When was the last time you read a fable? Here’s a classic by Aesop called The Goose and the Golden Egg. You may even remember it from your childhood. (We promise there’s a connection to your rental business!)
There was once a countryman who possessed the most wonderful goose you can imagine, for every day when he visited the nest, the goose had laid a beautiful, glittering, golden egg.
The countryman took the eggs to market and soon began to get rich. But it was not long before he grew impatient with the goose because she gave him only a single golden egg a day.
Then, one day, after he had finished counting his money, the idea came to him that he could get all the golden eggs at once by killing the goose and cutting it open. But when the deed was done, not a single golden egg did he find, and his precious goose was dead.
Moral: Those who have plenty want more and so lose all they have.
Safeguarding the Goose
To reframe the fable about the goose and the golden egg into an equipment rental business context, let’s say that the egg represents revenue and profit. The goose represents the business that creates the revenue–your products and services, your processes, and so on.
It’s essential to protect and bolster the health of a business–”the goose”–in such a way that it stays healthy and thriving.
Self-Funding a Damage Waiver
At first glance, a self-funded damage waiver can look like a quick revenue generator. But, it’s important to remember that any income generated from the damage waiver is not pure profit. Revenue generated through the program doesn’t take into consideration all the associated expenses. The actual profit will be affected by any claim payouts as well as the use of employee resources to manage the claims process. The income also excludes long-range factors that will affect profit, like customer satisfaction and retention.
When customers are given the best products and services, they buy more, buy more often, stay longer, and ideally become champions for your company. Offering lower-quality products, e.g., a self-funded damage waiver with limited coverage, will result in higher customer dissatisfaction. This will lead to brand dissatisfaction that will inevitably affect your bottom line. Speaking of the bottom line, let’s talk about the egg.
Collecting the Eggs
We believe that a crucial “egg” for a rental dealership is our damage waiver program, Rental Equipment Protection (REP). We’ve analyzed the statistics. After grouping our highest-grossing and most established dealer partners into a pool, we discovered that each dealer’s average damage waiver (REP) utilization rate is 25% YoY. REP provides more coverage than most in-house damage waivers, making it far more attractive for customers to purchase.
Side note: Nearly every day, we hear from prospective clients that they use an in-house damage waiver with limited coverage. Because it covers so few perils, some rental coordinators (believe it or not) try to talk their customers out of purchasing it. This is not a path that leads to employee or customer satisfaction or revenue growth.
Ultimately, REP translates to more return customers and less money spent on self-funded damage waiver claims. Together, they build the foundation for consistent, increased revenue.
If your self-funded damage waiver has a utilization rate of 25% or less, it goes back to the age-old question, “Would you rather be a big fish in a small pond or a small fish in a big pond?” Would you rather keep 100% (less all your expenses, like claims) of the revenue of your self-funded damage waiver or keep most of the 25% YoY growth of protected REP revenue?
We have dealers that greatly exceed a 25% YoY REP revenue growth and some that don’t match that. However, this simple equation should be evaluated when making the self-funded vs. insurance-backed damage waiver decision.
Rental Equipment Protection (REP)
REP is a straightforward system. Unlike most insurance programs, there is no set annual premium associated with REP. Instead, our partners compile a monthly report of all the rental transactions to which REP was attached. We take a small portion of that REP revenue in exchange for absorbing all the risk, and our clients keep the bulk of the REP revenue as profit.
Focusing on the “easy wins” and quick revenue strategies can be tempting. REP operates like that once-daily golden egg. It might not always be the most immediately gratifying revenue-building method, but it’s foundational to long-term profitability.
Entrust your LDW management to JT Bates Group so you can focus on caring for other aspects of your “goose!”
Contact Us: Website | Email: info@jtbatesgroup.com | Phone: (877) 595-7850
