategic plan with specific steps to take. We will continue to see uncertainty and wild gyration in the financial markets, inflation and the economy in general. But with uncertainty and market overreaction to daily events come opportunities for those who have solid systems in place in their businesses.
Dick Detmer is a nationally recognized consultant, lecturer and writer with 40+ years of experience in the equipment rental industry. In 2018, he celebrated the 30th anniversary of his business, Detmer Consulting Inc., and his column in Rental. Dick can be contacted at dick@detmerconsulting.com, (309) 781-3451 or by visiting his website www.detmerconsulting.com.
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