Improving rental business performance through asset turnover
Asset turnover, also known as utilization rate, is one of the key profitability levers for any rental business. It measures how efficiently you’re using your assets — in other words, how often your items are rented out versus sitting idle.
1. Why utilization matters
A smaller fleet with higher utilization typically outperforms a large fleet with low usage. It ties up less capital, reduces storage and maintenance costs, and maximizes profit per item. The goal is to balance fleet size with actual demand — ideally operating near 80% utilization.
2. Proactive improvements
- Right-size your fleet: Analyze your demand trends before purchasing new items.
- Design flexible pricing: Offer rentals by hour, day, or week — but model the costs carefully. If refurbishment takes two hours between rentals, short-term hourly pricing may not be sustainable.
- Plan maintenance windows: Build automatic downtime for inspections and cleaning into your booking software to prevent double-booking or rushed turnovers.
3. Reactive optimizations
- Shorten maintenance times: Review real data to see if your buffer is too long. If your team usually finishes inspections in 45 minutes instead of two hours, adjust your maintenance block to match.
- Encourage customer participation: Provide a water hose or cleaning station for bikes, or ask customers to return items cleaned — possibly charging a fee if not.
- Automate the process: Use tools like Twice Commerce to manage maintenance, availability, and data collection automatically.
4. Continuous improvement through data
Utilization optimization isn’t a one-time project. Seasonality, staff changes, and new assets constantly shift the equation. Track operational data to identify patterns — then adjust processes each season based on learnings.
5. Start small and scale safely
For new entrepreneurs, Tuomo’s advice is simple:
“Your wealth is measured by how big a mistake you can make and still recover.”
Start with a small fleet, learn how your business behaves, and only then expand. That way, even if your configuration isn’t perfect, the cost of mistakes won’t be catastrophic.
Karri: What can we actually as a rental operator, what can we do to make our business maybe a little bit better? So let's start with the asset turnover.
Tuomo: Yeah, so asset turnover or how some people call it utilization rate. In that we're trying to figure out or we're trying to optimize a maximum utilization or usage per item. So rather than having a big fleet and a lot of occurred, for example, costs in terms of buying that fleet, at low usage per item we want to have a smaller fleet, a lot of usage per item, as a kind of a way of getting a better profit for our investments and less tight capital into our inventory.
Tuomo: So of course there we can try to kind of optimize a few things. I think in each one of these we could talk about what are the reactive and proactive ways that we can go about things. Proactively we can make these decisions that we try to be thoughtful on the size of a fleet that we actually need. So in order to do that you have to understand your end demand a bit. So maybe don't go overboard, but rather try to be operating in that, let's say, 80% utilization rate if possible, and then start acquiring more items if needed.
Tuomo: There are other proactive ways, for example, in how you build your pricing. Again, extremely dependent on the kind of rental business you're running, but are you going to offer your customers the ability to rent by the hour, rent by the day, rent by the week, month, or all of these. When you're trying to figure that out you're probably kind of modeling a bit like, “Okay, how much do I need to spend time in between rentals in order to get it back?”
Tuomo: So if it takes you two hours to get an item back to the, to be in a condition where you can rent it to the next customer, at the same time you would then have to make quite a lot of income from that one hour rental in order to justify the costs for those two hours, and the cost of not having that item with the customer.
Tuomo: It is a lot about understanding the refurbishment needs of your item, and then when you're kind of defining your rental periods. Of course, it's kind of the rule of thumb tends to be that when the item is out with the customer, it's earning money, and when it's in, it's costing money. But that's one of the ways how you can kind of try to optimize utilization — to maybe model a bit around what's the real usage for the item and the refurbishment needs.
Tuomo: Then there are maybe reactive things that you can do. So I mentioned that, well, all right, that item might have that two-hour refurbishment period or inspection period in between rentals. Of course, you can try to optimize that. You can try to make that into one hour. That then is tied to your capabilities in that actual process of refurbishing.
Tuomo: Is there ways how your customer can declare things a little bit better? Is there some kind of a self-service way that if you're renting out bikes that you have, for example, a water hose outside of the rental store where your customers can already kind of hose the biggest dirt out of the bike, or maybe you can even demand this as part of the rental that customers are responsible for cleaning the item themselves. And if they don't clean you, maybe charge an after charge.
Tuomo: There’s multiple ways of going about it. But this is kind of, I think, the reactive ways how you can proactively plan that, but reactively on the spot, try to just like be a bit more efficient. And then software like Twice try to help there where you can proactively make sure that items, for example, automatically get a maintenance time added after booking. So it's taken out of the availability for a few hours. But after that maintenance has been done, your employees can mark it back into the inventory a lot faster.
Tuomo: And then you can start to look into, for example, the data — how often do you actually need those two hours? Do you need it every time? Or do you tend to have the maintenance done in 45 minutes? Maybe it's then time to adjust your automated maintenance time to be 45 minutes so that people can start to book it in the future already.
Tuomo: So these kind of things are the things where reactively you react, you store information to your order fulfillment or your commerce OS like Twice, then you learn from that and you proactively then adjust your operational logic in order to improve your asset turnover.
Karri: Sounds like there is a lot of things that you are probably picking up and learning when you start actually running the rental business. And even to me, it sounds like there might be moments that it's kind of optimized, but then of course you have seasonality and so on. So it sounds like this is kind of like active — something you're constantly doing. And for that probably having good data is the way to go forward and maybe take some learnings from previous years and so on.
Tuomo: Yeah, definitely. And it's kind of the mindset of you're not trying to constantly learn, constantly analyze, constantly apply, but rather having the secure knowledge that constantly all of these data points are being stored and you can just focus on delivering a great customer experience and delivering as good of a refurbishment operation as you can and then have those times where you can go and look at the data and start thinking, “Okay, can I actually automate it a bit more? Can I optimize it a bit more?”
Tuomo: And then knowing that you have these levers to pull in the software that allow you to kind of push the engine to its limit. Or if you, for example, know that you're going to have a completely new staff this season who do not have that much of knowledge of the rental fleet, for example, maybe you want to add a bit of an extra buffer this season just to allow a new staff to kind of learn time to learn without failing to deliver a great customer service.
Karri: And if you are a new entrepreneur and you're just starting out, it's probably best to just start with a small fleet and then kind of start understanding how it kind of grows rather than start with a huge and start to do some optimization before you actually have the rental business operating and running.
Tuomo: Yeah, definitely. I think there's a saying that your wealth is measured in terms of how big of a mistake you can make and still recover. And that's kind of the, if you're super wealthy, you can probably go and go with an extremely large fleet and then take big hits if they happen. But if you want to start with a bit lower risk profile, then you probably want to start smaller, start to take in the learnings with the knowledge that if and when things do not work out as you planned in your operational kind of configuration, the cost of that not working isn't catastrophical in terms of customer satisfaction or similar. So maybe that's the thinking there.