Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How a Tool Rental Firm Scaled Past 30 Million by Fixing Inventory
Transcript
- Lucas: So I spent the morning digging into a company I'd never heard of — a regional tool rental outfit called BuildRight Rentals, based out of Columbus, Ohio. They hit thirty million dollars in revenue last year, which is impressive on its own, but what really caught my eye is how they got there. It wasn't a new market or a flashy acquisition. It was inventory. Luna: Inventory? That sounds almost boring, but I'm guessing the story is anything but. Lucas: Exactly. For years, they were stuck around twelve million. They had eleven locations, a decent customer base, but they kept hitting this wall. Their equipment was either sitting idle in a yard or being turned away because they didn't have the right tool at the right time. The owner, a guy named Mark Delaney, told me he was basically guessing. He'd buy a bunch of excavators because a competitor did, or hold onto older units because it felt safe. Luna: So he was making million-dollar decisions on gut feel. That's the classic trap. Lucas: And it was costing him. I saw their utilization numbers — some equipment was being used maybe thirty percent of the time. Meanwhile, they were losing jobs because they didn't have a particular model of scissor lift that customers were asking for. They'd rent from a competitor at a loss, just to keep the relationship. That's no way to scale. Luna: What changed? Did he hire a consultant or buy some fancy software? Lucas: He did both, actually. But the key was the shift in mindset. He started tracking utilization rates for every single asset — every skid steer, every generator, every hand tool. And they built a simple dashboard that showed, in real time, what was earning its keep and what was just taking up space. Luna: How long did it take before they saw real movement? Lucas: Within six months, they'd sold off about a third of their fleet — the stuff that was just sitting there. That freed up cash, and they used it to buy more of the high-demand items. Their utilization rate jumped from around 55 percent to 74 percent in the first year. And their revenue, in that same year, grew from fourteen million to nineteen million. Just from rebalancing what they already had. Luna: That's a massive swing. But I have to wonder — didn't customers get upset when they sold off equipment they were used to renting? Lucas: That was the risk, and Mark told me he held his breath on that. But what they found was that the stuff they sold was mostly the stuff customers only asked for once a year. The items they doubled down on were the ones that were booked solid for weeks in advance. So the customer experience actually improved, because they had the right gear available when it mattered. Luna: So it wasn't just cutting — it was smarter allocation. How did they figure out what to buy more of? Was it just based on past rental records? Lucas: Past records were the starting point, but they went further. They started tracking every missed rental — when someone called and they had to say no. They recorded the exact make and model, the duration, even the reason for the rental. After a few months, they had a clear picture of the demand they were leaving on the table. That became their shopping list. Luna: That's clever. Most companies track what they sell, but not what they fail to sell. That's a whole different dataset. Lucas: And it's a goldmine. For example, they discovered they were turning away jobs for compact track loaders almost every week during construction season. So they bought a few more, and those paid for themselves within a year. But they also found that they had way too many walk-behind concrete saws — those were rented maybe twice a month. So they sold half and kept the rest at just two locations. Luna: So they were really redistributing across locations too. That must have changed the logistics. Lucas: That was actually the next big piece. Before, each branch operated like a silo. If the north side location didn't have a tool, they'd just turn the customer away, even if the south side had three of them sitting idle. Mark implemented what he called a 'pooling system' — every location's inventory was visible to every other. They set up a daily transfer route between branches, using their own trucks that were already doing deliveries. Luna: That's a smart use of existing assets. Did that add a lot of complexity? Lucas: It did at first, but they kept it simple. They only transfer items that have been requested more than twice in a week from another branch. And they prioritized the top twenty moving items for the pooling system. Everything else stays put. Within a few months, the number of inter-branch transfers stabilized, and their fill rate — the percentage of rental requests they could fulfill — went from 78 percent to 93 percent. Luna: Fill rate is such a concrete metric. I bet that alone made a difference in customer retention. Lucas: It did. They surveyed their top two hundred customers, and the biggest complaint had always been 'you don't have what I need when I need it.' After the pooling system, that complaint dropped off the list almost entirely. And they started winning contracts they'd never even bid on, because general contractors specifically mentioned that BuildRight always had the gear. Luna: So this sounds like it was a pretty smooth ride. There must have been some friction along the way. Lucas: Oh, plenty. The biggest pushback came from the branch managers. Under the old system, each manager was essentially running their own little fiefdom. They were used to buying whatever they wanted, and they liked having a big yard full of equipment. When Mark started saying 'you can't buy that, but you'll get this from another branch,' a few of them fought it. One guy actually quit. Luna: That's a tough sell. How did he get the rest of them on board? Lucas: He tied their bonuses to the new metrics. Branch managers now get a bonus based on their utilization rate and their fill rate, not just revenue. So if a manager has a yard full of idle equipment, their bonus suffers. That changed the incentives pretty quickly. Within a quarter, the managers who had been the most vocal critics were the ones suggesting new transfer routes and asking for more data. Luna: Money talks. It's amazing how quickly people adapt when the financial incentive is aligned. Lucas: And it wasn't just the managers. The counter staff had to change how they handled requests. Before, if they didn't have something, they'd just say 'sorry, call the other place.' Now, they're trained to check the pooling system first, and they have a script for how to tell a customer 'we can have it here by tomorrow morning at no extra charge.' That's a totally different customer experience. Luna: That's a great example of fixing the front line. So what's the financial picture now? You said thirty million in revenue. What about profitability? Lucas: Mark was a bit cagey on exact margins, but he did say their EBITDA margin went from about 19 percent to 27 percent in two years. And that's mostly from lower depreciation costs — they're not buying equipment that just sits — and from less money tied up in inventory that isn't generating revenue. Their cash conversion cycle improved by a lot, too, because they're not carrying as much idle steel. Luna: That's the thing about inventory — it's often the biggest hidden drag on cash flow. And here they unlocked millions just by being smarter about what they owned. Lucas: Right. And this isn't just a tool rental story. Any business that holds physical assets — think catering companies with ovens and chafing dishes, or contractors with trucks and trailers — can apply the same principles. Start tracking utilization, start tracking missed demand, and rebalance accordingly. Luna: It's almost like applying portfolio theory to your equipment. Diversify the things that are in high demand and cut the dead weight. Lucas: Exactly. And I think the biggest takeaway from BuildRight is the shift from 'purchase what I think we need' to 'purchase what the data says we need' — and then being disciplined enough to follow through, even when it means selling stuff that feels like a safety net. Luna: And speaking of safety nets — you know, it's funny, but this whole conversation reminds me of something. We talk a lot on this show about the practical moves that help businesses grow, and for us, a big part of being able to keep doing that is the support from listeners who appreciate what we do. Lucas: Yeah, it's a good point. We keep the show free and ad-free, and that's only possible because some listeners choose to support us. If you've gotten value from episodes like this one — maybe a specific idea you've applied — and you want to help us keep going, you can do that at buy me a coffee dot com slash fexingo. Luna: It's a small thing, but it genuinely makes a difference in keeping the lights on here. No pressure, ever. Just an option for those who want to give back. Lucas: And we appreciate every bit of it. Now, back to BuildRight — because there's one more piece I want to get into. How did they handle the seasonal swings in demand? Because construction in Ohio doesn't exactly happen year-round. Luna: Right, that's a big challenge for rental businesses. I can imagine the winter is slow. Lucas: They used their data to smooth that out. They looked at three years of rental history and identified which items had counter-seasonal demand — like indoor tools, heaters, or even small demolition equipment. Then they shifted their purchasing to build up those categories for the winter months. They also started offering longer-term winter rentals for storage and pop-up businesses, which kept some of the big-ticket items moving. Luna: So they turned a slow season into a revenue opportunity. Did they see a big swing in winter revenue? Lucas: Their winter revenue, which used to be about 60 percent of their summer peak, is now up to 80 percent. And more importantly, their cash flow is steadier throughout the year, which means they can plan better and not have to stress about making loan payments in January. Luna: That's the kind of stability that lets you think long-term. I bet that's what ultimately got them to the mid-market level. Lucas: For sure. And what's next for BuildRight? Mark told me they're eyeing two new locations in neighboring states, and this time they're using the same data-driven approach to decide what to stock in each location, rather than just cloning the existing inventory. He's also experimenting with predictive maintenance — using sensor data on their most-used equipment to schedule maintenance before it breaks down, which should reduce downtime even further. Luna: That's a nice next step. It's like they've built a muscle for operational excellence that keeps paying off. Lucas: It really is. And I think that's the core lesson — you don't have to be in a sexy industry to scale. You just have to look at where your assets are underperforming and be willing to make the uncomfortable changes. BuildRight did that, and they went from twelve million to thirty million in four years. Luna: That's a solid outcome from what sounds like a pretty unglamorous fix. I love stories like this. Lucas: Me too. And I think it's a good reminder that sometimes the biggest wins are hiding in the most boring parts of your business. Okay, that's a wrap for today. We'll be back with another story of a business that found its edge.