How to Start a Rental Business in 2021: A Step-By-Step Guide

Deciding to start a rental business can seem intimidating. Maybe you want to make some money on the side, or perhaps you have bigger plans and want to go all-in. Luckily, you’re...

Deciding to start a rental business can seem intimidating. Maybe you want to make some money on the side, or perhaps you have bigger plans and want to go all-in. Luckily, you’re not alone. Plenty of entrepreneurs have done it before, and you can learn from their successes and mistakes to make the start of your own rental company a success.

These 8 steps on how to start a rental business—whether you want to rent out bikes, camera gear, party supplies, equipment, or anything else—will guide you through everything from starting up to eventually launching your rental business.

1. Identify your rental business idea 💡

Finding a business idea is something many aspiring entrepreneurs tend to overcomplicate. No matter if you’re looking for a low-investment side-hustle or want to be your own boss, there are several approaches you can take.

  • Personal interests. Do you have an affinity with a specific product? Renting out items you know makes starting a rental business easier as you’re already knowledgeable and intrinsically motivated.
  • Find common frustrations. As a rental business, you’re often the more affordable alternative to actually buying the product. When you only need something for a couple of days, renting is cheaper. Besides economic benefits, rentals can also enhance the experience for customers. Think about the time you rented a bike during your summer vacation, for example. Finding these common frustrations or gaps is a great way to come up with ideas.
  • Look for trends. Sometimes, products seem to be popping up everywhere, out of nowhere. Capitalizing on these trends can make for a great rental business idea.

2. Conduct market research 🧐

You might think that validating your business idea is hard. But it’s really just a matter of testing whether there is a demand before investing too much time and money. You don’t want to sink your entire savings into a concept that looks promising on paper. The goal is to validate your assumptions.

When creating your business plan, location is a crucial factor to consider. Location matters unless you’re shipping items to the customer. That’s because starting the same business type in two different places can yield very different results.

For example, a bike rental business close to a popular tourist attraction will have a higher volume of walk-in customers than on the outskirts of town. The location will define the customer base and can also affect the way you receive bookings.

So before you start your rental business, know what your customers want and go from there. Here are some useful questions to answer:

  • What do potential customers want? Are they looking for high-end equipment? Which brands or specific products are popular, or don’t they care about that?
  • How much are they willing to pay? Instead of pulling random numbers, get a rough estimation of what your customers are willing to pay. Is your pricing reasonable compared to the original purchase price of the product?
  • Where can they get similar items? Don’t forget to analyze your competitors. Are you competing with other rental companies, or can potential customers buy similar items at retail stores?
  • Do they need more than rentals? Are there any other products your customers need in addition to rentals? Offering services and sales items can be a great way to increase the average order value and be helpful at the same time.

3. Purchase inventory 💰

Once you know more about your target customer, you can make better decisions about the inventory you buy.

Most new companies start by renting out just one or a few products. If you have a ton of different items, you might run into situations where you don’t have enough stock, no availability insights, or not enough staff. When your processes aren’t ready for the number of bookings coming in, running a rental business becomes stressful quickly.

By taking baby steps, you get to know the process of renting before you get overwhelmed. It keeps your initial investment low, minimizes risk, and allows you to build a strong foundation from which you can slowly expand your business.

In the early stages, you don’t need too big of an investment. You’re still gauging interest and verifying whether you’re on the right track. Once you get the ball rolling, you can start buying more stock based on your products’ popularity and profit margins.

Pro-tip: From a financial perspective, it’s also advisable to purchase extra stock later. It’s harder (and more expensive) to sell excess items or to have idle inventory in your warehouse. For more inventory management tips, check out this article.

4. Take good care of your products 🔧

The inventory you own is the core of your rental business. No products, no customers. How your customers receive the items also matters.

Just imagine you’re renting a camera, and suddenly the battery dies during the shoot. Or the bike you’re renting has a broken chain. Nothing is worse than equipment breaking down during a rental or receiving damaged goods.

Use these practical tips to make sure your inventory stays in tip-top condition and keep your brand reputation in check:

  • Proper maintenance: Don’t wait until your customers come back with broken or damaged items. Fix potential problems by conducting regular maintenance after a certain number of rentals.
  • Repair broken equipment: Fix any damages thoroughly the moment they appear and resist the urge to do quick-fixes. Quick-and-dirty repairs are future problems waiting to happen.
  • Cosmetic fixes: You only get one chance to make a great first impression. That’s why you want to resolve any cosmetic damages and clean your rental equipment in between bookings.

5. Bring your rental business online 🌎

Consumers today love convenience. They want to browse and book when, where, and how they want in the most efficient way possible. People are increasingly digitally savvy and don’t shy away from going online to rent equipment. Just look at the impact Airbnb and other rental platforms had on the vacation rental industry.

For equipment rentals, online bookings have many advantages too:

  • People don’t have to leave the house or pick up the phone to place an order
  • They can book 24/7, 365 days per year, without being restricted by business hours
  • They can plan and reserve in advance
  • They have access to more product information and can easily compare prices.

For many entrepreneurs, one of the scary parts of starting a rental business is building a website. Luckily, creating one has gotten more accessible. You no longer need a technical background or deep pockets. Website builders such as WordPress, Squarespace, and Shopify are very user-friendly and offer beautiful templates.

Note: If you’re building a website with WordPress, spend some time choosing a good theme, e.g. a WordPress template by TemplateMonster. They have the biggest collection of themes made by a creative designers community.

Consider allowing your customers to book or request a quote online to streamline the rental process. People expect the convenience of booking online without speaking to someone, and it reduces your time spent answering emails and phone calls.

6. Choose your software systems 🖥

Rental business owners wear many hats. They’re doing more than just renting out equipment: preparing orders, managing employees, conducting maintenance, serving customers, accounting, communicating… you get the point.

Recognizing the value of good software is essential when you’re starting a rental business. One of the best ways to reduce the complexity of renting and prepare yourself for future success is choosing software that streamlines the things you do on a daily basis.

Often, you’ll need to spend some time setting up and learning new software. But once you’re up and running, there is very little work required to keep things going. Consider looking into dedicated rental software that supports the following:

  • Order management. Even if you’re a one-man-band, having a single system to create and manage orders can help you stay on track. It allows you to prioritize your workload and see past and future bookings.
  • Inventory management. With so many products to keep track of and items being available and out with customers makes rental management complex. Setting up your systems correctly ensures you start your rental business on the right foot.
  • Online bookings. Choose a system that doesn’t just assist you with back-office tasks. Look for software that supports online bookings and gives you the ability to manage online and offline orders efficiently. To get an idea of what other rental businesses have built, check out this list of example websites.
  • Quotes and invoices. Good quoting and invoicing features allow you to communicate with customers and give you the ability to send the right documents to the right people at the right time.
  • Payments. Ideally, payments shouldn’t run through a separate app. By accepting and tracking payments in the same system as your orders and invoices, you’re keeping your entire rental operation organized in one place.

7. Create a watertight rental agreement 🔏

Rental agreements are documents that outline the arrangement between the rental business and the customer. These documents make sure you and your customers are on the same page and protect your business by defining your terms.

Once signed, the contract is considered legally and mutually binding. Here are some good topics to include in your rental agreement:

  • When does the rental period start and end?
  • What is acceptable wear and tear?
  • Which actions do customers need to take if something is wrong?
  • What are the consequences of damages, theft, loss, and late returns?

Having these terms and conditions in writing, signed by the customer, avoids confusion and arguments down the road.

8. Serve your customers right 🤩

Depending on the type of rental business you start, rentals can be repeat business. Customers rent your products for a short period and might come back in the future to rent similar items again.

By giving your customers a satisfying experience, you make sure they come to you the next time they need rental equipment.

  • Make your customers feel welcome. Let your customers know they’ve come to the right place by offering friendly service and advice.
  • Offer a seamless experience. People shouldn’t be in your store for too long. The pickup and return process needs to be smooth and without too much hassle.
  • Accept bookings in advance. By letting your customers reserve in advance, they’re doing most of the work for you. It makes renting easier for everyone.

Launching your rental business

At this point, you know some practical tips and tricks for successfully starting your own rental business.

Starting a rental business isn’t easy, but it also doesn’t have to be intimidating. So whether you want to start a business from home to bring in some extra money every month or want to be self-employed, these steps will help you hit the ground running.

Don’t keep the idea in your head. With the right preparation, you can build a strong foundation and start getting familiar with the process of renting. Now that you know how to launch your own rental business, it’s time to get to work.

Want to learn more about starting an online rental business? Download our Rental E-Commerce Guide.

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