20.08.2021

Middle Man dissatisfaction ?

In the past month or so, we have heard repeated complaints about low overhead 'middle men' such as 'contract hire companies' or rental brokers.

For those who are unfamiliar with the UK crane rental market, there are two ways of renting a crane in the UK. There is standard ‘Crane Hire’, where the customer organises the lift himself, including insurance, lift plan, risk assessments, slinger/signaller, lift manager and the appointed person. The crane owner simply sends out the crane and operator.

If the customer doesn’t have the knowledge or experience to handle the lift themselves however they must take a - ‘Contract Lift‘, in which the crane rental company provides everything – and charges for it. Contract Lifts provide crane rental companies with an opportunity to add value and earn a better return on their assets. However, in recent years an increasing number of individuals with no cranes have set up businesses offering contract lifts. If a person has the required experience and contacts, they can do the job from their living room. All they have to do is sell their services to the end user, hire any additional - usually freelance - specialist and rent a crane in from a rental company, for which they can aggressively shop around.

Some crane rental companies now feel that they are robbing them of the little cream on the top of an increasingly sour carton of milk. The independent contract hirers have few assets or significant overheads and can undercut the traditional rental companies and still make a profit. At the other end of the equation recruiting and retaining crane operators or drivers is becoming increasingly difficult and expensive for the crane companies, thanks to the HGV truck driver shortage in the UK. While fuel costs are set to rise with the impending phasing out of lower taxed red diesel. And that is before you consider the inevitable increases in crane prices.

Now it seems some companies in the access and telehandler rental market feel they are facing a similar issue from ‘brokers’ - in particular small operations or one man bands that typically have no equipment of their own, but who promote keen prices to end users, knowing they can always extract a lower rate from one rental company or another, and making a margin between the two, with no physical role in the transaction.

You can argue that these intermediaries carry the financial risk of not being paid, while having sales and marketing costs to cover. The good ones also can add real value - just like a good insurance broker. The payment risk is real but all too often if they don't get paid, they refuse to pay the supplier. And if something goes wrong with the job, whose name is plastered all over the machine? One thing is for sure, it won’t be the intermediary’s.

Clements Hire owner Jim Longstaff has encapsulated these issues and feelings in a letter he sent us earlier this week. He believes that the UK industry needs to get serious about pricing discipline and strategies. How is it possible that rates can be as low as they were 20 years ago? Why is it that contractors will accept 25, 50 or even 100 percent price increases on steel, wood, cement, etc... and yet refuse to cough up an extra couple of percent for the equipment they use?

Click here to go directly to Longstaff’s letter and let us know what you think in the comment section below. You can also let us know your position via our online voting poll on the Vertikal homepage.

Have a safe weekend.

Comments

flying_carpet

So now there seems to be two ways to start a hire business:

Option 1:
Spend a lot of time and effort creating a business plan and seek support funding your new venture while personally guaranteeing the loans. Speak with manufacturers to get the best deal that suits you. Employ drivers, engineers, Hire Desk etc. Find the right premises for you to grow into. Get insurance for all the above. Deal with breakdowns, parts, transport issues etc. Grow the business to match the customers’ requirements. Worry about low utilisation one month and the pressure of high utilisation the next. Pay the finance on the machines regardless of them being on or off hire. Pay the staff.

Option 2:
Get a phone and a laptop, call the hire companies and DEMAND THE LOWEST POSSIBLE HIRE RATES

This will not go away … so why are more brokers starting up?

1. Because it's easy and risk-free - if it goes wrong, you can get another job. Nothing lost.
2. It works - you can get credit and support from within the hire industry.
3. Why would you want to work in your current role with a wage when you can make all the money as a broker.

For the hire companies that make money off these brokers, enjoy it while it lasts. Success breeds success and that will come at a price to you.

I have no issues with brokers, I don’t blame them. Why would you bother with Option 1? It just amazes me that people who have set up a business the hard way will allow their margins to be squeezed by someone who nipped into Currys/PC world to start their business.
This isn't new business, it was already there to be shared from within the industry, just now minus the profits.

Aug 23, 2021

Welcome to the modern world
Brontosaurus, with respect, that is not the topic of conversation in this article

Aug 21, 2021

Brontosaurus
Cranes and access operator's are not being paid enough its simple as that. These operating drivers are not governed by tacho laws. The only way to make decent money is to do double or even triple shifts and work 7 days a week.
As soon as there is one serious accident in a company the whole industry will be come down on hard.

Aug 21, 2021

Themiddleman;-)
hi

Aug 21, 2021

Pemby
There's a reason I left the industry even for a lower pay job. Reasons that exist in both haulage and cranes. And since the last time I touched an actual truck was for my HGV license test more than half a decade ago the whole rear steer and crab has likely ruined me for being a potentially good truck driver. I know for near certainty because I had on road driving experience in the left hand drive cranes with L plates stuck to em (demag ac50 with bouncy suspension you almost killed me). Almost damaged so many cars going to right hand drive sat-too-high and terrible kerb side views. No thanks I don't want to kill cyclists.

Aug 20, 2021

Welcome to the modern world
STOP BLAMING EVERYONE ELSE. We the rental companies are the only ones at fault.

The basic laws of economics will always apply: Supply v Demand.

Don't hire more crane drivers, rather sell the older cranes from your fleet, and push prices up. Don't buy more powered access, push the prices up for the ones you already own.

Too many companies are too focused on growing fleets, instead of growing margins and building a sustainable business.

Time to stop blaming others, grow a pair, and do charge appropriately for what we offer.

Aug 20, 2021

10 in a row, hahaha
if you go on the job sites online.
Every crane hire company in the country are needing drivers.
Again everything is made so hard through CPCS and driving licences. It costs an absolute fortune. who in their right mind is going to pay 2k for a driving course and all the hassle passing it. CSCS test. 3k for a crane and Slinger course. plus 3 or 4 weeks loss of earnings and possible digs money. to earn 13 or 14 pounds a hour. unsociable hours no start times or finish times everything off the cuff everyday. its not very appealing. A groundman is on over 200 a day at the minute on sites.

Aug 20, 2021

10 in a row, hahaha
The mobile crane industry is ruined in the UK. it all needs resetting.
The parasites that your talking about could be stopped in a week or two. All the crane hire companies get together and agree not to cross hire cranes on contract lifts through subbies.
Wages are shocking in the UK for the responsibility of the job. No wonder drivers are going to drive trucks. The average wage is roughly 13-14 pound a hour for the responsibility of driving and operating a crane. Telehandler operator 16-18 and digger drivers 18-20.
It's the same as truck drivers there hourly rates got squeezed and squeezed till the profit margins were that thin. Now the haulage companies are paying the price for it. Same is going to happen with cranes just shortly.

Aug 20, 2021

MS
Who is to blame?
Bank of England and 0 interest rates policy for last 12 years.

Its easy to throw money around if you don't have to pay for equipment out of your pocket.
You can literally walk from the street to finance asset company and get financing for fleet of machines at interest rates hoovering around 0-3%.
Then we got bright MBA educated salesman's and CEO's, who's one and only strategy is "cheaper than others".

There is no more of adding value to the product or company. No more thinking how i can satisfy customer to get market share.
It's just dumping money you don't own on equipment that no longer makes returns.

Wait for interest rates to go up to 3% and half of the rental companies will be sweept.

Aug 20, 2021

Up and Over
Hire Manager-You are of course quite right. The brokers would not be able to offer the dreadfully low rates that they do without the asset owning companies supplying them. It is the hire companies that are allowing a new wave of 'middlemen' to gain market share by discounting their own assets. It seems that the lowest rates in the market (by some way) for Teles and Platforms are coming from the people that don't own any! Mr Longstaff's analogy is very apt, "It’s akin to fighting a battle against someone whom you’ve also provided the guns and the bullets!"

Aug 20, 2021

Hire Manager
Up and Over, How is the Hire Industry being destroyed by Brokers when they are getting their machines from the asset owners who set the price!

Some of the cheapest rates I have ever seen have been from rental company to rental company so who is driving rates down?

You can dislike brokers because you feel "annoyed" that they haven't bought machines and dont have the debt to contend with but I dont think you can blame Brokers for rate reduction when you have asset owning plant companies running 19ft scissor lifts around the country on trailers behind pick ups for £50 each way anywhere and £60 a week for the scissor hire!!

Aug 20, 2021

Welcome to the modern world
Jim's letter is blaming the wrong people. The middle men are not parasites, they are simply going about it a different way. (And before you make assumptions, I am not a middle man, but a rental company owner.)

The only people driving down the rental rates, are the rental companies themselves. Jim has exercised his right to say no, he does not accept the terms of the business transaction, and closed the account, and for that I applaud him. I too have done the same many times, not to middle men, but to long term high revenue customers. "My machines, my terms and conditions, and they are either acceptable to you or they are not". The problem is, more rental companies don't do that. They fuel the race to the bottom by renting machines too cheaply, and then buying more equipment when sales guys are telling them they don't have enough equipment in the yard. Jim referred some some suppliers who will "whore" themselves to a Broker, well although I hate to use the analogy, I believe a Whore will also name their price and stick to it, and doesn't drop their rate to improve utilisation.

Even with higher rental rates, there will still be room for the 'middle men' as they are referred to in this article, but yes, it should be at a different pricing level. In fact, I predict, more and more business will happen through 'middlemen' until the Equipment Rental Industry wakes up, and joins the modern world of transacting online. The longer they resist this, the stronger the "middle men" will become, and the steeper hill the rental companies will have to climb to get back where they need to be. The same has happened in many industries. The Equipment Rental Industry is afraid to show prices online, but it brings pricing transparency, and promotes real customer feedback, which will distinguish the professional rental providers from the cowboys in the trade.

So, I admire Jim for saying "no", and it is well time the rest of the rental companies said no to their own sales people and customers at these low prices, but don't blame the middle man who is perfectly entitled to use his customer and supplier relationships to earn a living.

Aug 20, 2021

Up and Over
This letter is absolutely spot on Mr Longstaff, well said. The Hire Industry is being destroyed by this new wave of brokers that have cropped up in the last couple of years. We are undercut on a daily basis by these 'parasites' who do not own any assets, carry minimal overheads and are allowed to drive rental rates into the ground. Its time that company owners 'wake up and smell the coffee'. I cannot think of any other Industry that would allow this to happen? I have worked in the hire Industry for over 40 years and cannot understand why business owners are allowing these companies to set up and take market share at the cost of their own margin. I dont actually blame the brokers.... One commented to me recently, 'Why would we bother buying kit and taking on all that debt when others will do it for us'! He then went on to tell me about the incredible profit margins that they work on which hire companies can only dream of! Who's got it right?

Aug 20, 2021


Well said Jim. When I was running my business, I would only ever give "Friends and Family special rates" to companies that also owned and operated the same or similar kit as me. Of course that did mean a lot of "Companies" stopped calling me. which became a blessing because I didn't need to devote any time or energy to them, or the stress chasing them for payment.

Aug 20, 2021
This website is using cookies to provide an optimised user experience. By continuing you are agreeing to the use of cookies. More Info
OK