Financial Incentives For Rental Fleet Readiness
Fall Rush is more profitable than Christmas for music retail stores with an instrument rental program. Having every instrument you own ready to be rented is critical to your financial success, so why do so many store owners miss the rental season with instruments still waiting to be repaired? Because most don’t pay their techs in a way that incentivizes this critical goal.
I remember my first repair job at a retail store in Wisconsin when the owner told me, “I’m your biggest customer so I’m going to get the best rate.” I was really young and uncertain of my value back then, but looking back, I wish I had helped him understand what was going through my mind.
I immediately understood that, if I wanted to get paid the most I could, I should not work on his instruments. Instead, I should work for all the other customers coming to my shop (like band and orchestra directors or private clients) because when I did, I earned more money. I wasn’t trying to be ungrateful for the job, I could just do math. There are only so many hours in a day and if one task earns me more money during those hours than another task, I’m going to focus on the more profitable task.
Years later when I owned my own store and had my own rentals to get out of my shop, I fully understood the value of those rentals being prepped and ready to go. I fully understood the potential rental value of each instrument and consequently knew exactly what my priories were every time I stepped into the shop: any rental return was my number one task that day because it was no longer earning any income and I needed it to be earning. Do your repair techs understand their role in this financial game they’re a part of? If not, you’ve got work to do.
Most techs are somewhat intelligent. You won’t have to talk slower, you can use big words, pictures and graphs will certainly help, but they need to understand their role in the financial game of your rental business. They need to understand your feeling of bliss when you walk into your storage room at the end of rental season and every shelf is empty. They need to understand the monthly and yearly value of each and every instrument. They need to understand your sales cycle, how many months of rental it takes to hit the break even point, what it costs to return then refurbish an instrument and how that hits your bottom line. The more your technicians understand your business, the more effective they will be for you.
They also need you to understand where they are coming from. They also have a family to feed by utilizing their rare skill set; and it is a rare skill set - do you know of a single shop with too many technicians… I don’t. What I do know is you can call 14 plumbers to come fix your toilet, 7 of them can be there in the next hour and they’ll all charge you $75 just to show up. Plumbing is not an overly rare trade and yet they charge handsomely for their service and get it every single time. When a store owner does not recognize this rarity, and instead disincentivize their staff to work for them by paying them less to work on their store stock, it’s no wonder why techs don’t stick around or, at the least, don’t have your rental fleet ready when you need it.
I’ve pointed out this disparity in pay incentive to several store owners over the years and the typical response is along the lines of, ‘Yeah, but I can’t afford to pay them more just for rentals…’ This type of response shows a lack of understanding in the owner who is at fault of not understanding their own business. They are guilty of not understanding the value of the rental versus the cost of repair. On average, a rental return costs a store about $82 before it’s ready to be rented again (reach out if you want the data to support this claim). On August 25th, what are you willing to pay to have the next 25 flutes ready to rent for tonights rental night versus buying new ones? The smart owner would gladly pay the $82 plus some to have it all ready.
Paying your technicians an amount equal to their earning potential for customer repairs is the first step in incentivizing the readiness of your rental fleet. The second step is ensuring your techs fully understand how they fit into the rental business model and how their works affects the bottom line of the company. The third step is making sure that a portion of what hits the bottom line also hits their wallet. As a tech, I’m happy that my work made you more money… but I’m happier when it earns us both more money.
When your road reps are yelling for 25 flutes on August 25th, and those flutes are sitting in your shop rather than in the hands of gleeful students, you’d be delighted to spend a few extra bucks to shift that inventory because you know where your income comes from. Rentals. So set up a bonus structure for your techs as a solid motivation to them to have every rental return prepped and ready to go by August 15th. It’s tempting to follow this carrot up with the stick - ‘have them done by August 15th or else the bonus goes away’ - but this will backfire on you every single time. Instead, structure your incentive to pay the highest bonus amount by August 15th, less by August 20, less by the 25th, and less come September 1. The bonus is still there motivating them to push through the last few weeks of August for you, but you’ve weighted the incentive to decrease your own stress.
There are several ways to structure this incentive, but I suggest doing so by the unit completed and not a percent of the whole fleet. It’s easier for everyone to conceptualize the unit rather than calculating the percentage; besides, as your rental inventory increases, a percent based incentive becomes less and you want to keep the motivation up. Create a plan that offers a bonus for every instrument that’s prepped and ready to go. One suggestion might be a $5.00 bonus for every unit completed by August 15. If you have 400 rentals, that’s a $2000 bonus for having every instrument completed and ready to go. This is only 20% of your 1st month’s rental income if you rent each instrument at $25/month. You’re next tier could be 90% of the $5.00 (or $4.5) for all instruments completed between August 16-20. 90% less ($4.05) for the 21st-25th, 90% less ($3.65) for the 26th-30th. You want a plan that creates incentive to have everything done early, but still keeps a carrot out front to keep their work coming.
Repair techs are very difficult to find, expensive to train and essential to your rental business. Take care of their financial needs and you’ll keep them around and have instruments to rent when it’s time to rent them. Ignore your tech’s financial needs and motivation and loose out on the earning potential of the fleet you’ve worked so hard to build up.
If you’d like to learn more about how to train your repair staff, or about sending your rental fleet off to have it completed, check out the training options from Repair Masterclass or contact me to discuss shipping your rental fleet in for servicing by the pallet full.