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Is the Tool Rental Business Profitable

Growing up in a carpenter’s family, I was always told that if you have the tools, you’ll have the trade. There is considerable truth to this. Whether you are outfitting a construction project or your own workshop, there are many tools that can help make your job easier. Finding the right tools for the job will make a huge difference on how productive and profitable your business will be.

It is a known fact that almost every business in the world has its ups and downs, despite experiencing continuous growth and development. Since, at times, businesses tend to experience eventual slowdown or stagnation, it is advisable that they consider a tool rental business as a viable and economically rewarding investment. That’s why you might currently be thinking about how to start an equipment rental business.

There are hundreds of equipment rental companies for sale. Every industry is facing the problem of underutilized tools and equipment. Equipment will be a headache and this is a common problem which arises problems when you need it in the relevant time. There are two types of rental business: -Rental equipment to residential customers only -Rental services to commercial customers as well

If you are thinking of buying or starting a tool rental business, the first question would be whether it is profitable. Many people assume that owning and operating a tool rental business has its perks. For example, there is no need to advertise your business, workers with special skills can often rent out their tools at a profit, and there is practically no limit to the kinds and numbers of tools you can keep in stock.

How much profit can a tool rental business make?

Profit will depend on your location and what tools you offer, but tool rental companies have been doing well recently, overall. Annual profits for a tool rental business can range between $35,000-50,000.

How can you make your business more profitable?

Some tool rental companies have looked into teaching how to classes for the public on the weekends. These seminars allow for novice users to understand how certain tool factor into projects and give the customers more confidence to attempt projects and, in turn, rent your tools.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Tool Rental Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

It’s very important to secure your domain name before someone else does.

The equipment rental industry is growing, and if you’re scouring for business opportunities, this might be your chance to get in on a lucrative one. After all, most rental business income in the United States is actually from tools and equipment rentals, accounting for about $2 billion in annual revenue. If you’re looking to turn those equipment rental trends into an entrepreneurial opportunity, here’s how to do it.

Talk to Your Potential Customers

Are you noticing an increase in construction in your area, or an unusually high number of renters getting into the business of flipping houses? If so, there’s probably a rising market in your area for equipment rentals. To fill that market, you first need to know what your potential customers are looking for. This helps you determine what kind of equipment customers want to rent, how much you’ll charge for it and how much business you can expect to drum up.

Get in touch with local home renovators, builders and construction companies. Ask them what kind of equipment they use most often, which brands they prefer, what their price ranges are and what types of projects they usually tackle. All in all, you want each company to answer these questions:

  • What kind of equipment do you look to rent?
  • What brands of equipment do you most trust?
  • How much are you willing to pay to rent equipment for your construction projects?
  • What other services do you wish a rental company would offer?

This will help you envision what your equipment rental company should look like to succeed in your area, and what your profit margins might be.

Stock Up on the Best Inventory Available

In the beginning, it’s all about quality, not quantity. Have the equipment that potential customers in your area definitely want to rent – not the stuff you think they just maybe might find themselves needing. Based on your conversations with those businesses, purchase your minimum viable inventory. You don’t want to go spending money on equipment that no one will ever end up renting, and it’s much easier to figure out what else you should purchase over time than it is to try and compensate for sunken costs from useless equipment.

Make sure when purchasing your inventory that you’re getting the best deals you can. If the local companies you talked to didn’t seem to care much about high-end brand names, don’t waste your money on that. Also consider purchasing used equipment, which can save you a ton of money.

According to census data from 2007, the average startup cost for equipment rental businesses was $75,000. However, this number can vary widely depending on where you’re located and what kind of equipment you plan to rent out. If you’re foregoing a heavy equipment venture to focus on smaller-scale tools, for example, it’ll cost you much less to stock your inventory and therefore bring down your startup costs significantly.

Set Your Budget

Purchasing your inventory will probably be your biggest upfront business expense, but consider the smaller stuff, as well, such as space for equipment storage and salaries for staff. You’ll also want to budget for insurance. People who aren’t your employees will be using your equipment, which could stick you with some ugly liabilities if the equipment is damaged or causes injury to someone while it’s out for rent. There are a few basic insurance policies you’ll want to set in place:

  • General liability to cover you and your staff if your equipment causes bodily injury or property damage while it’s being rented out. Most small businesses pay between $400 and $600 a year for a general liability policy.
  • Property insurance to cover any business-related space you own, the contents of that space and your rental items. Commercial property insurance policies average around $750 per year.
  • Commercial vehicle to cover bodily injury and property damage expenses for you or any of your employees who drive on the job. Rates for this policy depend on your and your employees’ driving records, but commercial vehicle insurance usually costs between $1,200 and $2,400 for cars and between $800 and $2,000 for trucks.
  • Workers’ compensation to cover your employees if they’re injured on the job – not all states require this one, though. Rates for these policies vary by state, from $0.75 per $100 in employee wages in Texas to $2.74 per $100 in employee wages in Alaska.

Speak to an insurance agent to determine what other types of coverage your business might need.

Once you have a general idea of the expenses you’re facing, it’s time to set a plan in motion to eventually turn a profit. Set prices for your equipment rentals that will help you go through with that plan.

Prepare Waivers for Customers to Sign

Equipment rental companies usually have their customers sign a few agreements to take out items for rent, including the following:

  • Indemnification agreement, which ensures the customer takes financial responsibility if your company is sued for liability while the equipment is in the customer’s possession.
  • Hold-harmless agreement, in which the customer agrees to hold your company harmless if the customer is responsible for injuries or property damage sustained by your equipment.
  • Conversion warning, which clarifies that if a customer doesn’t return the rental equipment as specified, your company can consider it theft and press charges.

Draw up these waivers before doing any business to protect your company against unwanted liabilities.

Get Your Name Out There

Create a web presence, including social media pages and a professional-looking website that includes all the information a potential customer needs to get in touch with you to get a quote or reserve a rental. Take out ads in the local paper, as well, and stay connected with those construction companies who answered your questions in the very beginning. They might end up being your first and even longest-term customers.

What’s the most profitable rental business?

Perhaps you already operate a business geared towards guests seeking out adventurous activities. Or maybe you have a passion for embarking on multi-day backpacking trips or skiing in the alpine.

If you’re just starting out with equipment rentals, try to stick with the kind of equipment you know. Doing so reduces the learning curve and simplifies the type of maintenance you’ll need to keep your fleet going.

To have a better sense of what to expect, here are some of the different factors to consider when thinking of starting an equipment rental business.


As a general rule, equipment that is suitable for all ages and abilities will be the most accessible. That’s not to say there isn’t a market for more specialized equipment.

When you think about equipment rentals, especially heading into different seasons, what comes to mind? The time of year will factor into the level of desire and market attention for your items.


Start looking at what local competitors are offering. From here, you can discover whether a market exists for the kind of equipment you’re considering renting to guests. Ask yourself:

  • What are your customers looking for?
  • Is the local market already saturated?
  • How can you create a better experience when compared to your competitors?
  • What is your competition offering and at what rate(s)?
  • Can you position your business as a way for guests to try a new sport without the initial purchase risk?
  • How far of a geographic area are you realistically able to target?


But before you start buying up all of last-seasons ATVs, kayaks and tents, you’ll want to do your research.

What kind of items are guests in your area chomping at the bit to rent? Gauge interest in your area by inputting a few different types of equipment rentals in Google Trends.

And if you’re curious to know more about the tourism search trend tools, you’ll be able to see what travelers are searching for in specific geographic areas.

Start by researching what the market will tolerate. As a result, you’ll develop a sense of the going market rate for different items. The rental rates you set will account for initial purchase cost, market tolerance and desired profit margin.

Fixed costs 

How much do you need to pay to store equipment year-round? Beyond your initial investment, look at the operating costs you’ll have from month to month.

Your fixed costs will account for the cost of buying your desired equipment, insurance and your salary, to name a few.

And if you’re planning to operate a storefront — monthly rental fees as well. In addition, you’ll need to look at replacement costs for items over time. You’ll also want to consider how you’ll keep track of your items and what type of approach you’ll take to sales and tracking of your rental gear.


Owning an equipment rental business is a big deal because you have the ability to go into any niche you want. You have the freedom to choose your own pricing structure, your availability hours and even the type of tools that you are going to rent out. This allows you the flexibility to really hone in on a market that you know or that you feel could be profitable for you. It provides not only flexibility but also a lot of possibilities for your business.

The tool rental business is a profitable, small business opportunity. Owning your own equipment rental company has multiple benefits. Equipment rental companies for sale can be found in different industries including home and construction, as well as many other business sectors.

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