Buying an equipment rental company in Florida

Equipment rental companies rent machines and tools to contractors, industrial customers, event organizers and homeowners: lifts and scaffolding, excavators and skid steers, generators and pumps, compressors, light towers, trench boxes, forklifts, and specialty items like cranes or portable restrooms. Rentals run by the day, week or month. The money comes from rental fees, delivery and pickup charges, damage waivers (a fee covering accidental damage), fuel and cleaning charges, and sales of used equipment and supplies.

The fleet is the business. It's expensive, it wears out, and it earns money only when it's out on rent. Good operators track time utilization (how often each item is rented) and dollar utilization (how much it earns against its cost), and sell each piece at the right age to buy new. The big costs are depreciation, interest on equipment loans, and repairs.

In Florida, demand follows construction and hurricanes. Generators, pumps and drying equipment can all go out within days of a storm. A small company usually has counter staff, mechanics, delivery drivers and a yard.

• A fleet with a sensible mix of ages, and maintenance records for each unit.
• Utilization tracked item by item, with machines that rarely rent sold, not left in the yard.
• Contractors and industrial customers who rent often on credit accounts and pay on time.
• Skilled mechanics and a clean, organized shop that turns returns around quickly.
• Rental contracts that make customers responsible for damage, theft and misuse.
• A niche (lifts, pumps, trench safety, event equipment) where the company knows more than general rental yards.
• Equipment loans on reasonable terms that a buyer can refinance or take over.

Florida doesn't license equipment rental companies. The rules are mostly about taxes and trucks:

• Rentals generally carry Florida sales tax plus any county surtax. A machine rented with an operator is taxable if the customer directs the work, but can be a nontaxable service if your operator does the job without the customer's control (rule 12A-1.071). A delivery charge is taxable unless it's listed separately and the customer could avoid it by picking up the equipment (rule 12A-1.045). Have an accountant check how the company taxes damage waivers.
• The fleet goes on a yearly tangible personal property tax return to the county property appraiser, due April 1 (section 193.062).
• Trucks of 10,001 pounds or more that cross state lines need a USDOT number. Trucks used only in Florida need one, and must follow federal safety rules, if they weigh 26,001 pounds or more or carry hazardous materials that require placards (section 316.302).

Buying more than half of a business or its assets can make you liable for the seller's unpaid state taxes, up to the price or the value of what you bought, whichever is greater (section 213.758). A certificate of compliance from the Department of Revenue avoids this. Your attorney can handle it, including any holdback.

• A list of every unit: age, hours, condition, utilization and what's owed on it. Compare it with a count of what's in the yard and out on rent.
• A mechanic you hire to inspect the larger machines.
• Rental contracts and damage waiver terms, and the history of damage and theft.
• What contractors owe: how old the bills are and how much may never be paid.
• Insurance for the equipment, general liability and vehicles, including claims from injuries on rented machines.
• How much revenue came from storms, which are unpredictable. Judge the business on its ordinary years.
• The yard lease and zoning, and whether there's room to grow.
• Whether the rental software's records can be trusted.

• Which equipment earns the most for what it cost, and which mostly sits in the yard?
• How do you decide when to sell a machine?
• How much of your recent revenue came from hurricanes?
• How many customers rent from you every month?
• How much equipment have you had stolen or damaged, and what did you get back?
• Who keeps the fleet running, and will they stay?
• How is the fleet financed, and how much is still owed?