What should I check before buying an equipment rental business?

An equipment rental business sells the use of machines it owns, so you are buying a fleet, a shop and a set of customer habits at the same time. Financial statements do not tell you whether the units are sound or whether the customers will stay. Plan to walk the yard, read the paperwork behind each machine and talk to the people who run the counter.

Go through the fleet unit by unit

Ask for a register that lists every unit with its age, hours or use, condition, and whether it is owned, financed or leased. Then see the units themselves. A machine that is fully depreciated on paper may still be earning, and a newer one may be tired from hard use. Ask which units are due for major repair or replacement soon, and have a qualified person inspect the larger machines.

Look at the shop and the logs

Rental equipment lives or dies on maintenance. Ask to see service and inspection logs, how returns are checked, and how repairs are tracked against each unit. Find out whether the shop is in-house or outsourced, and who the mechanics are. If one person holds all the knowledge of the fleet, plan for what happens if that person leaves.

Read the rental terms and the customer mix

Review the rental agreement, the damage waiver practice and how damage and late returns are handled. Ask who rents: contractors on repeat accounts behave differently from homeowners who rent once. Ask how the work rises and falls through the year and how the business copes with slow months. A due diligence review should also cover insurance and any open claims.

Find out who runs the counter

Counter staff, dispatchers and delivery drivers may hold the customer relationships. Ask who they are, how long they have been there and what they do each day. Ask the seller what a handover would look like, and how the seller expects customers to react to a change of owner.