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Author Topic: Install Rental Charge Formula?  (Read 1920 times)

John Chiara

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Install Rental Charge Formula?
« on: July 09, 2007, 03:36:40 pm »

I am getting out of the club business and will be renting my gear to the new management. Wondering how to calculate a fair rental price. 10+ shows a month. I will be supplying about $75K worth of gear..and will be responsible for repair/upkeep..etc. Again, this is an install with nothing ever moved.
Thanks,
John
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"mix is a verb, not a noun" Sooo, as Aunt Bea would say.."Get to it!!!"

John A. Chiara aka. Blind Johnny
Albany Audio Associates Inc.
Troy, NY
518-961-0069 - cell

Jeff Heart

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Re: Install Rental Charge Formula?
« Reply #1 on: August 19, 2007, 11:15:02 pm »

did you ever come up with a solution to this?  Long term rentals allow you more flexibility in changing the price structures.  Everyone I know calculates their Long Term Rentals (LTR's) differently.  We come across the same dilemma rather regularly with clubs we handle.  Generally, we compare pricing with various rental houses around the country (the Internet is a wonderful tool to get many prices quickly) about once every few months to see the trends in rental pricing.  Then, based on that we compare them to what we offer as a daily rate.  For us personally, if we can sign a contract for at least 6 months to a year, we will be as fair as we can with LTR pricing.  We usually take our daily for a specific piece of gear, them figure out the weekly rate based on the daily price.  Then we will take from 30 - 50% off  (eg : Turntable $50 a day / $350 weekly  / $175 weekly after LTR discount).  Now, for a turntable, $700 a month seems a bit crazy.  So based on how much is rented, after we total the individual rental prices & discounts, we will then apply a TOTAL discount on top of the grand total which is sometimes 30 - 50% more.
  In the end we just rationalize what seems fair and basically negotiate a deal.  LTR's are the only type of rentals where we do not follow any adhered to price structure.  If you can be renting the gear out regularly at daily rates, then the discounts should be minimized because you would be costing yourself money by having it tied up so cheaply in an LTR.
Perfect example is one club we handle :
LTR contains 2 seperate rentals.  One is the main rental which consists of :
4 JBLSRX712M's Tops
2 JBLSRX728's Subs
DRIVERACK 260
6 TRACKSPOT INTELLIGENT LIGHTS
1 INTELLABEAM CONTROLLER
1 CROWN ITECH 8000
1 CROWN ITECH 4000
ALL NEEDED CABLING INCLUDED
FREE MAINTENANCE "BUT" Blowouts are paid by renter unless it's obviously a wear and tear failure.  You spill something on it, or a dj overpowers all nite and blows a driver, then the client pays for it.
They get all this for a little more than $1500 a month.  If you break that all down, no matter how you price it out, you will see that all the prices at a weekly rate are well below normal.  But the year contract pays for itself.  If you are not getting your gear at dealer costs, then it would make sense to charge a bit more but in this instance, gear is purchased by us at dealer cost and it takes about the term of the rental to pay itself back and then, the gear is back in rental stock at the end of the LTR.  This is a rare case due to the fact that the owner is a good friend.  Typically, we would want a piece of gear to pay for itself in much less than a year of being in constant rotation and use/abuse.  As long as the system is setup right, and we set it up so that it does not take a beating throughout the year, we expect to have many more years out of the gear after the year rental is over.
 Other gear however that ALWAYS rents out week after week without fail and at regular daily rates, we compile into a separate contract.  For example, the dj booth equipment (we cater to raves and dj type events so our booth equipment is our most rented gear) is rented at a daily rate which is usually the same as the weekly rate.

2 Technics Turntables : $50 each / $100
1 DJ Mixer            : $50      / $50
1 JBL EON G2 Monitor  : $65      / $65

WEEKLY RENTAL TOTAL : $215  /  $860 a month

So you see the above large rental for $1500-$1600 approx.  and then we have this rental with only 4 pieces of small gear for a little more than half of the main rental.  together bringing the monthly total to about $2500.  $30,000 for the year. NOW the numbers make a bit more sense even though STILL under priced for what they are getting or at least comparing it to what the charge would be for the same type of rental from a corporate rental house or a hotel in house rental facility where prices can get up to $500 a day for one pro level wireless mic and $100 for an easel board!!!


Here is the problem area when discounting heavily due to long term rentals :  You have to word your contract carefully because when the client one day says, "i can't afford this and I want to remove some gear", you are now risking removing gear that will make the discounted rate far too low or even worth it to continue the rental.   If we know that a rental is already priced too low, we inform the client that removing gear affects the discount structure.  If you take away 3 items, then you no longer get the discount for the full 10 items.  Now you get a discount based on 7 items and this may be no cheaper than where we started.
 We also keep in mind that renting too cheaply causes headaches when something goes wrong.  Put a $3000 speaker on a rental for $100 a month (not the speaker in the above example) while packaged into a LTR with tons of other stuff and then it blows and costs as much as the full month rental to fix.  Your client may pay for it but it may take a long time to collect among other headaches.  We try to make sure that we are comfortable with the LTR pricing with the assumption that things will go wrong and cost us money in turn.  We weigh out the problems that could occur vs. the amount the rental will bring in over the full term and decide if it is worth the time to even offer the special pricing or if it should be full price.    On extremely expensive gear, we are more reluctant to even rent it out long term unless insurance from the client is taken out in our name among a few other precautions.

With all long discussion aside, the general consensus on LTR's from everyone I know of is to take a weekly rate and decide on a fair discount % for the monthly rate then, add the value of the gear and decide how much on top of that should be further discounted based on the length of the rental.  In other words, either come up with a very detailed pricing structure if you have the time or do it on a per job basis.  Our rental software has the formulas and generates the proper totals for us, but we find that it is too high for clients that are willing to rent indefinitely so we just work out a deal.  There is no one set discount for LTR's within our company.

I would love to hear other opinions on the formula used as I am sure some of the larger sound co's stick to the books.  Some software lets you set up pretty elaborate pricing structures.  We use Rent Control (princetoncyber.com) which has many templates for setting up pricing as well as a custom option that the software designers can program to your tastes.


hope this helps a bit,
jeff
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Jeff Heart
Wiggle Productions LLC
A/V, Lighting, Photo, Install, Rentals, Sales
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