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9 KPIs to Track for Rental Businesses (+ Formulas)

If you want your rental business to succeed, you should track various KPIs to help you streamline operations and reveal insights necessary to boost the business’s profitability.

Whether you’re operating a car rental or any other rental business, tracking metrics and KPIs will help you make better business decisions, enhance efficiency, boost customer experience and eventually make more your business more profitable. Let’s dive in!

1. Dollar Utilization

Financial utilization is one of the most important KPIs rental companies use worldwide.

This metric represents the amount of revenue per year a vehicle, car or any other asset you rent, divided by its acquisition cost. You can even expand the KPI to include other revenue sources for your business, such as delivery fees, upsell revenue, etc.

Tracking the financial utilization percentage is crucial as it helps to know the cars generating the most money for your business and those not. In addition, this will help you understand which units you should add to your fleet. 

Dollar Utilization = Annual rental revenue / Total cost of acquisition

For instance, if the total rental revenue is $165,000 and the rental Cost is around $300,000, then dollar utilization is calculated as follows: 

Dollar Utilization = $165,000 / $300,000 = 55%

2. Time Utilization

Always strive to have high utilization rates for your fleet. Tracking this KPI by car and time period can help you make faster and more accurate decisions regarding which type of cars you should keep.

The metric gives you decreasing or increasing utilization trends that will make you know what you need in the future. In addition, tracking the metric will help you determine when utilization falls below a certain percentage. 

Time Utilization = Days Rented / Days available

For instance, if you have ten cars, then the total rentable days per year will be 3,650, and if you have rentals for 2,500 of those days, then time utilization will be:

Time Utilization = 2,500 / 3,650 = 68%

3. Average Booking Value 

This is another important KPI rental businesses should track to monitor rental trends. Increasing the metric is one of the easiest ways to boost revenue at no extra cost.

In addition, you can use the metric to calculate customer lifetime value and create a pricing and marketing strategy. Usually, the metric is calculated each month, but in some cases, you can calculate it weekly.

Average order value = total revenue / bookings placed

For instance, if in a month you make $4000 from 160 car bookings, then AOV will be;

Average order value = 4,000 / 16 = $25

4. Conversion rate 

Conversion rate tells you how effective your marketing efforts have been. For example, your conversion rate will tell you if the specs and features you provide in your marketing efforts convince customers to rent your cars.

This KPI is a percentage of the number of visitors to your site that take a specific conversion action like making a booking. 

Conversion rate = # bookings / # leads

For instance, if you have 100 people visiting your page and only 75 end up making a booking for a rental, then 

Conversion rate = 75 / 100 = 75%

5. Customer Acquisition Cost

Customers are important, and a business has to spend through marketing to acquire customers. CAC is a crucial metric in the rental business, and it tracks the amount you are spending to bring in new customers.

It includes the Cost of advertising and payment to marketers, which will be divided by the number of customers. It is crucial to track CAC because the business could run into losses if it is higher than you generate per customer.

CAC = Cost of acquiring customers / # of customers acquired

For instance, if a rental business  spends $100 to bring in 20 customers, then CAC will be;

CAC = 100 / 20 = $5

6. Rental rate 

This KPI tracks the median rental rates change from one period to the other. It is among the easiest KPIs to measure for the rental car business but also the most important one.

You can break rates into weekly, daily or monthly contracts. Determining regular payment for the fleet shows the minimum rental price to set to keep revenue benchmarks and goals and also ensure short-term needs are met. 

Rental Rate = Rental Revenue / # of contracts

For instance, if in a month you generate rental revenue of $25,000 from 50 contracts, then the rental rate can be calculated as follows:

Rental Rate = $2,500 / 50 = $500

7. Profit

Profit is a critical indicator to measure in any business. Usually, calculating profit entails subtracting costs from total sales. But rental businesses are somewhat complex because of the fleet’s diversity and recurrent cost lines of each SKU.

Various indicators can be used to measure this KPI, but it is vital to track independent variables that influence Cost. 

Profit = Sales – Total expenses

For instance, if you generate revenue of $40,000  and your total costs are $25,000, then:

Profit = $40,000 – $25,000 = $15,000

8. Fleet to Rental Ratio 

The fleet to rental ratio is among the most important KPIs as it gives an idea of whether your fleet is being utilized or idle.

This KPI examines how many operational vehicles could be rented out of the overall fleet. This conveys an accurate impression of the sales.

Maintaining the ratio over a wider frequency range will also help to clarify how quickly the material depreciates (fleet). As a result, crucial purchasing decisions, unexpected failures, and accidents might be prevented.

Fleet to rental ratio = # of cars to be rented / total # of cars

For instance, if you have 50 vehicles and only 40 can be rented out, then:

Fleet to rental ratio = 40 / 50 = 80%

9. Customer Satisfaction 

Rental businesses, especially car companies, have been suffering from increasing costs over the years, which eventually impacts customer satisfaction.

Yet customer satisfaction is paramount for any rental business as it allows you to create customer retention. As we all know, repeat customers do tend to spend more and cost less (think damage fees, etc.) vs. new customers.

This will give insight into the client’s long-term value, signalling indications on investments such as how much you might spend in retaining the client or looking for new ones. Making these choices and boosting your revenue becomes quite simple if you understand your customer base.

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