Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on April 13, 2022 Updated on November 28, 2023
$8,550 - $18,100
$62,000 - $156,000 p.a.
Time to build
1 – 3 months
$50,000 - $125,000 p.a.
If you’re looking to start a business from home and make good money, an equipment rental business may be just the ticket. It’s a large and growing industry, expected to rebound more than 60% from a huge dip in 2020. Equipment rental offers all kinds of opportunities – from party equipment to large tool rental and heavy construction equipment. You’ll need to make an investment to get started, but you should start seeing a return relatively quickly.
Before you start shopping for your items of choice, you’ll need to learn more about the business side of things. Luckily, this step-by-step guide details the entire process of developing and launching a successful equipment rental business.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Number of people employed – In 2021, the US tool and equipment rental business employed 27,798 people.
Trends and challenges
Trends in the equipment rental industry include:
More and more construction companies and builders are opting to rent large equipment rather than buy, which is good news for the equipment rental industry.
The new infrastructure bill, which is driving the construction industry, is also expected to increase the equipment rental industry.
DIY projects are trending, with homeowners attempting to do remodeling and repairs on their own, and these people tend to rent rather than buy tools and equipment.
Challenges in the equipment rental industry include:
Evolving technology makes it necessary for equipment rental companies to periodically upgrade their equipment.
New technologies are being used to track equipment, which is solving a consistent problem in the equipment rental business but is an added expense for rental companies to assume.
How much does it cost to start an equipment rental business?
Startup costs for an equipment rental business range from $8,500 to $18,000, although the costs vary widely depending on the type of equipment. These calculations assume that you will start out with large tools such as chainsaws, tile saws, drills, power washers, and so on. Costs also include the down payment on a truck or van to transport your equipment.
Be sure to have an equipment rental agreement in place that customers must sign, and it should include a liability waiver in case someone is injured by the equipment. Also, make sure that your equipment is properly insured.
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$100 - $300
Business cards and brochures
$200 - $300
$1,000 - $3,000
10 - 20 pieces of equipment
$5,000 - $10,000
Software to track equipment
$500 - $1,000
Down payment on a truck to transport equipment
$1,500 - $3,000
$8,550 - $18,100
How much can you earn from an equipment rental business?
Daily rental rates for most smaller tools average about $40. Your profit margin should be about 80%.
In your first year or two, you might have 10 pieces of equipment and rent six of them five days per week, bringing in more than $62,000 in annual revenue. This would mean $50,000 in profit, assuming that 80% margin. As your business gains traction, you could add 10 more pieces of equipment and rent 15 of them five days a week. With annual revenue of $156,000, you’d make a healthy profit of $125,000.
What barriers to entry are there?
There are a few barriers to entry for an equipment rental business. Your biggest challenges will be:
The startup costs to purchase equipment
The space to store your equipment
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting an equipment rental business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research equipment rental businesses in your area to examine their products, price points, and what rents best. You’re looking for a market gap to fill. For instance, maybe the local market is missing a business that rents wet tile saws, or party supplies and party equipment like bouncy houses and karaoke machines.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as construction equipment or larger tools for the do-it-yourself-er.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
You’ll just need to determine what equipment you want to rent. You should specialize in a certain type of equipment so that you can focus on a certain target market. You might want to call construction or remodeling companies to see what they are most likely to rent.
How much should you charge for equipment rental?
Prices will vary based on the type of equipment that you rent. Check local market prices to make sure you’re competitive. You should aim for a profit margin of about 80%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will either be construction-related companies or homeowners. You should spread out your marketing to include TikTok, Instagram, Facebook, and LinkedIn.
Where? Choose your business premises
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a storage space for your equipment. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “equipment rental” or “tool rental”, boosts SEO
Name should allow for expansion, for ex: “Premier Rental Solutions” over “Power Tools Rental Solutions”
Avoid location-based names that might hinder future expansion
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: Summarize your equipment rental business’s goal to provide a wide range of quality, well-maintained equipment for short-term or long-term rental to various industries.
Business Overview: Describe your business’s focus on renting out equipment such as construction machinery, event gear, or audio-visual technology to meet diverse client needs.
Product and Services: Detail the types of equipment available for rent, including categories like heavy machinery, landscaping tools, party supplies, or audio-visual equipment.
Market Analysis: Assess the demand for rental equipment, considering target markets like construction companies, event planners, or DIY homeowners.
Competitive Analysis: Compare your rental offerings to other equipment rental businesses, focusing on your strengths like equipment variety, maintenance quality, or flexible rental terms.
Sales and Marketing: Outline your strategy for attracting customers, including digital marketing, building relationships with industry professionals, or offering competitive pricing.
Management Team: Highlight the experience and qualifications of your team, especially in areas like equipment maintenance, customer service, and business management.
Operations Plan: Describe the process of equipment rental, from inventory management and maintenance to customer service and delivery logistics.
Financial Plan: Provide an overview of financial aspects, covering startup costs, pricing strategy, and expected revenue.
Appendix: Include supplementary documents such as equipment catalogs, maintenance records, or market research data to support your business plan.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to equipment rental.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your equipment rental business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC)– Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding an equipment rental business. You might also try crowdfunding if you have an innovative concept.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your equipment rental business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Starting an Equipment Rental Business can be a lucrative venture, and aside from the obvious steps like creating a website and networking, here are some practical and effective marketing strategies to help your business thrive:
Strategic Partnerships: Forge partnerships with construction companies, event planners, or other businesses that frequently require equipment, offering them exclusive deals or discounts for consistent rental agreements.
Social Media Campaigns: Leverage platforms like Instagram and LinkedIn to showcase your equipment in action, share success stories, and engage with your audience by running targeted ads to reach potential customers in your local area.
Referral Programs: Implement a referral program that rewards existing customers who refer new clients, encouraging word-of-mouth marketing and building a strong network of satisfied clients.
Local SEO Optimization: Optimize your online presence for local search by ensuring your business information is accurate and consistent across online directories, making it easier for potential customers in your area to find you.
Specialized Equipment Packages: Create bundled packages for specific industries or events, offering a convenient and cost-effective solution for customers who may need a variety of equipment for a particular project or occasion.
Community Involvement: Sponsor local events, join community groups, and participate in relevant industry associations to raise awareness about your business and build trust within your community.
Online Reviews and Testimonials: Encourage satisfied customers to leave positive reviews on online platforms like Google, Yelp, or industry-specific websites, boosting your credibility and influencing potential clients.
Seasonal Promotions: Introduce seasonal promotions or discounts during peak periods when demand for certain types of equipment is higher, attracting more customers during specific times of the year.
Educational Content: Create informative content, such as blog posts, videos, or webinars, that educates your audience on how to use different types of equipment safely and effectively, positioning your business as an industry authority.
Customer Loyalty Programs: Implement a loyalty program that rewards repeat customers with discounts, exclusive offers, or priority access to new equipment, fostering long-term relationships and customer retention.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your equipment rental business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your equipment rental business could be:
Rent top-of-the-line tools for your DIY projects
Why buy when you can rent everything you need for your party?
Heavy construction equipment at great rates
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an equipment rental business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in equipment rental for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in equipment rental. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an equipment rental business include:
Drivers – equipment drop-offs and pickups
General Manager – scheduling, inventory management, accounting
Marketing Lead – SEO strategies, social media
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Start Making Money!
An equipment rental business is a great opportunity to start a company that can grow. You can run your business from home and make an excellent living. Start with small stuff, work your way up to larger items and someday your business could rival United Rentals, the largest equipment rental company in the world!
Now that you understand the business of equipment rental, it’s time to head to the hardware store and start shopping so you can start your successful entrepreneurial journey.
Equipment Rental Business FAQs
Can an equipment rental business be profitable?
Yes, you can make good money from equipment rentals since your ongoing expenses will be low. The key is to purchase the equipment that people will be most likely to rent.
How should I price my equipment rentals?
Prices will vary based on the type of equipment you rent. Check local market prices to make sure that you’re competitive. You should aim for a profit margin of about 80%. Once you know your costs, you can use this Step By Stepprofit margin calculator to determine your mark-up and final price points.
How do I handle maintenance and repairs for the rented equipment?
It is important to establish a maintenance schedule and set procedures for handling repairs, including regular inspections and preventative maintenance, as well as prompt response to customer complaints or concerns.
Can I start an equipment rental business on the side?
Yes, it is possible to start an equipment rental business on the side, although it may require significant time and effort to manage both the business and your other commitments. It is important to carefully consider your available time, resources, and expertise, as well as the potential demand for your services and the competition in the market.
Are there any special considerations or regulations for renting out heavy machinery or specialized equipment?
Renting out heavy machinery or specialized equipment may be subject to additional regulations and safety requirements, depending on the type of equipment and the industry in which it is used. It is important to research and comply with all relevant regulations and safety standards, and to ensure that your staff and customers are trained and educated on safe operation and handling of the equipment.
How to increase customer retention for my equipment rental business?
To increase customer retention for your equipment rental business, you can focus on providing exceptional customer service, including prompt response to inquiries and complaints, flexible rental terms, and personalized attention to each customer’s needs. You can also offer loyalty programs or incentives for repeat business, and regularly communicate with customers to stay top of mind and offer new promotions or deals.
How to Start an Equipment Rental Business
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Business Name
Create a Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Licenses/Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Start Making Money!
Equipment Rental Business FAQs
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