How To Determine Rental Price For Event Equipment

When it comes to growing your business, knowing how to determine rental price for the new target markets you’re looking to expand into can be critical to your success.

It’s also why event planners and rental businesses must set competitive yet profitable prices in addition to using rental industry software to stay ahead. Here are four steps to help you determine the right rental price for your equipment in a new market:

Step #1: Regularly analyse market demand and competitor pricing.

Regularly checking your competitors’ prices can help you become even more competitive and help you identify if there are opportunities to offer competitive advantages.

It’s vital to consider both market trends and what your competitors charge while factoring in your costs. This ensures your prices are not only attractive to potential clients but also robust enough to cover your expenses and secure your desired profit margins.

You can also provide additional value, such as streamlining your services with smart booking software for rentals, which will give you the competitive edge you need without having to lower your price point too much.

Step #2: Implement flexible pricing based on rental duration.

Create pricing tiers for daily, weekly and monthly rentals.

Implementing tiered pricing allows you to cater to diverse event planning needs. What works for one market may not work at all for another one. Thus, by offering daily, weekly and monthly rental options, you’re increasing your service’s accessibility and attractiveness across multiple markets simultaneously.

On a granular level, event planners often seek cost-effective solutions based on the events they’re organising; reduced rates for longer periods can be a compelling incentive for them to return to your rental business.

This is just one way you can use flexible pricing to fill the booking calendar on your party rental software more effectively, fostering repeat business and client loyalty. The result is, ideally, a steady flow of income while strengthening customer relationships, making your service the preferred choice among customers.

Step #3: Include maintenance and operational expenses in your calculation.

Estimate regular maintenance costs, including cleaning and routine checks.

Operational efficiency starts with estimating regular maintenance expenses. However, not all locations or markets require the same attention or operate under the same licences and regulations. This could mean fluctuating expenses on maintenance and overall operations.

For example, budgeting for cleaning and routine checks is necessary because you need your equipment in peak condition. Thus, proactive maintenance is needed to reduce unexpected breakdowns, which can lead to costly cancellations or reputational damage.

By extension, paying for these services could add up over time if you don’t have a budget and schedule outlined. Setting aside funds for regular upkeep means your equipment consistently meets high-performance standards.

By estimating these costs upfront, you’re able to incorporate them into your rental pricing without affecting your bottom line negatively. Your business standards can be better maintained when you pair this with robust equipment rental software.

Account for potential repair expenses due to wear and tear.

Planning for potential repair costs addresses inevitable equipment issues.

No matter how carefully equipment is handled, wear and tear are unavoidable with repeated use. Anticipating repair expenses allows you to maintain readiness for quick fixes, reducing downtime and maintaining client satisfaction. Allocating a portion of your budget to cover these essentials ensures you’re not caught off-guard by unexpected repairs.

Step #4: Factor in depreciation to reflect equipment value over time.

Choose a depreciation method, like straight-line depreciation.

Selecting the right depreciation method is crucial for managing equipment value over time.

The straight-line depreciation method is straightforward to apply, especially for those new to the concept. As the equipment’s cost is spread equally over the life of the product, you can see how much value is lost each year. It simplifies financial tracking and assists in setting rental prices based on an ever-changing asset value.

Choosing this method is a practical step that aligns well with efficient financial planning.

Figure out how much value each item loses each year.

Understanding annual depreciation using the straight-line depreciation method involves a simple calculation using the equipment’s costs and lifespan.

Subtract the salvage value – the estimated resale value at the end of the equipment’s life – from its initial purchase cost. Then, divide this amount by the number of years of expected use of the equipment. This calculation helps you adapt your pricing strategy to account for decreasing asset value, ensuring your rental fees are always justified.

Adjust your rental prices to reflect the decreasing value of your gear.

Incorporating the annual depreciation expense into your rental pricing is a strategic move.

As each piece of equipment loses value over time, adjusting rental prices through your rental management software ensures that the equipment remains profitable throughout its lifecycle. When you take the depreciation expense into account, you can set rental fees that cover not only the current value of the gear but also help recoup the initial investment cost.

This adjustment is essential for maintaining a balance between competitive pricing and business sustainability. Adapting your pricing to these changes means your rentals remain profitable and fair.

Key Points to Remember

• Research market demand and competitor rates to strike a balance between competitive pricing and profitability.
• Use tiered pricing and discounts for longer rentals to attract diverse clients and encourage repeat business.
• Factor in depreciation to adjust rental prices over time, reflecting the equipment’s decreasing value while maintaining profitability.
• Your budget for expanding your business should take into consideration the cost of equipment purchases, transportation, storage, maintenance and customisation.

Gecko simplifies the setup and management of your equipment rental business. Reduce admin time with Gecko’s smart software solutions and focus on growing your business while delivering exceptional service to your customers.