That Is the Question
In the event staging industry, one question is often top-of-mind for owners: “Is it better to invest in equipment or cross-rent when the need arises?
In the past, staging companies cross-rented equipment to each other. We had a friendly, competitive relationship. However, as the industry has evolved, wholesalers have emerged. Because they are able to provide goods that staging companies might not have in their inventory, at a highly discounted rate, the dynamic has changed, and reduced rates have de-motivated staging companies to purchase gear.
As a result of the industry’s evolution, the philosophy of investing capital dollars annually to purchase products has changed, and two schools of thought have emerged: 1) buy and take a risk, but maintained the advantage of quality control and having your road cases on your show; 2) cross-rent and be safe, but lose some control of your end product. From my experience, there are definite pros and cons for each school of thought.
Cross-Renting – Pros and Cons
Cross-renting can have its benefits. You have no cost of acquisition. You’re charging it back to a job, so there is no “out-of-pocket” expense. No maintenance is required. The equipment doesn’t take up space in your warehouse. And, you don’t risk buying an “item of the week” that is soon replaced with a better product. All are important factors to consider.
However, there is a flip side. Cross-rentals from wholesalers require you to build in extra time to test the gear after picking it up to make sure it works. Training is also difficult when you cross-rent, because the gear isn’t in-house. Another challenge: Depending on demand, cross-rental vendors may not be able to supply you with the goods you want … when you want them … at prices you can afford to pay.
For example, staging companies generate a lot of proposals, and you don’t always know which ones are going to confirm. As you find out, you may realize you have shortages. In trying to fill them, the time comes to figure out whether to cross rent or make a purchase. A wholesaler may or may not be able to meet your gear needs during peak times. As a result, you lose flexibility in pricing the job because the gear isn’t available.
In addition, the rental equipment may not be maintained to your expectations or standards. Often times if there is a problem – whether the gear breaks or you aren’t familiar with how to operate it. It is very difficult to find the same level of 24/7 service and support in a wholesaler that you would find on your own staff when you own the equipment.
Buying – Pros and Cons
Buying equipment provides price flexibility and allows for value-added service to clients who are price conscious. Storing gear in-house also affords you the opportunity to properly train your technicians. In addition, buying enables you to uphold your quality-control standards to deliver the best show possible.
Conversely – though at LMG, we tend to see it as a double-edge sword – when you own equipment, you have to spend the necessary hours on maintenance. (Of course, when you do, you know the equipment is well maintained.) In addition, when you also make the commitment to buy your own gear, you need to realize that it will depreciate. Housing gear may also be a hindrance for some.
With every purchase, you need to evaluate the total cost of ownership (TCO). TCO includes the initial cost, interest cost (if you’re borrowing money), and maintenance. It is also important to consider the return on investment (ROI) for each purchase of new equipment. How many times do I need to rent this piece of gear to make a profit from my initial investment? Once you’ve weighed the pros and cons, reviewed the TCO and ROI, you can make an educated decision about what is best for you and your company.
Effect on Industry
The emergence of wholesalers isn’t a challenge only for owners; it’s a challenge for the industry as a whole. Wholesalers offer small companies the ability to compete with large companies. Small companies don’t have the gear that larger companies do, and wholesalers give them the ability to supply similar gear at competitive prices. Due to the competition that has resulted between rental companies, staging companies and wholesalers, prices are being reduced in the marketplace.
Manufacturers are feeling the pressure as well. Fewer companies are investing in gear because wholesalers have offered an alternative solution to committing to a purchase. Some companies have actually become so reliant on wholesalers that they cannot deliver a show without using one or two of them– a precarious position to be in.
Wrap-Up
Ultimately, the limiting factors are: 1) the financial ability of the company to purchase; 2) whether or not to commit to a purchase at the risk of a newer and better model release in the industry. The kicker for me is always the fact that if you cross-rent, you’re helping to pay off someone else’s investment.
Whether you buy or rent, at the end of the day it’s the people who make the shows happen. And, in order to achieve a quality end product, they need good equipment – regardless of where it was acquired.
