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When to say yes—and no—to new inventory

Management | December 1, 2016 | By:

The economy is improving, tented events are on the upswing, and customers are spending more on decor and accessories such as sidewalls, doors, liners and drapes. This is good news for tent rental companies, because these items can bring a very good return on investment, says Scott Sutherland, president of Olympic Tent, a tent manufacturer located in Tacoma, Wash., that offers a variety of these products.

“One of my rental customers recently told me the add-ons are where she makes most of her profits,” Sutherland says. “For example, she can sell one job for $20,000, while her competition is busy setting up 20 tents for the same amount of revenue.”

But this rise in activity comes with a few pros and cons, says Biff Gentsch, national sales manager for Anchor Industries Inc. Located in Evansville, Ind., the company manufactures tents, clearspan structures and other outdoor fabric products.

“The growth is good because it creates demand and helps differentiate rental companies by their ability to satisfy these needs,” he says. “But it’s bad when the client wants their event to be completely different each time the rental company performs work for them.”

In the hopes of winning or keeping a major client, tent rental companies may end up adding inventory they didn’t otherwise plan to acquire. And if a project requires creating custom products, it can be difficult for the company to recover the costs.

Gentsch acknowledges rental companies may not always have a choice when it comes to declining a request, especially for a long-time, valued customer that might otherwise wander off to a competitor. But even so, take a deep breath. Adopting a long-term strategy when you’re thinking about adding a new item to your inventory makes the most sense. What to consider?

Know your market, Sutherland says. “Can your client base afford the accessories you’re considering? Will the accessory give you the opportunity to break into new markets? If you can get a decent return on your investment and maintain good cash flow, then it’s a fairly easy decision.”

Also factor in the potential labor, maintenance and handling costs. This is especially important when it comes to hard sidewalls. Although Sutherland says there’s been growing interest in these products, particularly among high-end clients, rigid sidewalls do bring certain challenges that may prove prohibitive. For example, these items (as well as some door models) can come packaged in large, heavy crates that can be difficult to transport and store. They often require different handling and installation methods, necessitating the use of specialized tools. More time may be required for set-up and tear-down. And rental opportunities might be limited because some solid sidewalls are designed to work with just certain kinds or brands of tents.

“Don’t say yes to every request,” Gentsch advises. “Pay attention to trends. Listen to your customer. And make prudent buying decisions that can be supported by the rental opportunities.”

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