Business Plan – Part 2: Tool and Equipment Rental Business
Table of Contents
Business Plan – Part 2: Tool and Equipment Rental Business. 3
1.2. Introduction to market opportunity. 3
1.3. Brief description of the company. 4
1.4. Description of the unsatisfied need creating the business opportunity/innovation. 4
2.0. Section: Operations Plan. 5
2.3. Production and Service Delivery Procedures. 7
2.4. Supply Chain Process Flow Chart 7
2.5. Products Return Process. 9
2.6. Supplier Relationship Management 10
3.0. Section: Financial Plan 13
3.1.1. Funds Required and their Sources 13
3.1.2. Current Funding Requirements. 14
3.2. Financial Statements for First Three (3) Years. 16
3.2.3. Cash Flow Statements. 21
5.0. Section: Conclusions & Recommendations. 25
The paper comprises of a comprehensive analysis of a business plan for tools and equipment renting business opportunity. This is an opportunity under the larger umbrella of rental industries that largely and directly benefits from various construction activities. The extensive nature of the construction needs, the access for proper tools is integral to successful completion of projects. Therefore, targets residential customers and business in the construction industry such as contractors and subcontractor companies to provide them with necessary tools. This is an opportunity that seeks to offer the proper tools for specific tasks in the construction, save purchase costs for single-use tools, and provide the necessary expertise on the usage of the tools. Therefore, the opportunity offers to solve key needs for the customers. Hence, stand a better chance to flourish.
The purpose of the plan is to provide homeowners with any do-it yourself customer experience by making it easier, provide more reliable, and affordable opportunities to rent highly required construction tools. Also, the plan seeks to enable customer cut on purchase costs in preference of renting and access to expert guidance on projects and proper tool usage. This is vital to attract customers in need of implementing different construction projects especially in their residential areas.
The equipment rental market has been growing over the years to reach an estimated value of $59.4 billion in 2021. This shows the huge potential for the tools and equipment rental services that can be utilized on a large scale. The high demand for customers to access reliable and affordable tools while maintain quality and standards gave birth to the market opportunity. This can be further utilized through providing customers with highly desire tools needed to run do-it yourself constructions. As well the opportunity to save money from purchasing of single-use tools is essential for the customers. Hence, provides a market opportunity that is informed by demand and solutions offered to customers.
The company is named Borrow My Tools which specializes in renting of construction tools. The company aims to save costs in the construction by providing accessing to diverse tools required for the construction of projects. Also, to attract more customers, the company intends to offer insights on projects and guidance on proper usage of tools. The capacity to maintain quality and high standards at minimal costs through renting of tools is the driving factor for the company.
This is informed by the growth of companies, contractors and homeowners preferring to rent than buy tools utilized in the construction of projects. The renting of tools provides an opportunity to save substantial amount of money that can be utilized in the implementation of the project. The growth and expansion of the construction industry and more and more people having the need to improve, change, or renovate their residential areas creates a market opportunity to fill. The unsatisfied need is driven by the need to access rental tools than buying and spending more resources for something that will not be used again in the future. Hence, it is an opportunity to cut project costs and increase efficiency.
The capacity to acquire new tools and equipment used in the construction industry primary for house constructions is fundamental to ensure the company has sufficient and functioning tools all the time. This is designed to ensure customers can access functional tools at any given time and whenever required (Mobtaker, Awasthi, Chauhan & D’Amours, 2018). This indicates that regular update, replacement, and repairing of the construction tools and equipment must be kept up-to-date. As a result, the need for stable suppliers is vital to ensure that the company acquires quality and high standard tools that can be able to meet the customer needs. The diverse nature of the customer needs to utilize the construction tool requires the suppliers to regularly update the inventories with diverse tools and modern equipment that can make the customers’ work simple and easier to accomplish (Mobtaker, Awasthi, Chauhan & D’Amours, 2013).
The following summarizes a list of potential suppliers that can be sourced to supply the company with high standard, quality, and substantial tools. The companies include American Wire Tie, Aervoe Industries, Inc., Apex Tool Group, Caterpillar, Dixon Valve & Coupling Company, DrillCo Cutting Tools, Eagle Manufacturing, Elwood Safety Appliance, Hit Tools USA, Imperial Blades, Krylon, Linzer Products Corp., Marshall Company, Radians, Spectrum Concrete Products LLC, Sprayon, among others. These companies are strategically selected to ensure the company acquires world-class tools that can help customers achieve their objectives (Mobtaker, 2012). As well, the diverse of the suppliers is informed by the need for various used for construction such as rammers, pole tampers, vibrator plates, screeding systems, concrete mixers, internal vibrators, wet screeds, power trowels, stone and concrete saws, groove-cutting machines, portable grinders, floor saws, scabblers, laying camps, construction site rotary hammers, block litters, levels, distance meters, etc. The extensive nature of constructions tools requires numerous suppliers that can provide the necessary tool that is essential to make the customer’s work easier (Alam, 2010). Therefore, numerous suppliers making world-class tool will be used to ensure the company acquires the best tools to rent to the customers.
The primary target market for tools and equipment rental business comprises of the residential customers that seek to complete a task around their houses. These comprise of individuals that do not need to own the tool based on one-time use and space availability for the storage of the tools. For a single-use tool, residential customers provide a lucrative business opportunity that can be utilized to generate huge profits for the company. To make the residential customers the primary target, the company will establish tool usage manual and training to enable the customer handle the tool well and comfortably. Also, this is vital to minimize tools breakdown and customer satisfaction.
The second tier of customers targeted to rent the construction tools from the company comprises of the businesses and contractors/subcontractors in the construction and home improvement industry. The businesses and companies specializing in the home construction and improvement/remodeling sector provide a huge market for tools and equipment rentals. Start-up companies can commit to acquire contracts and implement them using rented tools and equipment rather than committing substantial capital in purchasing of extremely expensive tools. The lack of sufficient capital and availability of tools renting services provide an opportunity to successfully implement construction projects without the impediment of availability of certain tools used for specific purposes. This is vital to mitigate costs incurred in running a construction business or company.
The production of construction tools and equipment and their delivery to the company entails a critical process that impacts on the functionality and efficient operations. The procedure will follow production from the manufacturer, distributors, and transportation logistics into the company’s head office warehouses (Smith, Ng & Maull, 2012). From the warehouses, the tools and equipment are bound to be distributed to local stations which is intended to increase accessibility and sense of touch with the customers at the ground. The distribution of tools is based on demand, kind, and nature of products conducted in certain areas (Maserang, 2002). For example, kitchen, interior design, house improvement and construction will require key tools that align to the tasks. The distribution centers in areas specializing with high-end buildings, plumbing, and electrical demands will require specific tools designed for the purpose.
At the local distribution centers, use of barcodes on the tools is essential for the tools categorization, inventory arrangement, and keeping track of the availability of the tool whenever a customer requires one. The system is designed to make sorting, accessibility, and availability of the tools much easier whenever demand arises (Al Shamsi, 2019). As well, it is vital to ensure that every tool required by the customer is available and in functional condition. The system is designed in a way that it categorizes the tools to use and functional status. Hence, smooth operations are guaranteed at all times from the head office to the local distribution centers.
The products return is based on the local distribution centers where the customers acquired them as they rented for various purposes. The local distribution centers equipped with electronic inventory system (EIS) is designed to record every tool that is out of store and the ones returned by the customer. The condition of the tool must be maintained all the time to ensure smooth operations should the customer require the product (Lodorfos, Kostopoulos & Kaminakis, 2015). The return of the tools is designed to follow specific procedures and steps that ascertain they are in perfect condition to operate. Hence, allow the tools to be rented in the future to a potential or new customer in functional condition. This is vital for the reputation of the company to ensure that every customer that walks into their doors is issued with a functioning tool and not a tool that is going to be stressful and difficult for the customer to use or fail in overall (Li, 2014).
The procedure for the return of the tools will include an inspection process where an expert is tasked to determine the functionality of the tool. On the determination of the functionality of the tool, the customer is issued with a special card that indicates where the tool is to delivered. That is, if in perfect condition, the inventory code is used to clear the tool and sent to the designated area of storage based on its categorization (Choudhary, Nayak, Malik & Singh, 2018). In case of minor dysfunctionalities, the customer is issued with a different card that indicates that the tool requires minor repairs and issued with a warning on future renting. In the state where the tool is broken or faulty, the customer is issued with a penalty card that requires them to replace the tool (Chi-Chang & Po-Lin, 2017). On several encounters of this trend, the customer can be banned entirely from renting tools from the company. This is meant to ensure that customers remain accountable for proper usage of the tools as much as the company is bound to providing efficient services.
The implementation of effective supplier relationship management is critical for the continued efficiency in the company’s operations. The supplier relationship management is vital to ensure the company acquires quality and high standard tools that are delivered to customers for use (Teller, Kotzab, Grant & Holweg, 2016). The management of supplier relationship is maintained in the company by the supplier management department that maintains cordial relationship between the company and the suppliers (Ibrahim & Hamid, 2014). The department is tasked with pursuing the following objectives to ascertaining efficient functioning of the company.
The management of an optimized procurement process that is thoroughly coordinated and delivered on time. The capacity to acquire different products is crucial to ascertain smooth operations and at no time should a customer request a tool that is unavailable. This prompts the optimization of the procurement process by timely settling of all costs for purchased products on time (Adrodegari, Pashou & Saccani, 2017). The suppliers are expected to maintain quality and high standards on the procured products. Also, the supplier management department is tasked with cost reduction negotiations. As part of the relationship management, the supplier management department focuses on negotiating for agreeable costs on different products (Dubey, Gunasekaran, Childe, Papadopoulos & Helo, 2019). These include discounts, cost reduction, and premium products. Negotiating with different companies is critical to acquire the best possible terms. As a result, this impacts on the reduction of wastes for both the suppliers and the company (Chi-Chang & Po-Lin, 2017). Furthermore, the management of supplier relationship is critical for a strengthened supply chain and improved efficiency for the process (Forkman, Henneberg, Naude & Mitrega, 2016). Thus, impact in the overall efficiency of the operations of the company specializing in the tools and equipment renting business.
The logistics involved in enhancing the operations of the company comprises of the fleet management, inbound and outbound transportation, warehousing, inventory management, and distribution of tools based on their categorization (Oghazi, Rad, Zaefarian, Beheshti & Mortazavi, 2016). The fleet management goes hand in hand with the inbound and outbound transportation. The inbound transportation shows the supply of the tools from the manufacturers, retailers, distributors, and key suppliers (Li, 2014). This ascertains that all the requested stocks are delivered to the company. Outbound transportation comprises of the transportation of the tools to the various local distribution centers. The fleet management is critical to ensure that the tools must arrive at their respective destinations on time and at the right condition (Chi-Chang & Po-Lin, 2017). Proper transportation of the tools is vital to smooth operations of the company. This enables the customer to access the required tools at their local distribution centers whenever a need arises.
The capacity to effectively managing the warehousing requirements is critical for the company to run smooth and efficient operations. The warehouses comprise of the first destination to which the tools are assessed and evaluated (Ibrahim & Hamid, 2014). This involves inventory management which examines the supply of the intended tools to respective destinations. The suppliers and the distribution of the tools to the local centers is expected to meet all the inventory demands.
Packaging is conducted using the tools categorization and specialized keys. These comprise of the special barcodes used to manage the tools and give them easier accessibility. The tools storage, access, and distribution to the customers and return, is management under the inventory management that is expected to run on EIS. The EIS provides electronic management system which makes it efficient to track any tool at any particular time (Londorfos et al., 2015). The EIS enables the packaging of the tools whenever required by the customers. Customer demand for a product prompts subsequent packaging and delivery for their use. Depending on renting of the product in bulk, the company can offer to deliver the tools at the construction site (Al Shamsi, 2019). Hence, packaging is easily managed on basis of demand of the tools.
The transportation of tools is based on three criterions. The inbound transportation that is expected to deliver the tools from the manufacturers, retailers, and other distributors and suppliers. This is business-to-business transaction that will allow the company to make all the arrangements under the supplier relationship management (Chi-Chang & Po-Lin, 2017). The inbound transportation will deliver the tools to the company’s head warehouses waiting for distribution to the local distribution centers. The fleet feeding the company’s head warehouses originates directly from the suppliers and all the tools are new. All the tools are expected to be of high quality and standard to give the company a longer lifespan in renting them (Mobtaker et al., 2018). Thus, tools evaluation is conducted as they transported and received by the company.
The outbound transportation connects the company’s main warehouses to the local distribution centers. The outbound transportation is designed to deliver the tools to respective stations where the customers make applications and requests. The transportation inventory is informed by requests from respective local station in which the company hopes to serve its customers. The delivery of the tools is made for both old and new tools (Li, 2014). This is because of the exchanges from one station to another as demand grows and fluctuates for specific tools grows. Therefore, operates on the basis demand and supply of the tools. Hence, it is essential to enable the customers to access the key tools they require for various purposes in their construction needs.
Finally, entails the transportation from local distribution to the customers both business (contractors and subcontractors) and individuals. The transportation of the tools is based on the quantity of tools rented by respective customer. This facilitates the movement of the tools to the site of customer. Also, it is used as an after-sales service to complement the customers for renting tools from the company. As a supplement service, it attracts customers to make more deals and businesses with the company. As well, helps in protection of the tools during transit from one destination to another. Therefore, contributes to the long-term durability of the tools owned by the company.
For a tools and equipment company, to start the business, it requires substantial amount of money to sustain the planned operations. As a start-up, the company likes an estimation of $100 million committed to the functioning of the company (Edwards & Holt, 2009). The funds are based on minimal budget specifications to ensure that the start-up does not strain the investors. As well, starting small is vital to build confidence on investors to increase their funding on the company’s expansion agenda. The capacity to build the business over time is intended to install confidence on investors to expand the company exponentially (Hacklin, Bjórkdahl & Wallin, 2018). As well, this is critical to give the company time to develop a loyal or potential customer base.
The funds required will be sourced from different entities including investors that comprise of business incubators that provide funding to start-up ventures. The use of bank loans will be a major source for funding of the business venture with the intention of generating profit and repaying the owed amount (Clapp, Shuler, Nobe, DeMiranda & Nobe, 2007). Also, search of potential business angels is critical to entice them to invest on the business idea that appears to be creative and potentially beneficial. The potential of the venture is high, hence, stands an opportunity of wooing business angels to committing their resources to the idea. As well, following the establishment of the company, the implementation of a buyout strategy will be essential to ensure the company takes off (Lim, Oo & Ling, 2010). That is, provide substantial funds required to ascertain the success of the company.
The current funding requirement is based on the potential of the business to source for funds from different initiatives. The funding requirements the outlining of a business plan which constitutes of the business objectives, vision, and strategy. The inclusion of business strategies is vital to convince investors of the potential and capacity of the business. This is bound to outline the business growth potential which informs the cost-benefits of the project to be funded. An inclusion of the risk management plan is critical to outline the cautionary measures that should be adhered to avoid incurring losses (Sajoudi, Sadi, Abdullah, Kasraei & Rezaie, 20110. Due to the inexistence of collateral associated with the business initiative, the investment will be based on the ideas and projected growth of the company. The credibility of investors is critical to provide baseline values in which the company is built upon and establish the credit worthiness in access loans from banks.
The funds collected to start the company are expected to be used for various purposes in the purchase of both products and services. The key equipment to be purchased comprise of the specific tools used in the construction industry, vehicles, and warehouse properties (Kyssima, Tesha, Lello & Mtitu, 2020). The vehicles are necessary for the transportation of the tools from one warehouse to another, to the local distribution centers, and to the customers. The warehouses are vital properties used for the storage of the tools to ascertain the safety and security of the highly expensive tools. The funds will be used to settle expenses related to inventory, operations, and service providers at key positions in the running of the company. Such services include the attorney, inventory managers, accountants, computer system administrators, maintenance, and accessories (Azizul, 2015). The funds will be transparently utilized to ensure the company makes maximum use of the available resources. The investment is directed to the smooth running of the company in order to effectively serve their customers. The efficient use of the funds is vital to enhance the competitiveness of the company. Therefore, every fund will be articulately utilized for the benefit of the company (McGovern, 2012).
To avoid making losses on the investment, certain measures are critical to control the direction in which the company is taking. The loss control approaches focus on making due diligence on understanding the market, designing effective market entry strategies, management of funds, and transparency (Spuchlakova, Michalikova & Misankova, 2015). These are critical measures that maintain the usage of the funds under strict control measures. The risk assessment and management plan provides the loss controls that are critical to mitigate potential negative effects on the company (Kratsas & Truby, 2015). Thus, the company is expected to make lasting growth and developments.
The income statement table 1 below indicates the core financial entities that the company is bound to regulate for the operations. The management of revenues and expenses is vital to attain substantial income for the company. The capacity to generate a higher income culminates in huge profits for the company. As a result, indicates the competitiveness and value addition of the company in the new market. The high demand for tools and equipment rental services is a crucial business opportunity that should be capitalized maximally. Therefore, the income statement table can be used to monitor the expenses and revenue generation for the company.
Table 1: Income statements table.
|Sales revenue (Less sales returns and allowances)||500,000||400,000||420,000|
|Cost of goods sold|
|Furniture and equipment|
|Maintenance and repairs|
|Computer system administrator|
|Web hosting and domains|
|Net Income Before Taxes|
|Income tax expense|
|Income from Continuing Operations|
|Income from discounted operations|
|Effect of accounting changes|
The balance sheet analysis in table 2 below shows the growth and expansion of the company’s assets and liabilities. The assets are a result of increase tools and equipment purchase by the company used to be rented to customers. The higher the demand from the customers for different tools, the higher the total assets for the company. This is expected to expand based on customer demand requirement for specific tools. Therefore, the purchase of assets is strategic and customer-informed. This is designed to ensure that the company purchases only worthwhile tools highly demanded by customers. Thus, it ascertains that the purchased tools are essential and serve the interests of the company.
Table 2: Balance sheet.
|Balance Sheet Breakdown||2020||2021||2022|
|Total non-current assets|
|Total non-current liabilities|
The cash flow breakdown in table 3 below shows the movement of cash in the company. The cash flow is integral to the successful running of the day-to-day operations. The cash flow analysis is used to show the appetite for growth and expansion as day-to-day operations increase. This is a crucial feature to inform market competitive periods/seasons that tools and equipment renting is high. Hence, the need for additional employees and experts to guide the customers on proper usage of the tools.
Table 3: Cash flow statements.
|Cash Flow Breakdown||2020||2021||2022|
|Operating cash flow|
|Cash from continuing operations|
|Investing cash flow|
|Cash flow from continuing investments|
|Financing cash flow|
|Changes in cash|
|Effect of exchange rate changes|
|Beginning cash position|
|End Cash Position|
|Income Tax Paid|
|Issuance of Debt|
|Payment of Debt|
|Free Cash Flow|
The implementation stage of the business plan is a fundamental step that can determine the success of the initiative. Various steps need to be properly laid out to ensure the plan’s launch takes off effectively in a way that it can attract customers and provide new dynamics of serving the clients. The capacity to ascertain customer satisfaction is integral to successful operations of the company. Therefore, every component of the business plan must be articulately executed to the letter.
Step 1: Business initiative brainstorming. Following the conception of the business idea, extensive brainstorming is integral to ensure the business is adequately to take shape. This provides the opportunity to scrutinize various prospects for the company and determination of how to approach the market. The capacity to attract customers is essential to the success of the idea. Therefore, every concept and approach must be effectively analyzed and determined to ensure the success of the business.
Step 2: Funding. The identification of funding sources and their approval to raise the required sum gives hope to the new business idea. This is a step that must be completed effectively. Also, the funding is essential to provide a safety net for the business as a contingency measure should unexpected financial demands arise in the process of implementation of the business idea. The feasibility study is critical to determine the business viability of the initiative. Hence, on meeting all the business ideals threshold, it is designed to give the green light towards commencing on the implementation of the initiative.
Step 3: Marketing and strategic positioning. The identification of the target market segment and areas to open the local distribution centers is paramount. These must be strategically selected to ascertain the business acquires the maximum benefits. The opportunity to strategically identify the core customers and market opportunities to utilize is bound to lead to a successful business. Also, the market strategies are essential to create awareness on the company as a new venture focused on solving dire needs for the customers. The business idea presents an opportunity where the company seeks to provide new solutions to highly evolving customer needs in the construction industry.
Step 4: Risk management plan. The preparedness of the business commencement for any eventuality is critical to ensure it is not blindsided by the realities in the market. The risk management plan is essential to identify and develop contingency plans. This gives the company a prepared lifeline for every scenario that is bound to affect the operations and functionalities of its initiatives. As a result, this is an approach that is designed to provide a stable path of operation in which the best ideas are implemented. The risk management plan accounts for the market competitiveness and ways to counter major competitors in the industry. As a result, this is bound to give the initiative a fighting chance that can be transformed into a highly beneficial initiative.
Step 5: Actual implementation. Having assessed and determined all possible scenarios and acquired the funding for the initiative, this marks the time for actual implementation. The implementation process must be conducted in line with the agreed terms and conditions and follow the implementation plan effectively. This is intended to ensure the business within the expected realities as it take shape. The utilization of contingency plans and risks management plan will be critical to provide alternative solutions where the first choice fails to materialize. This is a crucial concept that should be emphasized to avoid potential errors and losses in the implementation process.
In conclusion, it is important to note the significance and value of the business venture. The capacity to fully implement the initiative presents numerous benefits for the company. The implementation of the business venture should be highly considered and implemented. This is based on the fact that the tools and equipment renting service is a unique business opportunity. The need to renovate residential houses, improve, or change the designs is a high demand opportunity for customers both individuals and businesses. The initiative driven by individual desires seeks to facilitate cost reduction in purchasing of the necessary tools used for specific purposes. This is based on the future use or need for the tool making no sense to spend so much money on a single-use tool. Therefore, the opportunity comes to serve a profound need for the customers and help them cut costs. This impacts in the encouragement of more customers taking to construction or improving their residential areas.
The commitment to the initiative is highly beneficial and promising to generate substantial profits. As an under-utilized market opportunity and high market demand, this is a venture that should be highly considered. The students should join in further analysis of the venture to determine the best approaches that can be utilized in ascertaining its success. The extensive analysis provides an opportunity in which the best ideals and initiatives can be designed and give rise to a highly competitive business. The future of the construction industry is dependent on access and understanding of how to use different tools. Therefore, the company comes to fill the market gap and void by providing customers with tools and expertise on utilizing different tools. Hence, the opportunity solves profound problems for the customers and the market.