In many cases, starting your own business is similar to buying real estate: It's all about location, location, location. That's been Todd Welberg's experience ever since he established Central Equipment Sales, situated just off Interstate 94 in Sauk Centre, located northwest of Minneapolis in central Minnesota.
"The visibility of my business from the interstate has been key," Welberg says. "People see the equipment lined up in our equipment yard along the interstate.
"I'd estimate that our visibility generates about 20 to 30 percent of our business every year," he says. "Even now, I have people who come in and say, I've seen your place from the interstate for three years, and now I'm finally stopping in.' So I know it's a key factor."
The interstate also provides easy access for delivering machines to customers, Welberg adds.
"We deliver rentals primarily to southern Iowa, central Wisconsin, South Dakota and northwestern North Dakota," he says.
COMPANY HISTORY
Welberg started the company from scratch in 2005, after accumulating more than 20 years of experience as an industrial mechanic, specializing in repairing scissor lifts and telescopic forklifts.
"I had purchased the property along I-94, and decided it was time to go on my own," he says.
Growth has been steady. After one year, Welberg hired a mechanic. In two years, he hired another mechanic. After that, he hired someone to handle equipment rentals, then a part-time truck driver to deliver the rental equipment. In addition, the company's facility was expanded last January to 8,600 square feet, up from 4,200 square feet.
BUSINESS MISSION
"We're very service oriented," Welberg says of his business. "When we buy used equipment or get a trade-in, we do a complete inspection and write up a condition report, then make any necessary repairs."
When a customer's equipment breaks down in the field, Central Equipment will haul a new machine to the jobsite and bring the broken machine back to the shop for repairs.
"We do that so customers can keep their jobs going," he says. "The farthest we've ever gone to pick up a machine is Minot, N.D., when a telescopic forklift broke down on a jobsite where a contractor was erecting a steel building. The customer had purchased the machine about two years before that, and we wanted to keep him satisfied."
CONTRACTORS BUILD THE BASE
Most of Central Equipment's customers are commercial contractors and agricultural-building erectors. Because the company isn't tied heavily to the housing market, it has avoided the worst of the economic downturn.
"We're diversified enough to stay busy," Welberg says. "There are a lot of pole buildings going up."
Welberg says Central Equipment's Web site has broadened the company's geographic reach. He even sells equipment in Canada.
"Some people just see a picture on our Web site and want more information," he says. "We send them a condition report and usually answer a few questions. Then they wire us the money, and we deliver the machine."
GIVES CUSTOMERS A LIFT
Central Equipment primarily rents and sells scissor lifts, man lifts and telescopic forklifts. Most of the machines sold or rented are used, but the company also is a dealer for new Genie Industries equipment.
Welberg estimates that his typical business mix is about 60 percent sales and 40 percent rentals. But that ratio has shifted closer to half sales and half rentals during the last seven months or so as the economic slump picked up speed.
"I started out with just industrial forklifts and scissor lifts, then expanded into man lifts and telescopic forklifts," Welberg says, noting his company repairs all brands of equipment.
RENTALS LEAD TO SALES
Welberg estimates that about half of Central Equipment renters end up buying the equipment they rent, although that percentage is diminishing as the economy worsens. Welberg allows customers to put up to 80 percent of their rental payments toward the purchase of the machine. A typical rental period is one or two months.
CAREFUL ABOUT EXPANSION
Welberg says he periodically thinks about expanding his business, but so far has held off.
"We're busy enough with what we've got, and I don't want to get stretched too thin with products we don't know as much about," he says.
INVENTORY CHALLENGE
Trying to figure out how much equipment to have on hand is a constant struggle for Welberg.
"I go through it every day," Welberg says. "For example, right now I don't know if I want to buy more equipment because of the state of the economy. We're a little low on telescopic forklifts, but I don't know if I should buy more or wait for more rentals to return. Balancing my inventory is a gamble month-to-month - it's an inexact science."
Welberg says his best barometer of future business is constantly talking with customers and listening to what they say they'll need down the road.
REPAIR SOFTWARE INCREASES COSTS
Another business challenge facing Central Equipment is the growing trend toward expensive computer software that diagnoses repairs and calibrates machines. Each manufacturer has its own software package, Welberg says
"Right now we have software for five different brands of equipment, and I expect to see more and more of it (from other manufacturers)," he says. "The last software package we bought came as a subscription, which automatically provides us with new software as it becomes available."
Welberg concedes that sometimes the software increases productivity - but not all the time.
"When it works correctly, it saves us a lot of time," he says. "But sometimes we just have to do it the old-fashioned way. With some repairs, even diagnostics don't help you fix them."