Rental Measurements to Live By - Time Utilization

by Betsy Chase

Last week we shared and discussed one of two different types of Rental Utilization KPIs, Financial Utilization.  This time we are going to discuss Time Utilization.  By the end of this article you will not only know how to calculate both Rental Utilization KPIs but also how to use them in conjunction to make better business decisions. These calculations are designed to help you determine the ROI on either individual units or an entire rental fleet so you can measure performance and make more informed business decisions.

Time Utilization

This method provides a measure of your fleet’s efficiency and is often used in conjunction with Financial Utilization. It can be calculated for any date range and should be tracked over time to help you monitor trends and compare fleet efficiency during different time periods. Time utilization is a great way to determine whether you have enough rental units in your fleet, or too many.

Time Utilization Formula:

Total Days on Rental

________________________________

Potential Number of Rental Days Available

Things to note about using Time Utilization rates:

  • The days available for rental will depend upon the date purchased. New units will have a lower time utilization rate than older units.
  • Your business management or rental management software should allow to see what your Time Utilization rate is and prevent holding on to equipment that is no longer making you money.
  • Using Time Utilization and Financial Utilization together provides powerful business insights.
The following chart helps you analyze Financial and Time Utilization rates together and act accordingly:

 

If Time Utilization Rate is:

And Financial Utilization Rate is :

Analysis:

Low

Low

Time to sell the unit.

Low

High

Rental rates are too high, or rate is seasonally skewed.

High

Low

Rental rates are too low.

High

High

Expand your rental business. You’re renting units at a great rate.

 

It’s important to use Dealer Management Software like ASPEN by Charter Software that features rental utilization reporting.  ASPEN’s Financial Utilization Reporting and Rental Profitability Reporting provides detailed insight into the utilization and profitability (excluding maintenance and repairs) of your rental fleet, allowing you to make important decisions regarding fleet expansion or transferring units out. You can also track rental revenue streams by a market segment, equipment type, and more. 

Filed under: Best Practice, Financial Management, Rental