Where Are We Going?

In a market where every sale means the lights stay on longer, we look forward to this elusive recovery. Obama’s administration says the economy is already out of the recession and headed into a recovery, but with hands on experience I can officially proclaim “BS”. Just because the staff of the White House is driving nicer cars, doesn’t mean that my friends, family, and colleagues can go back to eating meat and potatoes for dinner.

Every day, I call on contractors, landscapers, and farmers while looking for used equipment to sell and acquire for export. Every day I hear horror stories about the massive losses these folks are enduring and how there is no relief within their sites. Some days, I hate haggling with them because I know how much they paid for these pieces and I know they need every penny they can get. The truth is, this market has diminished all senses of value we thought we once knew. A $300,000 excavator can now go for 20% of what it would have pulled in a good market while an older Cat loader can go for twice what it would have in the past. Mainline brands such as Cat, Komatsu, and Kawasaki are holding their own while value lines like Hyundai, Kobelco, and New Holland are taking a severe beating. Even Case has been fighting a tough battle and Deere? I can’t even give it away right now for some reason.

We look at this market every day, trying to figure out where it is headed so that we can get a jumpstart on the curve and turn out a profit to make up for the staggering losses that have molded our business lives and greatly impacted our personal lives. A few months back, I called on a longtime customer of mine to see if they were looking to sell any pieces. They had been thinking about it for a while and said they’d call me to let me know. A couple weeks later, I got a call from the owners wife and she had to sell a piece of equipment in order to cover their payroll. I bought a dozer from them and went over some other machines that I was interested in. This is a slippery slope. With most companies, once you get that first piece sold, you find necessity to start selling more to cover the jobs you are not getting. I watched their truck get repossessed while at their office. Not a pretty sight.

2011.

As I said in a previous post, I believe 2011 is the year of the rental house. They are going to be poised to recover the quickest. The companies that need to buy inventory will find that the manufacturers will be much more likely to accommodate them with excellent terms and pricing that we haven’t seen in over a decade (with the exception of Caterpillar, who feel they have some secret justification to raise their prices). Rates will slowly recover and utilization rates will increase and eventually hiring will resume in a manner that could indicate an actual recovery. Contractors who lost or sold their equipment will be too gun shy to buy new so used equipment sales and rental will be their answer to filling equipment needs for jobs as they come in.

What’s next?

As the Obama administration enters it’s last two years (hopefully), we should see some form of recovery. The emergence of a stronger political candidate should restore some confidence in the market and we should start to see some money flowing back into the industry. The major competitors, Sunbelt, RSC, United, Hertz, etc will plug millions into revitalizing their aging fleet but they will likely spend money on the value line equipment in order to bolster their bottom lines. With CARB’s recent about face on the emission standards, rental companies may keep some of the machines with high acquisition costs for a few extra years in order to whittle down some debt. The smart ones will put sales veterans in who were successful before the market exploded, because the strong market created “fake” superstars. The day of having a strong area and being successful for that reason only are long gone. It may even make sense to just fold the resume in half and only read the bottom? It will be interesting to see who is the first to push through and launch new programs and pursue new locations and niches. My guess will be that Sunbelt will be the most aggressive and successful at pushing the bar. United will be a close second. Large private competitors like Ahern, Modern, and NES will push to grow their companies and give the majors a run for their money. I hope to see Home Depot finally throw the towel in and let another company come in and manage their rental locations while I am confident that Lowes will begin to pursue different opportunites alternative to having Sunbelt operate out of their stores. This would make a great niche for a smaller company looking to grow exponentially while piggybacking off another major company.

No matter where we are heading, wear a seatbelt it’s gonna be a bumpy ride.

A year many will hope to forget………

As the year comes to a close, we can all take a look back at how this year has affected our lives. Our year was a roller coaster . As we were taking a beating from the economy, my wife and I decided to move back to Florida and get back in the mix doing what I love to do, sell equipment. I started U.S. Equipment Sales, Inc. and we have brought it to a seven figure company within the first year. It hasn’t been all champagne and steak, but life is good. We have had some serious hurdles to overcome like everyone else dealing with this mess, but we kept our eyes on our goals.

This year has been extremely humbling to meet some of the people I have in some of their worst times. Whether they were selling off fleet to liquidate, or they were just trying to make payroll, they have all been a profound influence in my life and I hope that 2010 treats them better. With the 30,000 people laid off by Caterpillar, coupled with the other companies in my previous blog post that shelled off more than half their staff, we have seen the worst that most of us will ever see in our lifetime. We have to be strong and remember that we live in America, the land of opportunity. If we keep our heads up and work hard and honestly, we will benefit from this.

MY PREDICTIONS FOR 2010

While I hear a lot of people talking negatively about the outlook for 2010, I don’t think that’s accurate. It won’t be like 2005/2006, but it sure will be better than 2009.

The rental market.

The rental market will see ultimate stabilization in rental rates and closer to the end of the year we may actually see some increases. Growing pains will resurface as they did around 2001 and we will again see the big dogs buying up the smaller companies to regain marketshare and increase their overall presence. Dollar utilization should increase minimally but time utilization will increase greatly. I think this will be due in part to the fact that rentals will see themselves out on longer term jobs that we didn’t see much of in 2008 and 2009. There are still a ton of companies who haven’t realized their fate yet and we will see some of the equipment whores go out of business. It’s going to be obvious which ones, $500 backhoes don’t help anyone. If they can’t hold employees, their rates are the best out there, and they take three days to service you, they will be gone or bought out in 2010. I hope to see the emergence of some of the industry veterans we love to hear from. Fleet aging should decrease again as the manufacturers start to give some bold incentives to buy so they can ramp up production again. I think we will see more of this going into 2011, but it should start in Q4 2010. As far as salaries and unemployment, I don’t think there will be a significant change throughout the year, but in this one I hope I am wrong.

Manufacturers

I think this is going to be the most volatile area. This downturn has left little doubt in my mind that Caterpillar is king. They held their value more than any other, people are still buying it, and they will be in the best position to recover. I think that’s crap because they pretty much bailed out on everyone in an effort to keep very high profit margins but that’s business. If it was about making friends, then Doosan would be king. With the recent Terex sale to Bucyrus and the strong push by companies like Doosan, Hyundai, Sany, Kawasaki and others, I think we will see some marketshare shifts. Deere should probably give up while they are ahead and just stick to saturating the rental companies and farms, that’s a good niche for them. JCB, JLG, IR, and many others have nothing to worry about. They have always been strong companies and the recovery should be kind to them. I still think we have a couple surprises ahead of us as far as companies going under in this sector.

Used Equipment

This is going to be a gray area. I think we have a good 18 months of the way this market is. I find myself exporting more than anything. Profit margins are all across the board. You may find a 950G for $30k one day and sell it for $50k the next now, but our market is only as good as the next auction. Values are still sliding, companies are still going under, and the days of people buying without haggling are over. Evolving is the only way to keep in the black in this sector.

This is my prediction and I am basing it on what I see every day in the field. I may run a company but I spend every day out in the mix meeting with contractors and equipment companies to learn about where we are headed. I would love to hear anyone else chime in on what they think will come of 2010.

I wish you all the very best in 2010!!!!

A market with consequences

It’s been a while since I have updated, business has exploded and U.S. Equipment Sales is on target to having a $1,000,000 year in it’s first year. If you counted our cooperative deals with other companies and brokers, we have already passed that mark for the year.

There have been some recent events in the Florida market and I want to chime in on them and see if anyone out there has any more info on these suspicions.

A week or so ago, I got an internal email from a friend that was addressed from the VP of Briggs Equipment. It said they are closing all of their Florida and South Carolina branches down in stages over the next few months. This is a blind side. I would have never thought in a million years it would be them. I have suspicions on several other local competitors, but not ever Briggs. I always try to read through the words and see the intent with everything I get. It oddly coincides with a press release from Ahern of Las Vegas that they will be opening (or acquiring) 15 new branches over the next few months. They just opened a branch in South Carolina so this marriage of equipment companies makes sense. They have a presence in nearly all southern states with the exception of Florida, Alabama, and a couple others.

It sounds a little conspiracy theory-like, but I would not be surprised. I have tapped a couple of my sources but have no response yet. If you know of any pending merger, I would love to hear. As far as the Case line, I am not sure why anyone would NOT want the line. A new dealership would not have exorbant expectations with this market which gives them a great opportunity to build. The pool of experienced staff has never been better in the area. Case is a high quality brand with a great municipality presence. It’s a no lose situation. Obviously the bigger rental companies are not going anywhere. United is still on top, Sunbelt and RSC are not far behind. Sunbelt has made some tremendous implementations and fleet movements that are borderline genious. They will be effectively raising their utilization with new greenfield stores while still capitalizing on their remediation and industrial markets. Ring Power has the money to survive this and ramp back up almost immediately once the market shows signs of life again. Nortrax will survive, but not the same as it once was. The JCB dealers will have a tough time, but JCB as a company has a great support team and will help the dealers re-calibrate their purchasing and sales. There are a few rental companies that I will not name that will face an almost certain failure. They whored up the market and only became known for being the “lowball”. That is never a good marketing strategy.

As I said before, if anyone has inside knowledge of the Briggs Equipment or Ahern deal, please drop me a line and let me know.

Side note: Now is the perfect time to get a guy like Bryan Rich (NationsRent) or Bruce Dressel (Sunbelt) to come in and fill Briggs gap. The facilities are already in place, the candidate pool is impressive, the Case line is strong, and the rental industry is going to start recovering over the next 12 months.

Knowing when to let go……..

Recently the market landscape has been “reported” to be improving. I am in Florida, the market is a mess. It’s erratic, it’s unpredictable, and it’s unforgiving. The auction companies are doing the best they have ever done. There’s a reason for that: it’s an auctioneers world right now. Contractors can’t lose, their equipment will sell no matter what.

Sometimes they just don’t know when to let go. Granted, sometimes they can’t. They may owe too much or may believe that the value is going to increase when the market comes back. History tells us different. I had an incident recently where neither case was present. A few months back I called on a contractor who wanted to sell some items. He had some older, poorly maintained machines that all needed some work. I worked up some numbers and gave him a range on what he could expect. He was happy with most of the pricing. I began working on moving them for him and about a week in presented him with an offer above what we had discussed. He changed his mind. He wanted to wait until the market comes back and try to sell at higher prices. Bad move. Equipment sits and rots, defects show up, engines rust and lock up. Case in point, his Galion grader that we offered him 11k for:

Sometimes we just have to let go………….

The equipment industry is bleeding…..

There is a massive destruction going on in our world right now. It’s not the buildings being blown apart by bullets across the world, it’s not the earthquake ravaged orient. It’s the economy in America. I just heard a video by AEM that says the construction equipment industry has an unemployment rate right now of 37%. That’s right, over a third of our colleagues, partners, bosses, and friends are out of a job. While our money is being plowed into this healthcare mess that likely will never help anyone (our government has a history of failing in these areas), and put into banks that may or may not be using the money to help our country, the construction industry is still waiting for the check that the government says is “in the mail”.

If this industry fails it will be catastrophic. Not detrimental, catastrophic. Many people don’t realize how much of our economy is built upon the construction and related industries. If they are “bleeding”, the heart (our country) will not function properly. I have many clients who I have been helping liquidate their fleets who are praying every night that they will be able to keep their workers and still be able to keep the doors open. They are in desperation right now. It’s not just the mom and pops, it’s some of the largest companies in the world.

At what point do we work on focusing on just the economy instead of political side projects? While our president is off trying to be Robinhood, the middle class are quickly becoming poor. Of course, he is not worried, he get’s a steady paycheck and knows there will be book money when he is not reelected. He’s set for life. Those of us who have to hope our next check will be there and equally worried that it will clear, have no other option than to watch our government drag our economy back 200 years. Any way you look at it, we lose with the people we have in place. They have stopped acting in our best interests and have now switched into ass-kissing mode to make a name for themselves and ink some book deals. There are no more pioneers like back in the day. George Washington would be rolling over in his grave………….

How Will You Be Remembered?

Timing is everything in life and in business. Some thing we can control the timing of, some things we can’t. Take for instance the economy. No one knew exactly when the bubble was going to burst, but they knew it was going to happen. Those who could gauge it enough to shore up their finances and get traction enough to survive are doing well despite the tough times going on worldwide. Those who timed it wrong are likely in line at the US Bankruptcy Court waiting for their chance at a new beginning.

My good friend who I mentioned in previous blogs owns a small rental company called Coastal Rental Center. He built the company from the ground up, beginning with only him and his wife. When the economy started to turn, he was ready and he has actually had some of his best months during this recession. He will be remembered as a very intelligent business man who remains involved in the community.

On the other hand, take John Milne. He will be forever remembered as the guy being prosecuted by the SEC for inflating United Rentals stock prices. (Please note, I am not commenting on whether I think he did it or not, and will not make an opinion on that point). There had to be some involvement, even if by ignorance, or the SEC would not put their neck on the line with accusation. Had United not had a failed buyout by Cerberus, these allegations likely would have never surfaced in my opinion. Again, timing is everything.

Then you have pioneers like Robert Gray and Mark Richter, who took the down economy to their advantage and launched a very necessary service that matches potential customers with rental prices for equipment. Marketing a site like that is tough, but looking into their background it looks like they have the necessary skills. With success, they will be remembered as pioneers.

We all spend a lot of time trying to time the market, the economy, and other people’s intentions. In all this, we can’t lose track of why we do this in the first place. If we do what we are passionate about and do it with honesty and integrity, we will be remembered that way. Passion is just as important as knowledge, ability and drive. So, how will you be remembered?

When in a Recession, Expand……….

While most people are thinking how bad a recession is killing their business, there are a few out there who have figured out that a recession is an open door. When better to get into the water than when the level is low enough that you can’t possibly sink? If you can survive and swim with the big fish in this kind of market, you are prepared to face the worst of the worst. That is, with really good planning.

Some of the best and most tenured businesses in this country were built in recessionary times. They found the entry point for their market and pinpointed how to sway the buyers into their businesses. Construction equipment is not much different. You can get in for next to nothing with a great network in place and some truly good people in your corner. You can build equity by building rapport with your clients and colleagues. It won’t happen overnight, but it will happen. I once had a contractor tell me you have two things in construction: Your word and your credit. Without them you cannot succeed. That’s why he is in a position where he doesn’t have to bid jobs out that make him lose money. That’s also why he won’t backtrack on jobs he does bid. Some are getting their money by putting in excessive change orders and others by cutting corners. He entered this business in a recession, he knows the game.

I have been watching some companies closely and those with too much invested think this is the time to pull back and retract their size and scope. I think it’s a fatal mistake. You don’t make money without putting your butt on the line. Smart ones are expanding and growing, taking the time to capitalize on the opportunity left on the table. It it those who will see the benefit of that expansion within the next 18 months.

The Importance of Networking

You can always tell the difference between old school and nexgen sales people by the way they network with others. I once had a sales manager that told me that you should hate the competition and should never be amicable with them. I completely disagree. I often had lunch with the competition. A few times I had been to their homes and them to mine. Competition today is different than most people think. If you network intelligently, your businesses can coexist peacefully and do well from combined experience and lessons.

I have been networking since I got into equipment sales and rental in 1997 in one form or another. Whether it was communicating with local companies and exchanging deadbeat lists, or calling around to find clients equipment I didn’t have. Sites such as Linkedin, Facebook, and Twitter are fantastic outlets to broaden your contact base. I have made many friends and contacts through these sites and worked with people across the world. I got on Linkedin in 2006 when it was still relatively new just to test the waters. I followed with Myspace, then Twitter, and finally I jumped on the Facebook bandwagon (which I couldn’t live without now).

Without networking, we are in the dark. My old sales manager is in the dark. He has no idea what the competition is doing, nor the clientele for that matter. You gotta get out, shake some hands and kiss some babies if you want to broaden your base and expand your network. Recent networking has enabled me to meet people I would have never met otherwise and opened up so many more avenues in the way I do business. I have been able to take my game to a global level. If you are interested, I would love to network with you. http://www.twitter.com/equipmentmedia is the best place to find me. I look forward to connecting.

Positive Indicators of the Construction Equipment Market

For the past four or five months I have been witness to some very erratic behavior within the construction industry. It is actually misleading in some ways and comforting in others. I had the pleasure of talking to a contractor whom I now consider a friend about the cycles in the business and if you read my last blog you know some of my views. He told me that he had the benefit of going through several downturns, though nothing quite this bad. In 2005 he refinanced some of his equipment. He didn’t refinance it to pull money out, he refinanced to lower his interest rate, release some of his equipment from his loans, and plan for another downturn. It’s easy to say “I seen this coming”, but not quite so easy to say you did something about it. I guess it goes without saying that he wasn’t going to sell his equipment at wholesale prices like I had asked him upon meeting him. I did however sell two of his older pieces that he was ready to part with at every penny he was asking for them. I bring this up because he is not the first person who told me they had planned ahead and not only don’t want to sell anything, but they don’t need to.

This past month we have sold several pieces at prices that seem to be going up. The hard part now has become getting contractors to part with their equipment at a price that allows me to make some money on it. Again, it seems very erratic. Some contractors have no jobs at all while others seem to be landing jobs enough to bring some laid off workers back to their previous jobs. I have seen places starting to hire again and you can see a little bit of money starting to change hands.

We are not out of the woods yet, not even close. However, it can be summed up similar to some of those horrific winters I spent in Northern New York. You start to think it will never end and then one day you wake up and the gray clouds seem to have parted enough to let the sun through. The snow melts and soon enough you see the leaves starting to grow on trees and the grass taking it’s original shape. After this, you get nailed by another nasty snow storm and think to yourself again that it won’t end. I think we just hit that first parting of the clouds and the next storm will be the remaining fallout and dust settling of the finance, real estate and construction industries combined.

We are headed in the right direction, I assure you. As i said in my last post, we are far too advanced a society to continue to sink. Those who have weathered the storm and emerge ready to move on will be the ones with the most to show.

The rental market and it’s future

Let me start out by saying I am very tired of hearing about how bad our economy sucks right now and how it will take decades to get back to previous levels. It will not. I am not being overly optimistic or hopeful, I am being realistic. Call it what you will but we don’t live in the era of the great depression and our circumstances and resources are tremendously different now than they were back then.

There has been a lot of very bad fallout from our economy and I have seen good friends and clients go bankrupt and lose houses, businesses and life savings. Our way of life will not allow the economy to sustain this downfall, it will come back. People have to have transport, they have to live in houses, and we have to eat.

What we will see over the next 18 to 24 months is going to be stabilization of rental rates (hopefully an increase as well) and we will see a lot of smaller companies grow much stronger as a result of this fallout. Why? Most of them have prepared for reality a long time ago and if they are still in business now, they aren’t going anywhere. We are going to see alot of the “whores” go under. By this, I mean all the companies who said low price is all they need. They dropped service by the wayside and just went in for the kill with their pants down saying that they can get it to the contractor cheaper than their competition. This business is not about price, it never was. Just ask my good friend who got me into this business right out of high school. His business Coastal Rental Center in New Port Richey, FL is doing better than ever. He kept his service top tier, cut his rates only a little bit, and increased his business the old fashioned way, by being better than the competition. Now he is in a position to be much more profitable when the market comes back and if he capitalizes, more market share and deeper penetration in the region.

Equipment companies don’t get bailouts or huge incentives to do business in a certain area so they have to adapt very quickly to their economic environment by keeping in the positive. The ones who went in and cut their rates to $700 backhoes and $150 20′ scissors are going to have a difficult time when they can’t get the rates back up and are forced to continue paying out more than make on their equipment. I think we all know what the result of more going out than coming in becomes.

With companies closing down, thinning out their stores and stretching their sales force thinner, it leaves us to wonder how stable they were in the first place. When you have to layoff over 20,000 people like Caterpillar did or close 75 branches like United did, how do you inspire your investors to have trust in you when you want to do it again? When you have to write down hundreds of millions for branch closures, layoffs, and fleet disposal it seems a little hard to say let’s do it all over again.

Here are my predicitions for the next 24 months in the rental industry:

The market will feel the end of the free fall by the end of this year and we will begin to see who still has the contractors’ confidence. I am quite sure it won’t be the lowest price that keeps the customers. In the Spring of 2010 we will see major projects starting to break and seeing this, investors will again begin to spend their money. The rental market will be much stronger more appealing because equipment manufacturers do not have the capacity to build and sell equipment as quickly as they did before and buyers will not have as much confidence in purchasing as they once did. If the equipment companies can get it right this time, the rates should see a 10-15% increase within a year or so. By 2011 everyone will “forget” what happened and how it began and we will go back to business as usual. People will be just as greedy as they were before and likely just as careless as they were when this mess began. There are some very powerful exceptions to those people. I think we will see people like Bryan Rich, who is now with Acme Lift, lead the industry in a different direction with profitability and service running parallel to each other. There will be a lot of “out of the box” thinking and this will spawn new avenues that will no doubt face harsh criticism. Some companies will see their diversification pay off, but they will lose track of it once the market heats up again, and it will. Larger companies will again begin to gobble up the smaller ones to make up for the hundreds of branch closures in the past three years. Their will be an influx of people coming back to the industry from the “temp jobs” they took while the market was down. We all come back, no one really leaves the business. Obviously, not all of this will transpire in the next 24 months but the events in this time frame will lead to everything mentioned above. There will be roughly 10 percent who plan for the next down market which I am guessing will come around 2015 based on history. Those 10 percent are going to be the ones who have lost hard at least once or had the foresight to predict this one.

The only true unknown is who will learn their lesson and build from it and use this lesson to create a backup plan for our next down cycle.

For those of you wondering why my fascination with Bryan Rich, he is first and foremost an industry icon but that’s not the only reason. He is the perfect example of someone who lost big and came back and built something he truly believed in. That being the NationsRent bankruptcy. He went in after and built them into a profitable company and sold it to another with perfect timing. He did what it took and if everyone in this business did that, we wouldn’t have the extreme volatility we do now. His most recent position with Acme Lift will be interesting to watch. I have long believed that there is profitability in rerenting equipment if done correctly against some tremendous opposing views. I will be watching this one closely.