Equipment Rental
Company Summary
ER began its operations on May 2, 1997 with little capital investment. The company combined 10 years of experience in the sales and rental field to generate a large customer base. After eight months of operations at the present facility, the company has increased its customer list by 100% and its vendor list by 75%. ER takes pride in having brought several new items to this area that were otherwise unknown, such as the spreader/grader and Ramrod products.
2.1 Company Ownership
ER was founded in Memphis, Tennessee in May 1997 to sell and rent heavy equipment, small home use machines, and construction equipment. The company was formed by Mr. David James and Mrs. Sally James. ER is a Tennessee S-Corporation, with principal offices located in Memphis, TN.
2.2 Locations and Facilities
The company has one office currently in Memphis, TN.
ER is located 1/2 mile from the Interstate (I-65) with easy access and a large turnaround area for larger vehicles used in pick up and delivery of equipment. ER is not inside any municipal jurisdiction which would restrict the type of business being conducted. The location also benefits from easy access to hotels (1/2 mile), banks (less than 1/4 mile), groceries (1/8 mile), repair shops (1/4 mile), service stations (1/8 mile), and a parts supply house (1/3 mile).
Currently, there are no environmental concerns, but the company hopes to be able to have a repair shop located on the premises at which time any environmental concerns will be seen to. ER’s current hours of operation are from 8:00 a.m. until 5:00 p.m. However, the company does receive after hours calls and provides assistance as needed. Work hours have sometimes extended from 5:00 a.m. to later than 6:00 p.m. as needed.
2.3 Past Performance
The following is the company’s past three years of performance since start-up.
| Past Performance | |||
| 1997 | 1998 | 1999 | |
| Sales | $49,000 | $57,000 | $100,000 |
| Gross Margin | $32,830 | $42,351 | $86,500 |
| Gross Margin % | 67.00% | 74.30% | 86.50% |
| Operating Expenses | $33,810 | $39,330 | $69,000 |
| Collection Period (days) | 0 | 0 | 0 |
| Inventory Turnover | 4.00 | 4.00 | 4.00 |
| Balance Sheet | |||
| 1997 | 1998 | 1999 | |
| Current Assets | |||
| Cash | $3,500 | $1,500 | $2,500 |
| Accounts Receivable | $6,000 | $7,000 | $9,000 |
| Inventory | $8,000 | $14,000 | $19,000 |
| Other Current Assets | $2,500 | $5,000 | $6,000 |
| Total Current Assets | $20,000 | $27,500 | $36,500 |
| Long-term Assets | |||
| Long-term Assets | $5,200 | $6,400 | $8,000 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $5,200 | $6,400 | $8,000 |
| Total Assets | $25,200 | $33,900 | $44,500 |
| Current Liabilities | |||
| Accounts Payable | $5,500 | $7,000 | $9,000 |
| Current Borrowing | $8,000 | $9,000 | $9,500 |
| Other Current Liabilities (interest free) | $4,000 | $3,400 | $3,700 |
| Total Current Liabilities | $17,500 | $19,400 | $22,200 |
| Long-term Liabilities | $10,000 | $12,000 | $10,000 |
| Total Liabilities | $27,500 | $31,400 | $32,200 |
| Paid-in Capital | $0 | $0 | $0 |
| Retained Earnings | ($2,300) | $2,500 | $12,300 |
| Earnings | $0 | $0 | $0 |
| Total Capital | ($2,300) | $2,500 | $12,300 |
| Total Capital and Liabilities | $25,200 | $33,900 | $44,500 |
| Other Inputs | |||
| Payment Days | 60 | 45 | 45 |
| Sales on Credit | $0 | $0 | $0 |
| Receivables Turnover | 0.00 | 0.00 | 0.00 |
2.4 Future Facilities
There is 1/2 – 1 acre of additional property directly to the north side and is available for the construction of a storage/equipment yard if necessary. Mr. James has worked with a steel building construction company and is able to purchase items to construct a building at cost or at a sufficient discount that it would not be necessary to use the greater portion of the loan for building needs. The estimated cost of building is expected to be between $10,000 and $13,500. ER has access to a main highway with concrete entrances to and from the property.
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