Why would two women in their early 20s choose the equipment rental industry to be the area of focus for their entrepreneurial drive and career aspirations?
That’s just one question Jennifer Lombard and her sister, Elizabeth Faruzzi, asked themselves when forming their company Lizzy Lift.
“We grew up in a family heavily immersed in the equipment industry,” Lombard and Faruzzi say. “Our father worked for the company his father established - National Lift Truck. We remember spending countless hours at our father’s office waiting for him for whatever family time we were trying sneak in while he kept telling us, ‘Just a little bit longer girls.’”
The sisters’ father, they say, had a passion for not only equipment but also growing a business. Both women were exposed to “pretty much anything with an engine” from the time they were born to their father’s passion, drive and enjoyment in building and watching a business entity grow.
“It was contagious,” the women tell ALH. “We both spent many years learning through our father and others at National Lift Truck about the many aspects of the material handling industry. Although we potentially had an opportunity at our family’s company to continue to grow and be successful, we wanted to build something on our own.”
The sisters aimed to see their own dreams advance from fruition and to understand the processes by which said dreams became realities. They wanted to take the risks, put in the hours, make mistakes, listen, and, above all, learn how to flourish and establish their own brand and business. They wanted to transform challenges into positives.
In 1998, Lombard and Faruzzi asked themselves that burning question: Why step foot into the equipment rental industry?
“We were in our early 20s and our financial resources were minimal,” the two tell ALH. “Purchasing even a small fleet of equipment would not have been possible. The catalyst that gave us the means to make this a reality was when Jennifer (while working in sales at National) found there was an increasing demand from her customers to secure rental equipment outside of the local area for a fair rate.
“At the time, this was a service that most traditional rental companies were not comfortable doing. It was an opportunity for us though; We would be able to provide the equipment needed on any given jobsite by means of re-renting the equipment from other rental houses. This would allow us to start building not a customer base but also relationships with other rental houses without having the capital needed to invest immediately in a fleet or the other various costs associated with equipment ownership. We could purchase equipment and expand as we were financially able to do so.”
Today, Lizzy Lift employs 17 people from its office in Elmhurst, IL. The company doesn’t house any equipment at its Elmhurst home, it is solely office space for staff. All equipment that isn’t being utilized is stored in a warehouse in Chicago.
“In our 19 years in business, we have developed many strong and symbiotic relationships with both other rental houses as well as others with equipment knowledge or experience that allow for us to store our equipment as needed at their facilities across the country,” the sisters say. “We ship our equipment where it is needed so our locations are always in flux. Right now, we have some equipment being held for us in Georgia, Arkansas, California, New Jersey, New York, Missouri, North Carolina, Texas, Nevada and Tennessee.”
Faruzzi and Lombard say that being a smaller company in the industry means outsourcing makes sense in terms of manpower, not only to keep the company’s overhead costs as low as they can but also to be able to have access to a higher level of talent.
“It would not make sense for us to pay the full-time salary that would be required by higher-end personnel,” the sisters say. “By outsourcing, we are able to utilize more skilled, experienced and educated individuals, without having to pay the costs associated with having an employee and utilizing them only as needed.”
Access, Lift & Handlers (ALH) spoke with Faruzzi and Lombard about the company’s growth outlook, revenues, capital expenditure and more. Here’s what the women had to say.
Elizabeth Faruzzi, left, and Jennifer Lombard, right, have been the brains and brawn of Lizzy Lift for 19 years.
ALH: Where are you seeing growth for your company? Is there a certain sector or application you’re renting out to more than another?
Faruzzi and Lombard: We are seeing growth in various sectors as well as applications. Private and public opportunities have really seemed to start to take off for us with the start of the second quarter this year. In the private sector, we are seeing an increase of work in distribution centers, new construction, installs and retoolings, as well as quite a bit of shut down work.
In the public sector, we are seeing an increase in revenue via infrastructure spending, specifically in the areas of pipeline projects and road projects. This is an area we have been working to expand further into.
“Rental rates have been fairly stable across all the boards in comparison with 2016. We do not expect to see much change in this over the next 12 months assuming there are not any unforeseen incidents or changes that would dramatically affect the supply and/or availability of equipment,” Faruzzi and Lombard say.
In the public sector, we are seeing infrastructure growth in the areas of pipeline projects and road projects. By obtaining more certifications as a DBE/MBE/WBE, we will be able to meet more of our customer’s needs on jobs that have requirements regarding minority/disadvantaged business participation goals. Our certifications include: DBE - Illinois, New York and Minnesota; WBE - City of Chicago, The New York/New Jersey Port Authority; and the WBENC, WOSB – SBA and an FBE - Illinois CMS Services. We are currently in the application process to expand this further as we feel this is an area where there is not only a need but also an opportunity for growth for company.
What products are doing best for the company and why?
In our own fleet, from both a profit margin and volume standpoint, comparing aerial equipment with telehandlers, aerial equipment is much stronger. This includes both boom lifts and scissors. When we don’t have the equipment needed to meet our customers’ needs in our own fleet, we utilize other rental companies’ equipment. Looking at our income generated via outsourced equipment, electric scissor lifts dominate, followed by aerial booms both electric and rough terrain. The majority of our clientele work predominantly in the industrial market and require units that are either electric or propane. Small scissor lifts and smaller aerial equipment are in very high demand for us. Most of our customers work inside of facilities so they need electric and propane scissors lifts and smaller aerial equipment.
How many aerials are currently in your fleet? How many telehandlers?
Lizzy Lift has always had its own fleet of equipment but we have shifted our focus for growth to put more emphasis on the growth of our fleet. We have been concentrating our aerial fleet purchases primarily on both scissors and aerial booms that are 40 feet and above. We have been rebuilding our telehandler fleet and have sold off some of our older units and have been replacing them with larger telehandlers.
What was your aerial and telehandler CapEx for last year? What was it for this year? What do you expect it to be for next year – will this be an increase, decrease or similar figure to this year?
In 2016, we spent just under $1 million in new equipment purchases. This year we have budgeted to invest an additional $2 million. We anticipate that 50 percent of our Capital Expenditures will go toward aerial and telehandler purchases. The other half will go toward purchasing specialized industrial forklifts (25,000 to 80,000-pound capacity and forklifts with higher lifting masts ranging from 20 to 26 feet.) A variable that may influence this projection would be our interest in potentially allocating some funds toward earth moving equipment.
How are rental rates? Up over last year? Down? How do you expect them to fare for the coming 12 months?
Small scissor lifts and smaller aerial equipment are in very high demand for Lizzy Lift.
Rental rates have been fairly stable across all the boards in comparison with 2016. We do not expect to see much change in this over the next 12 months assuming there are not any unforeseen incidents or changes that would dramatically affect the supply and/or availability of equipment. Looking down the road longer term, we do feel that all the acquisitions taking place will influence rental rates greatly.
What were your 2015 revenues? What were your 2016 revenues? What are your projected 2017 revenues?
2015 - $12,664,020; 2016 - $13,764,033; 2017 the projection is $15,000,00.
What opportunities do you see for the coming 12-18 months? (Low level access? Big booms? Industrial work? Diversification?)
We are seeing an increase in requests for small (5 to 6K) and big (10K+) telehanders as well as larger aerial booms.
Can we expect any new products in your fleet next year? (Big booms, low level access, generalist items?)
Right now, we have not definitively decided on any specific new types of additions to our fleet. Items we are considering include small skid steers, mini excavators and larger (80- to 135-foot) aerial booms. We are continuing to add to our fleet of Versalifts with more 25 to 80k forklifts. A contributing factor in how we allocate our spending is also dependent on what types of longer term projects that we are able to participate in.
What’s your general feel for the equipment rental industry currently? will there be growth? will it be a steady line? Why?
2017 did not start the way we had anticipated. Many of the projects that were projected to start the beginning of this year were put on hold. Things seemed to really start to pick up pace in the second quarter and seem to be continuing to build.
The rest of this year should be very busy for us. The slower than expected start of the year, beyond normal seasonality, is something we have heard mirrored by many of our peers. The momentum we felt in improvement in the second and third quarters was also echoed by colleagues. We feel this trend of improved growth will continue to steadily increase. There seemed to be an air of uncertainty that resulted in a cautious approach with regards to spending at the start of the year. That sense of uncertainty seems to have dissipated and momentum is really picking up pace as far as going forward with construction projects. We are seeing growth in a well-rounded manner; new construction, improvements and shut downs. From our viewpoint, the forecast looks strong.
What are the biggest challenges currently facing the rental market in the U.S.?
Technology stands out as one of the biggest challenges we see that smaller sized rental companies are facing. Large companies can afford the constant investment required in order to stay current with all of the opportunities and improvements made in technology. Smaller companies don’t have the resources to keep up at the same pace with new innovations in technology. Additionally, the benefits that come along with the buying power of a larger company versus a smaller company make it very difficult for a smaller company to compete, especially when selling the same products.
The trend of revenue concentration rental industry we feel is a cause for concern. The constant buyouts and diversification by giant companies threatens the health our industry and economy in general. The control that this puts in the hands of so few is not conducive to an industry environment where entrepreneur and smaller business will have a fair opportunity to compete. Small to medium and start-up companies play a very integral role in maintaining an environment of healthy competition, which is integral to growth on so many levels. We feel that is something that everyone should be concerned about. A fair opportunity for growth and ingenuity is something I hope we never see disappear from the equipment rental industry.
What acquisitions do you see forthcoming? Will there be any (other) big mergers like United/NES? Are smaller, independent rental companies thriving or will they be bought out? [How much room for consolidation do you think is left in the U.S. rental market?]
We do feel that more acquisitions and mergers will continue to occur in our industry. The larger companies are filling gaps in coverage in both equipment and location by means of acquisition. We anticipate seeing more of the mid-range players being bought out, especially the ones in major metropolitan areas. The companies that seem to be targeted most frequently are local companies that do a lot of relationship business. Businesses that are really are a part of the community; having been around a long time in that area with a very loyal customer base. These types of companies have, in some cases, proven to be roadblock for the giants in certain areas as far as penetration. Acquisition seems to have become their go-to solution to overcome this obstacle.
Despite the many concerns and challenges that the consolidation in our industry raises, we do feel that smaller independent rental companies can still (at this point) have the opportunity to thrive. As much as size affords larger companies to be able to offer customers some conveniences that smaller companies can’t compete with utilizing technology, smaller companies also can make life easier in different ways. Sheer size in location, employees and products brings with it a lot of rigidity, with systems, procedures and just too many people to make changes happen quickly.
“We specialize in hard-to-find equipment and we almost never say we can’t make something happen,” the sisters say.
Another significant advantage smaller companies have is in the close bonds they are able to create with their customers. It is a challenge for larger companies to compete with a smaller company in this arena. When dealing with a smaller company, customers most likely will feel connected personally not only to their sales person but also to many of the staff members. If the atmosphere at a smaller or mid-size company has a family/community type of internal atmosphere, customers will feel it, and the comfort that familiarization brings is not something a large company can offer.
In particular, we feel that growth for smaller to mid-size companies lies within a customer base primarily focused on the less frequent to moderate renters. These company owners often are not only running their business but also consistently working/laboring on their jobsites as well. They have a deeper understanding of the challenges we all are facing with regards to the consolidation of a marketplace as it is their reality as well. Many of these customers see the importance of smaller business and want to help keep the market balanced. In addition, this size of customer to a large rental company would not be a significant customer in terms of revenue. The attention and time required to make that customer feel truly valued is more difficult for a larger company.
Smaller companies need to stay focused on what they can control, what they are good at and where they really think they can find a gap and/or need in the marketplace that the larger companies would struggle with doing so as effectively. We need to adapt and be creative. There are advantages to being small and we need to capitalize on those assets instead of putting all our focus on trying to keep up and function in the same way as the giant rental houses.
What do you offer that your competitors don’t?
We have been in business for 19 years and have been in the industry much longer than that. The contacts and knowledge we have gained through these years of experience is extensive. Over the years we have built relationships across the country that have proven to be a valuable resource for not only us but also our customers. We specialize in hard-to-find equipment and we almost never say we can’t make something happen. If there is a way to make it happen, we find it. Even if it is not financially beneficial to us we still want to always provide customers with an option. Our customers need to know that we will always find a solution. The solution we present may not be financially is feasible for them, but they will always be provided with an option. We thrive on being challenged to do what may seem impossible!
As a smaller company, we have the flexibility to adjust to our clients’ needs and requests quickly and effectively. We are not hindered by a lot of red tape; not as many people or processes in the way of an action or decision. We have a leaner structure and a family atmosphere that extends to everyone we work with both clients and vendors. We pride ourselves on our integrity and honesty and have done “the right” thing even if creates a financial loss for us at time. Sure, we want to be profitable, but we want to do it in a way that is honorable. Our customers know we care about not only their continued business but also about them personally as well. We are able to builder stronger relationships because of our flexibility, transparency and focus on customer service.
What is the company’s management philosophy?
The best managers are coaches and cheerleaders for their staff. They inspire, encourage and acknowledge. They are flexible and see that everyone responds to different stimuli and they really listen to their people. We count on our employees to be self-motivated and take ownership over their roles. We are very hands-on during training but then look to our staff to reach out to us when they need our input. We encourage our employees to be solution-focused. If you see a problem, when you bring it to us, also bring with you a possible solution. We try to create a work-hard, play-hard type of environment where forming close personal bonds with others in the office is encouraged. We want everyone to know that we personally care about them and see them as individuals that were chosen specifically for the potential we see in them in addition to their positive personalities. We make ourselves available to all of our employees for anything they may need; our door is always open. We encourage them to bring us any ideas they have for change, growth or improvement.