We mentioned in a previous post that there are certain key metrics you should track and know at all times in your business. The very first and most basic of these measurements are your revenues; your revenues are the equivalent of the speedometer on your car’s dashboard—you should always know how “fast” or “slow” your business is moving. Many rental store owners may say, “That’s easy, I know exactly what my revenues are.” (Unfortunately, we see many rental store owner’s tracking of key measurements stop and end there). Let’s go over a few basic points to make sure you are tracking your revenues correctly.
First off, be sure to break out your revenue into major relevant categories. Always separate rental and related revenues from sales categories such as merchandise sales, new equipment sales and used/rental equipment sales. Also, separate out any “re-rental” or “non-owned” rental revenue! Your comparisons should not be skewed by a sale of a large piece of equipment. We define rental and related revenues as equipment rentals as well as ancillary charges such as damage waiver, delivery and other charges such as environmental/shop fees. Secondly, if you have more than one location, always break revenue by location; each store should stand on its own.
Tracking and knowing where you stand on revenues should be second nature to you. Every business morning, you should know your revenues as of the end of the previous business day.
On a weekly basis (pick a day that is a good cut-off for you, many stores use Friday or Saturday), you should have the following data summarized:
- Revenue for the most current week
- Revenue for the previous week
- Revenue for current month-to-date
- Revenue for same period last month
- Revenue for same period (weekly and month-to-date) last year
- Year-to-date revenue, current year
- Year-to-date revenue, same period last year
On a monthly basis, you should have the following data summarized:
- Revenue for the most current month just ended
- Revenue for the previous month
- Revenue for same month last year
- Year-to-date revenue, current year
- Year-to-date revenue, same period last year
Remember to separate all these revenue comparisons into their components (rental, sales, by location, etc.) as well as the totals. If you are in the party or special event rental business, you should also track categories such as advance bookings, customer deposits or quotes to give you a good idea for future revenue trends.
We know numerous rental stores that were tracking revenues using this system that saw the early warning signs of declining revenues in 2008 and 2009. Some of the sharper rental store operators we deal with can recite these numbers, any time, any day, driving down the road on their cell phone (with a headset on of course) with no reports in front of them. Start tracking your revenues and make this metric second nature to you.