19 Yr Old Commercial Equipment Rental Company

The 2024 revenues were 3.96M with 1.75M in earnings.  2023 had 5.7M in revenue with 3.1M in earnings.  The business rents equipment to large well-established companies.  This company has seen slow long term steady growth until 2024 which is explained below.  The sales price is 6.5M which would have been closer to 10M if they had sold a year ago.  Most of their revenues are recurring year over year from long standing relationships. 

Equipment rental companies generally sell for 4 times the earnings or higher for many reasons including the high percentage of recurring revenues, the value of the rental equipment, high profit/revenues per employee ratio, and the high profit margins.  The 6.5M sales price is only 3.7 times their  2023/2024 earnings.  They believe the one time drop off in 2024 was mostly their fault which is the main reason that they are selling and should be easy for a new owner to fix.    

This is great timing for a buyer to buy it.  The owners bought the business in 2020 and have always been absentee owners living out of state.  The working owner works 10 to 15 hours a week and the other owner has never worked the business.  They hired an operations manager after buying the business in 2021 which increased expenses.  The new owner can easily replace the working absentee owner who works 10 hours a week and the operation manager working 30 to 35 hours a week.

The business rents equipment and supplies fuel for their equipment along with the equipment for other equipment rental companies.

Reasons to be excited about buying this company: 

• 44% profit margin or higher(2023 was 54%) which is very high for an equipment rental company.  This is because of how efficient their model is and the high mark up for the diesel fuel sales.  Their rental equipment typically rent each year for more than what they bought each piece of equipment for, and they last 15 plus years on average.  They rent large specific types of equipment which cost +/- 15K and rent for between 1,100/mo to 2,300/mo which is very profitable.

• No active website, SEO, Google ratings, or outgoing sales, advertising, or marketing.  Have never marketed to some industries like the oil and gas industry that needs a lot of their type of equipment along with construction sites of all types, outdoor event locations, etc.  The company’s domain/website address is not being used, it is inactive, which is proof that the absentee owners have never tried to grow this business.

• Don’t need a special license to run a commercial rental business nor a CDL for their fuel drivers because their “field trucks” are not considered tankers because they are less than 1,000 gallons holding 920 gallons.  The owner only needs a basic general business license and the drivers a regular drivers license.

• Great model:  They don’t need a lot of employees, and they can be trained easily.  This company generates 4M to 7M in revenue with 5 employees and a part time mechanic who only works 2 to 3 days a week.  They take orders, drop off equipment, fuel them as requested, perform basic maintenance/repairs, and pick the equipment up at the end of the season which is very efficient.     

• Low Risk: Their revenues are almost 100% made up of recurring revenues because they are paid monthly on rentals and weekly on most fueling.  For their size, they have had hardly any bad debt, and the structure of the company offers automatic protection because they can collect any equipment not being paid for in real time.  They are also making money weekly selling diesel fuel to more than just their rentals which helps even out the cash flow.

• Quality of Life for Owner:  They are highly seasonal with most of their revenues generated during the winter which allows the owner to take most of the summer off which coincides with kids being out of school and allows a unique opportunity to travel as a family during warm weather.  You can go stress free to Europe/Asia, go to Alaska, fish, golf, and decompress. 

• The new owner has a huge opportunity to add rental equipment like lifts, skid steers, excavators, trenchers, forklifts, ladders, and more lighting, etc.  Add on equipment rentals are easier to rent than one offs.  Their current customers should take advantage of the extra equipment right away. 

• They have almost 100% recurring revenues, so the buyer doesn’t have to worry about the business changing after the closing.  Their equipment serves a need which is one of the main reasons they have such a high profit margin.

• The new owner can pick a more efficient location than they currently have with a structure on it for employees, storage, and repairs and maintenance. 

• You also get approximately 1.33M in current value assets.  This includes generators worth 592K, heaters worth 372K, 288K in trucks and trailers, along with a small amount of tools, etc. 

• This is a “Fun” business to own. 

In summary, there are many ways to grow this business to create a huge amount of value(equity).  They only spent 3K in marketing last year compared to 3.9M in revenues which is under 1/10th of 1% which is basically no marketing at all.  Rarely do I think a buyer should consider what they can do with a business when considering what they are willing to pay for it but this one seems like an exception to me because the owners are absentee, they have never advertised or marketed their services, have no active website or Google rating, and have not added any add on equipment, etc.  One of the biggest positives is that they can find and easily train employees unlike many service industry companies that require highly experienced and licensed employees who are more expensive.  Their employees need zero special skills because the rental equipment manufactures will train them on their equipment. 

A Sales Price of 6.5M which is only 3 ½ times the earnings which is a low multiple for a large equipment rental company especially with this much potential to grow.    They have a very high percentage of recurring revenues which makes them more valuable.   This is a LLC that files as an S Corp and can be an asset or stock sale.  The Sellers prefer a stock Sale.  The business is being offered with the Sellers keeping their cash, AR, and they will pay off all debt including the AP.