1.0 Executive Summary
The purpose of this business plan is to secure $4.5 million for the development of a heavy equipment rental business based in Weakley County, Tennessee. Heavy Equipment Rental Service LLC (“the Company”) was founded with the intention of providing a wide range of equipment that is used during the course of agricultural and construction activities. The business will generate substantial contribution margins from the ongoing daily, weekly, and monthly rental of its equipment inventories.
Operations
The primary revenue center for the business will come from the ongoing rental of a wide assortment of equipment spanning all needs among agricultural and construction enterprises. Given that this is both an area that has a number of farms as well as new residential developments, there is a significant demand for access to state of the art equipment on a rented basis.
As a valued benefit for the Company’s, clients, the business will manage all aspects of the delivery and pick up of the equipment to and from job sites. This will provide the business with a significant differentiating factor.
The third section of the heavy equipment rental service business plan further discuss the operations of the business.
The Financing
As noted above, the Company is seeking $4.5 million capital for the development of this enterprise. Nearly all capital will go towards the acquisition of tangible equipment that is used during the course of agricultural and construction operations. The Founder will contribute $500,000 towards venture.
Moving forward, the Company could easily secure additional capital on an ongoing basis to finance the acquisition of additional heavy equipment components. This business plan assumes that the Company will use its retained earnings to finance its growth objectives.
The Future
The Company will continue to acquire additional equipment while concurrently expanding the scope of its marketing operations in order to attract agricultural and construction companies within a target market area. After the fifth year of operation, the Company may establish additional locations in Tennessee based on the economic viability of additional market entry.
Market Overview
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The funds required will be allocated as follows:
2.2 Management and Investor Equity
The Founder is the 100% owner of Heavy Equipment Rental Service.
2.3 Exit Strategies
In the event at the businesses to be sold, the Company will coordinate with a qualified business broker to find a suitable buyer. Given the significant demand for these types of enterprises, Management expects a sales premium of four times EBITDA. The sale of this heavy equipment rental business will not occur for at least ten years.
3.0 Operations
As noted, the executive summary, the Company will be actively involved in providing a wide range of equipment specific for the needs of both agricultural and construction enterprises. For agricultural businesses, the following equipment will be available:
• Combines
• Plows
• Seeders
• Tractors
For construction Enterprises types of equipment that can be offered are as follows.
• Bulldozes
• Cranes
• Digging Equipment
• Tractors
Generally speaking, the Company will produce $200 to $1,000 per day of rental income based on the size of the equipment. The Company will maintain its own in-house staff of mechanics so that all equipment is properly maintained after use.
4.0 Overview of the Organization
4.1 Registered Name
Heavy Equipment Rental Service LLC. The Company is registered as a limited liability company in the State of Tennessee.
4.2 Commencement of Operations
Full scale revenue generating operations will commence in the fourth quarter of this year.
4.3 Mission Statement
To provide cost-effective solutions for agricultural and construction enterprises that require heavy equipment on an ongoing basis.
4.4 Vision Statement
To operate is a widely respected heavy equipment rental service within Weakley County.
4.5 Organizational Objectives
• Properly source a wide range of equipment that is used by the Company’s target clients.
• Adhere to all regulatory frameworks regarding the rental and distribution of heavy equipment.
• Conduct extensive direct outreach with a wide range of agricultural, farming, contracting, and construction enterprises in the target market area.
• Properly onboard mechanics that will provide ongoing maintenance of the Company’s heavy equipment.
• Properly retained sales staff that will conduct ongoing relationship development with potential clients.
• Implement fiscal policies that ensure that the business is able to remain profitable even during a challenging economic climate.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section of the heavy equipment rental business plan will focus on the industry, the customer profile, the current economic climate, and the ongoing competition that the business will face.
At this time, the economic climate within the United States is moderate. This is primarily due to the fact that there have been significant changes in global trade policy. Ultimately, this is led to a higher than expected to inflation within the US economy. However, the Federal Reserve is taking appropriate measures to ensure economic stability.
These issues will only have a modest impact on the Company’s ability to generate revenue. The Company’s ability to operate and provide services for both agricultural enterprises, as well as contracting firms, will provide a substantial degree of economic stability for the Company.
5.2 Industry Analysis
As of this year, heavy equipment rental services produce $83 billion revenue. For companies that are engaged in farming and construction, it is far more economically advantageous to rent this type of equipment when needed rather than to make an outright purchase. As such, the industry will be able to thrive in the coming years, especially as the price of housing and agricultural goods continues to increase.
5.3 Customer Profile
The Company will work with a wide spectrum of farms and construction enterprises within the target market area. Generally, these enterprises will have revenues ranging from $1 million to $2.5 million per year and will spend $1,000 to $30,000 per engagement with the heavy equipment rental service.
5.4 Competitive Analysis
The Company will maintain a significant factor by operating with both farming and construction equipment. The business’ ability provide drop off and pick up for the equipment that is used will further create a significant value that will provide a competitive advantage for the business.
6.0 Key Strategic Issues
6.1 Sustainable Operations
The Company will have sustainable operations as a result of the following:
• Significant in ongoing demand in the target market area for access to heavy equipment.
• Limited competition among companies that operate in a dual capacity discussed this document.
• The business will have controllable operating costs, which will allow for ongoing reinvestment into new heavy equipment inventories.
• The Company can scale its operations to include other markets in Tennessee.
6.2 Basis of Growth
The Company will expand via the following methods:
• Continue to expansion the Company’s marketing campaign to the focus on direct outreach with construction enterprises.
• Expand the scope of the types of equipment that are offered by the business.
• Potential development of satellite locations in other economically viable markets.
• Potential acquisition of companies that operate in a similar capacity.
• Expansion of operations to include heavy equipment for other industries.
7.0 Marketing Plan
7.1 Marketing Objectives
• Leverage search engine optimization techniques for the Company website.
• Maintain a significant presence among organizations that focus on the farming and construction industries.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• First year revenue will reach $1.5 million.
• Gross profits will reach $1.3 million.
Year 2
• The business will expand its operations, and revenue will reach $1.6 million.
• Gross profits will reach $1.47 million.
Years 3-5
• By the fifth year of operation, total revenue will reach $2 million.
• Gross profits will reach $1.83 million.
7.4 Marketing Strategies
As this is not a consumer facing business, the ongoing marketing required by the business is relatively straightforward. As has been one of the themes throughout this document, extensive direct outreach will be the core focus of how the business acquires its clients. The Company is also sourcing a high visibility lot where all heavy equipment will be showcased. This will further increase visibility on an organic basis.
The Company will maintain an expansive online presence that showcases the wide range of heavy equipment that is available for rent. This platform will undergo significant search engine optimization on a regional basis in order to ensure that businesses are aware of the types of products that can be rented through the heavy equipment rental service.
The Company will also maintain a presence on LinkedIn in order to use targeted advertisements among entities that list their profession as a managerial level employee for a farming or construction related enterprise. This will further contribute to increase brand invisibility while also improving the results of the Company search engine optimization operations.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• The business will have a compounded annual growth rate of 8%.
• Management will acquire $4.5 million to establish operations.
• The Founder will contribute $500,000 towards the development of this heavy equipment rental service.
9.2 Financial Highlights
• The Company will maintain its mechanics in house which will lower operating costs.
• The business will achieve contribution margins of 95% on all rentals.
9.3 Sensitivity Analysis
In the event of an extremely severe economic recession, the revenues of the business may decline slightly. However, the Company’s dual approach, providing services for both agricultural enterprises as well as construction firms, will contribute to the economic stability of the business. The Company is operating at a high growth market area, which will further ensure that the business is able to remain profitable at all times.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
Appendix A – SWOT Analysis
Strengths
• Significant demand within the target market range for access to cost-effective heavy equipment and delivery solutions.
• The Company can easily add additional equipment as needed to its inventory.
• The Founder has extensive experience in the field of heavy equipment rental.
• Limited competition among companies that operate in both an agricultural and construction capacity.
Weaknesses
• Significant operational complexities given the scale of this business and its rental of heavy equipment.
• Moderately high cost related to equipment maintenance.
Opportunities
• Continued expansion of the heavy equipment inventories that are available for rent.
• Expansion into other markets.
• Acquisition of existing heavy equipment rental service services.
Threats
• An incredibly severe economic recession could impact operations.
Appendix B – Risk Analysis
Development Risk – Low
The primary development risk faced by the business is Management’s ability to source the capital discussed in this document. The types of equipment that we offered have already been sourced by the business.
Financing Risk – Low/Moderate
The $4.5 million of capital sought in this document we principally used for heavy equipment acquisitions. These risks are reduced by the highly predictable streams of revenue that will be produced from their ongoing rental.
Marketing Risk – Low
Management will use and expand on the marketing strategies discussed earlier to establish ongoing relationships with agricultural and construction enterprises. The use of online marketing strategies will temper these risks.
Management Risk – Low
The Founder is a highly experienced entrepreneur that has extensive experience operating similar enterprises. He will be able to quickly bring the operations of the business to profitability.
Valuation Risk – Low
The valuation risk is offset by:
• The Company’s tangible assets will consist primarily of divestible heavy equipment, machinery.
• The Company generate substantial contribution margins on daily, weekly, and monthly rentals.
Exit Risk – Low
There would be a significant demand for this type of enterprise, given the economic stability as well as the predictable nature of income. An event of this nature is not expected to occur for a significant period of time.