The worked example
A rental company owns 150 Chiavari chairs at $48 each, $7,200 in total. Each chair goes out 14 times a year at $6.50 a rental, so the chairs bring in $13,650. Washing and loading costs $0.60 a chair a rental ($1,260 a year), card fees at 3% take $410, 2% of the chairs break or go missing ($144 to replace) and storage is $1.10 a chair ($165).
| Line | Per year |
|---|---|
| Cash after handling, fees, losses and storage | $11,672 |
| Wear (cost over 8 years) | $900 |
| Profit after wear | $10,772 |
| Return on the money tied up | 162.1% |
| Payback | 0.6 years |
Each chair has to go out 1.4 times a year before it covers its wear, storage and losses. It goes out 14 times.
The item that looks as busy but is not as good
The dance floor panels cost $210 each and rent for $14, but they go out only 6 times a year and cost $8 a panel to store. They return 28.3% a year against 162.1% for the chairs and take 3.5 years to pay back.
To pay back in two years the panels would have to rent for $21.84, which is $7.84 more than $14.00. Folding chairs, by comparison, return 160.4% and pay back in 0.6 years at $1.50 a rental.
Run your own items: open the calculator.
Common questions
Which rental item should I buy next?
Rank every item by what a year of rentals returns on the money tied up in it: rentals times price, minus handling, card fees, losses and storage, divided by what the units cost. The item at the top returns the most on each dollar. This assumes the extra units rent as often as the ones you own, so check how often you are already sold out before you add stock.
How do I know if a rental item has paid for itself?
Divide what the units cost by the cash they bring in a year after handling, card fees, breakage and storage. That is the payback in years. Compare it with the useful life: an item that pays back in three years but wears out in three has returned nothing.
What should I charge to rent an item so it pays back in two years?
Work backwards: the yearly share of the purchase cost needed for the payback you want, plus storage and expected losses, spread over the rentals each unit gets, plus the handling cost of each rental, divided by one minus your card fee. The calculator shows that lowest price for every item.
How many times a year does a rental item have to go out to break even?
Add the item's yearly wear (cost divided by useful life), storage and expected losses per unit, then divide by what one rental earns after handling and card fees. Below that number of rentals per unit the item loses money even if it is always in use for a customer.