Party Rental companies

investor profile

December 18, 2018

by an investor from University of California, Berkeley - Haas School of Business in Moorestown, NJ 08057, USA

Anyone looked at rental companies, willing to talk about what to look at in these deals?  There is brief mention of a rental company in the HBS book but no details LOL.

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commentor profile
Reply by a professional
from University of Southern California in North Palm Beach, FL, USA
"A few tactics business sellers use to inflate market value: deplete inventory; defer asset maintenance and repair; neglect to upgrade assets, staffing or marketing below level of competition; classify owner compensation and perks as business profit; reduce labor cost with fewer or cheaper employees; discount the price (or offer special terms) of a product to a level that cannot be profitably sustained."


"Don’t believe “discretionary” cash flow can pay debt.
Don’t think “discretionary” cash flow is available to finance debt. Is owner’s salary discretionary? Is health insurance? Is depreciation? Absolutely not. Treating these as though they are discretionary expenses is a big mistake. Doing so means you earn less than the business would spend to compensate a manager. It could cause the business to become insolvent and lead to a fraudulent conveyance, which puts your personal assets at greater risk. Use the business’ net profit—after fair owner comp—to retire debt."

Much more on topic:
https://partneroncall.com/how-to-buy-the-right-business-the-right-way/
commentor profile
Reply by a searcher
from University of Pennsylvania in Chicago, IL, USA
I looked at one of these types of companies in the greater-Chicago metro area. One of many considerations that I would look at is marketing/lead generation - how does the customer find the company? Is there a referral base from event planners? If there are partnerships with event planning firms, then those firms could in effect be the “customer”. Evaluate the concentration or lack thereof. What I like about the business is that it is inherently recurring. Good luck with it!
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