Starting a party rental business is not a complicated process when employing the right strategies and utilizing effective technological solutions.
No matter what type of business you are trying to start, you should always start with a well-defined business plan. If you do not plan, you will get lost in the process.
Generally speaking, starting your party rental business without a plan will not be a smooth process, and you will face a series of challenges along the way.
To prevent some of those challenges and limitations, we have created an in-depth business plan creation process, which we will share below.
Note: This chapter is not a step-by-step guide; it provides you with the complete information needed to develop your business plan.
Components of a Party Rental Business Plan
1. Setting Up Your Business Location
Large Cities vs. Small Towns
We recommend you start your party rental business plan by determining the areas you want to serve. It is ideal to set up our party rental business in areas with larger populations is perfect. The higher the people, the higher your chances of getting clients.
However, it does not mean we should avoid small towns. Because small towns usually lack the party rental business. As a result, those areas may have greater demand for your rental equipment.
Throughout our experience, we noticed that most rental businesses face difficulties in the party rental business because of their inconvenient location.
If you are trying to rent a large warehouse or rent your party equipment right from your home, you need to establish your business location closer to your service area.
For example, some businesses open their warehouses too far from their target areas. As a result, they spend high transportation costs and valuable time delivering their party equipment.
Equipment Storage
Before you start procuring valuable equipment and supplies, you must have a proper place to store them. Keeping them in unprotected areas or the open air will be prone to damage from weathering or possible theft.
Also, it would help if you made sure that the storage area had enough room to store all of your equipment. Stacking everything on top of each other will not be convenient nor secure.
For example, packing everything in a tight room may lead to equipment damage, inconveniences in finding what you need, and extra effort and time in putting things back.
Surveillance Cameras
Additionally, your storage area has to be secured with surveillance cameras so you can view the activities taking place in your area and have peace of mind at all times.
We strongly recommend installing remote surveillance cameras, and they can be monitored using a smartphone or PC from any location. That method adds an extra layer of security to your party rental business, plus you will be monitoring the activities of your business while you are away from your office.
2. Setting a Price for Your Rental Equipment
Before starting your business, you should create several packages depending on the size of the parties you want to serve.
For instance, you may create a package for household parties such as birthdays and family reunions and assign affordable pricing for each. Then, you may make more extensive packages for commercial promotions, community events, and weddings.
Generally speaking, creating your rental packages will help you organize your business and make the selection process more convenient for your customers.
Pricing for your packages should be relevant to the value of the equipment. Higher-quality equipment with a high price tag should not be priced at the same rate as cheaper, low-quality equipment.
Here are the steps to consider when pricing your equipment:
Using a Simple “Cost Plus Margin” Formula
The formula works in the following pattern: First, you need to write down the original cost of procurement. Then, you need to add the cost of ownership, which includes things like depreciation, maintenance, storage, and other miscellaneous expenses you may accumulate while owning the equipment.
For example, let’s say you purchased a large tent for $1000 and spent $100 on its transportation.
There is a depreciation of 2% per usage after spending $50/ month on its storage and maintenance, which equates to another $20.
Since we have come up with a cost, you need to determine the margin of profit you are attempting to get.
For example, if you rent it 50 times per year, your total annual depreciation cost for a single tent will be $2,700 (1000+100+50 (x12) + plus 50 x $20 for maintenance).
In the United States, a large tent that covers more than 20 people costs between $350 and $500 (or $.75 and $1.50 per sq. ft.) per day.
That means that even if you rent your tent for $350, an annual total of 50 rentals will net you $17,500 (50 x 350). Now you need to subtract the $2,700 yearly depreciation cost of the tent from the generated $17,500 revenue, which equates to a $14,800 profit.
Note that depreciation is the sum of depreciation fees exceeding a tent’s original cost.
For example, after charging $20 for 50 times, the value of the tent gets nullified. After that, you decide to keep renting it or replace it with a newer tent version.
We strongly advise you to replace worn-out party equipment regularly because old, rugged items are neither attractive nor safe for parties.
Research Your Competitors’ Prices
Pricing your costs using the provided formula is not enough to make your party rental business profitable. You will also need to beat your competitors’ prices to increase the volume of rentals.
First, you have to find and list all party rental businesses in your area.
The simple way to do it is to google phrases such as
“party rental business near me” or “party rental businesses in [area]” in the search engine.
Then, visit their websites to learn their pricing options for each item so that you can price yours a little lower than those.
The Advantages of Competitive Pricing:
Every beginner should focus more on building a reputation than making money. Have you heard about the first impression theory? First impressions last a lifetime. So, start with an outstanding performance to leave an exceptional appearance in your community. Unstable beginnings usually lead to quick failures.
Conducting Surveys and Making Your Prices Suitable for Your Audience
Pricing is the first thing your clients will notice. That means you need to know your target population and study their financial conditions so you can make your prices affordable for them.
For example, offering high-end equipment or luxurious furnishings to middle-income communities may not be ideal. So, consider the average household income in your community to come up with attractive pricing.
Suppose you are unsure how to check the average income of your target population. In that case, you can use government websites such as data, or you may search for the following keyword on Google: “Median Household Income in (name of your city, county, or district).”
Additionally, you can learn what your community wants in pricing by distributing surveys. Learning about your community’s needs does not only help you to come up with reasonable pricing but also enables you to determine what type of equipment will generate greater profits in that specific area. Generally speaking, the method will help you prevent procuring equipment that will perform poorly in your area.
Creating surveys may be challenging without appropriate software. However, now you can use Reservety’s Party Rental Software to create customizable surveys and distribute them to large numbers of potential customers with bulk email or SMS campaigns.
Read this post to read completely to find out more on how to calculate equipment pricing
3. Promotions and Marketing
Identifying Your Target Market
Knowing your target audience is another essential part of developing a business plan and developing effective marketing strategies. Most party rental businesses target companies, the general public, or organizations depending on their capacity.
For example, companies usually organize promotional activities, holiday celebrations, and other events that may need your business. The general public needs your rental equipment to celebrate birthdays, holidays, and special events such as weddings and homecoming parties. Organizations use party rentals to organize advocacy events, promotional activities, or public awareness programs.
Even public schools may need to rent your party equipment to mark special occasions or organize sporting events.
You need to know your target audience before procuring appropriate equipment and supplies and developing promotions and marketing strategies. It is okay to target all of these three groups as long as you have enough funds to purchase equipment to meet the three groups’ demands.
In one of our previous articles, we mentioned that serving the bigger parties with a limited number of or poor-quality equipment will ruin your reputation and hinder your progress as the quality of your rental equipment will not meet the customer’s expectations.
The Primary Ways to Reach Out to Potential Customers
Currently, we are living in a technological era where 4.66 billion people have access to the internet. Therefore, you can utilize internet marketing and promotions to grab your customers’ attention.
Here is how you can do it:
Being Active on Social Media
Social media is effective in showcasing your party rental business to millions of people. Globally, internet users spend 145 minutes per day on social media platforms, and this figure is steadily rising year after year. That indicates that you need to be active on social media by posting fun and engaging content.
For example, sharing beautiful moments from somebody’s wedding or videos from festive parties may attract viewers to your social media pages and may gain you an army of loyal fans through the process.
Special Discounts for New Customers
Promotions are a common marketing strategy to attract customers to a new business. Plus, you may create a loyalty program to gather a group of returning customers.
We noticed that some party rental businesses offer free rentals to their community in the first few days following their grand opening. The promotion may sound like a loss of money and time. But when you consider its long-term impact, the strategy is worth the effort.
For example, when Mr. Luke offered free rentals to organize a Christmas celebration in a local children’s hospital, the community reacted well and got to know the new business in their community. Simple and good promotions like these build long-term impressions and foundations for the future of the party rental business.
Establishing Partnerships and Affiliations
Most successful businesses establish partnerships with other successful companies. For example, since you are new to the party rental business, you may not have a customer base in the beginning. However, you can establish a partnership with successful event organizers and offer these companies special discounts or monetary incentives to use your rental services in their operations.
For instance, let’s say Joan owns an event organizing business, and she won a contract to hold a special event in a local park. If Joan does not have her equipment, she may rent the equipment from you under the conditions of your partnership. You will give Joan 5% of her total income as an appreciation for her referral. This type of partnership creates a win-win situation for both sides.
Generally, referral programs work in two ways: firstly, they increase the number of returning customers; secondly, they increase word-of-mouth advertising in the community.
Organizing Charity and Awareness Events
The best way to make your party rental business known is to show it in action
. By organizing charity events in your community, you are increasing your business visibility and gaining a good first impression in the eyes of your community.
4. Ensuring Adequate Funds
To start a successful party rental business, you need to plan your finances ahead of time. There are two popular methods used in business planning.
In the first method, you can develop a workable plan and start looking for various sources to fund those plans. In the second method, you can create a business plan based on your available funds. These are both methods employed around the world.
If you decide to take the first route, you can start looking for loans from banks, financial agencies, and alternative lenders. Your local banks will be more reliable and transparent than third-party lenders as far as transparency is concerned. However, most startups cannot take loans from local banks as they require records of a minimum of three years of business.
How to Get Funding for Party Rental Business:
Private Sponsors or Investors
They can be angel investors, wealthy individuals willing to provide funding for startups in exchange for an ownership stake in the company.
Venture capitalists can also provide funding in exchange for an equity stake, but you have to demonstrate the potential for significant revenue to convince them.
Personal Investors
They can be one of your family members, friends, wealthy acquaintances, or a mixture of all. We recommend signing a contractual agreement when dealing with an investor. So you won’t face disagreements once the business takes off.
Peer to Peer Lenders
They can be either individuals or companies. Did you know that peer-to-peer lenders can approve your funding requests faster but with a higher interest rate? So, it would help if you were extra careful when dealing with lenders. Reading their contracts, discussing conditions, or even trying smaller loans at first may save you from unexpected costs and issues.
Banks
We already mentioned that some banks are not willing to give loans unless your party rental business has shown some positive performance in the past. Nevertheless, some private banks may negotiate a deal under certain conditions if you convince them with a great business plan.
Also, some banks may give out loans if you put your valuables, such as your home or property, as collateral. It obviously should be the last resort because of the risk of losing the house.
Small and Medium-sized Enterprises (SMEs) Funding from the Government
Some countries have adopted policies to ensure that small and medium-sized businesses have an opportunity to grow and compete with large and wealthy corporations. Depending on your country, you may qualify for government funds for SMEs. You can find out about it by either going to the local commerce chamber of your government or doing a quick internet search on Google.
For more information about securing sufficient funds for your party rental business, you may visit Chapter 2.
5. Procurement Planning
Procurement planning should be an integral part of your business plan.
First and foremost, to obtain equipment, you must locate reputable wholesalers or vendors who can provide the equipment at a reasonable price.
We have already shared a list of vendors to purchase party rental equipment.
You need to consider three things when you select a vendor to procure party rental equipment.
Quality of Products
You have to make sure that quality passes the regulatory standards so you can avoid crippling lawsuits in the event of accidents. Plus, quality products last longer and they come with a manufacturer’s warranty.
Affordable Pricing
There are hundreds of vendors that offer party rental equipment at wholesale prices. You can take your time and visit each one of them to compare their pricing. However, you also need to factor in the transportation costs and shipping time. For example, ordering equipment directly from a manufacturer from a foreign country when the same equipment is available in your area for a slightly higher price may not be a smart idea. Because when you add transportation costs and wait time, you may break even.
Line of Credit
Some vendors work with party rental companies. Let’s say you bought 10 tables and chairs from a vendor, but do not have enough cash to procure a dance floor. In that case, reliable vendors can give you a line of credit to purchase the equipment at that moment with the option of paying later.
Additionally, you need to determine how much equipment you need for your party, which will directly depend upon your target population.
In other words, with only $25,000, you may not be able to cover mega parties or events. Here is a convenient calculator to determine how much tent or space you need to accommodate a certain number of people.
6. Safety and Insurance
Your business plan must include safety and security procedures before operating as a business.
Safety refers to the safety of your staff and customers, while security refers to keeping and maintaining your party rental assets in good condition.
Let’s talk about safety first. You need to make sure that your party equipment is safe for the public.
For example:
In the United States, the Consumer Product Safety Commission found that inflatables alone caused more than 113,272 injuries in the ten years that required emergency treatments.
So, we suggest you develop strategies to mitigate similar risks while developing a business plan.
In the planning phase, you must consider the following components to ensure the safety of people who come into direct contact with your business: Here is how you can get your party rental business insured.
– Always buy safe and quality equipment and supplies.
– Do regular check-ups and maintenance on equipment to avoid potential flaws and risks.
– Create safety and user-agreement forms for customers to sign so you can take some of the responsibility off of your shoulders.
– Provide user manuals for clients so they could handle the rental equipment properly. This tactic will protect your clients from injuries and your equipment from damage.
Proper insurance is also essential to protect your valuable party rental equipment.
When you purchase a business owner’s policy (BOP), it covers everything from damaged equipment to employee or customer injuries. However, BOP will not cover health and disability insurance, worker’s compensation, professional liability, or auto insurance. Therefore, you need to purchase additional policies to cover those things.
As far as pricing is concerned, the following are the average prices that small businesses in the United States pay for various insurance policies.
General Liability: $50 per month or $600 per year
Business Owner’s Policy (BOP): $99 per month or $1,191 per year
Commercial Property Insurance: $63 per month or $755 per year
Business Interruptions Insurance: between $40 and $130 per month
Commercial Auto Insurance: $142 per month
Worker’s Compensation Insurance: $47 per month
Please note: We obtain these insurance rates from Insureon.com, and the rates may vary depending on the region or country.
Chapter 5 of the series will discuss the various types of insurance in detail and teach you how to select a reliable insurance company.
7. Preparing a Business Model
We recommend operating your party rental business under a solid framework or business model. Your business plan should outline the key processes and tactics you may use throughout your business.
There are four primary types of business models: Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Business (C2B), and Consumer-to-Consumer (C2C) business models.
Most party rental businesses utilize hybrid business models, including B2B and B2C models. More specifically, you will be offering your party rentals directly to consumers and businesses.
Tactics for Your Business Model:
Research Your Competitors
Some people make mistakes by targeting smaller towns. Because they fear that bigger towns or cities already have several party rental businesses, and it will be tough to compete against already established companies. However, that is the wrong mindset.
First, you should find your competitors and start studying them in detail. To find them, google the keywords such as “Party Rental Businesses in [name of your location].” Once you list them all, you can continue with the following:
Find Weakness of Your Competitor
Please make a list of the party rental companies in your area and read their reviews to study their weaknesses and use the results as leverage to win new customers. For example, if George’s Party Rentals offers outdated inflatables and unattractive decorative items, you should employ your creativity and procure more innovative and creative party rental equipment.
You can take our word for it. Suppose your business offers attractive designs, safe equipment, and creative supplies at an affordable price. In that case, you will easily divert the attention of potential customers to your business by utilizing effective marketing strategies.
Conducting a Cost-Benefit Analysis
The numbers speak for themselves. If your party rental business does not seem to be profitable in the numbers, then it is more likely to be unprofitable in real life. Thus, do a thorough cost-and-benefit analysis in the business plan.
Calculating your costs and subtracting them from your potential revenue will allow you to determine your potentials more accurately. We do not want to price our equipment too low, as it may lead to too much usage without any profits. We also do not want to price our rental equipment too high; it may scare off potential customers.
Incorporating Technology In Your Business Model
It is essential to select party rental software in your business plan. The software will help you get going and achieve optimal growth in a short period by streamlining or automating time-consuming manual processes.
Did you know that online booking systems increase sales by about 37%? Plus, having reliable software solutions will help you manage your inventory more efficiently and track the movement of your party rental equipment.
When you select rental software for your party rental business, make sure that the software solution enhances the following qualities:
Increase User Experience
Reliable party rental software should allow your customers to reserve spots or book party rental equipment in the comfort of their home by paying with popular payment options such as Visa, MasterCard, PayPal, Stripe, Square, Authorize.net, and others.
Boost your Online Presence
We strongly advise focusing on online activities used by 4.66 billion people or 59.5 percent of the world’s population. That means you need to set up your business website and establish reliable online communication channels to serve online traffic needs.
For example, Reservety’s Party Rental Software helps you create professional websites. Even if you already have an existing domain, you can easily connect it to your new website.
Additionally, the software provides a built-in communication system, through which you may send emails to potential buyers, notify customers of due payments, view customer history, and send out surveys and feedback to customers
Stay Productive
Before starting your business, it is essential to know how to organize your equipment and keep track of them.
A handy way is to do is to employ a rental software like Reservety in your technical firepower
We recommend using a system to keep track of your inventory stocks and booking in real-time.
It is where Reservety can be your Powerball! At the end of the day, you want all-around productivity and time saving so make sure you take it as a critical and priority aspect for the success of your rental business.
Assistance with Marketing
Good marketing is a gateway to business success. Therefore, the right software should have the tools to create coupons, promotions, and discounts. It should also help develop marketing programs with precise reporting tools, website popups with special offers, social media integration, and upselling and cross-selling abilities.
This is all we have in planing the party rental business.
Go Read Our Part2 of the Series of How to Start a Party Rental Business.
