sell or lease

Discussion in 'Christmas Trees & Seasonal' started by TimNNJ, Oct 6, 2011.

  1. TimNNJ

    TimNNJ LawnSite Senior Member
    Messages: 321

    Hey just wondering what most of you do...sell the lights and packages of materials or do you lease everything..I met some folks and they seemed stand offish about not owning the lights if they were to fork over all the cash..just curious what you guys signs are on there way and my postcards are almost done...hopefully have them sent here by next week ready to go out on their first is everyone doing out there?...
  2. Adeas Printing

    Adeas Printing Sponsor
    Messages: 606

    Hey there - sorry to intrude on your post but just wondered if you already ordered your postcards or if there is anything I can do to help you with them? We have a great enhancement we add to our postcards called Stick-It® which allows the recipient to Stick-It to their fridge instead of in the drawer where they may forget to call you when they are ready. Depending on the type of mailing you are doing & the quantity the price is about $0.26 per piece including postage, full color printing, 9x6 size & postage!

    Our Band-It Stick-It Seasonal Service Calendar would be a great item to distribute door to door while you are out hanging lights as it is an upcoming calendar reminding them of the services they need to schedule with you for the upcoming season.

    Call or email me if you want information or go to our website

    Robin Christopherson
    866-778-4254 ext 200
  3. David Gretzmier

    David Gretzmier LawnSite Gold Member
    Messages: 3,646

    If you read through the threads on here over the years, you will find the two schools of thought represented here pretty well. I travel around a bit doing some consulting here and there with folks that do Christmas lights, and both ways can be profitable. My own personal instal company does about 95% sell and 5% rent. long post, I'll put out there here what I know, and let others chime in and poke holes-

    I can tell you that rental customers tend to view this service as a service and not a purchase/ownership decision. The service call volume tends to be lower, costs up front for the customer are lower, and expectations and pride of ownership of customers seems to be a bit lower. When single bulbs or sections are out, timer or outlet issues, rental customers tend to tolerate it more, thus less service visits, but, the numbers I hear from rental folks and read on here is rental customers tend to cancel on a year to year basis in the 15-25% range. However, this works well for companies that want to develop an inventory of reusable product over a number of years and want to have a somewhat set number of customers yearly to keep a set of employees busy they already have on staff doing another seasonal service job, such as insect control, lawn/landscape maintenance, chemical lawn care etc. These companies tend to be used to asking customers for a $100 service or less when they come and provide a service for the customer when not doing Christmas lights. They have a built in base of customers in the middle income range and up. These companies tend to not hire additional employees for lighting, or just use a few temps to help the full time yearly guys. they use existing fleet, and usually do not buy trucks specifically for lighting. The first 5-8 years of doing rental tends to be less profitable, as you are building an inventory of product, paying for it, and receiving less money up front than the purchase guys. Thus there is less cash flow and profit in the the inventory buildup years. But once you have enough product paid for, for the number of customers that keeps your current employees busy, then profits are usually very good, but flat, depending on what your area will bear on charging folks for this service. You are merely replacing the number of customers every year with the same number you lost, and using product already purchased. some rental product of course wears out and must be replaced, but many/most rental companies repair product past the normal service life to save overall costs. Christmas Decor is typically the most well known rental company, I don't know any that do true purchase, but others do rental as well. Most rental companies tend to top out around 200 customers per year, as you may get 40 new customers per year, but you tend to lose 20% or lose 40. companies in very large markets, maybe 1 million population or more, or markets served by 2 competitors or less, can buck this trend. There are a few rental companies that have more than one sales person and can sell more than 40 customers a year, but very few. But they also tend to take the number of new customers they close per year and multiply times 5 and that tends to be thier max size.

    Purchase customers tend to view Christmas lights as an investment. They are a bit more particular about foliage, and tend to spend more in the first year, require more service as they take ownership in the lights and that pride leads them to notice when bulbs are out or sections are out or timer/outlet issues. The rate of cancellation tends to be lower, in the 5-15% range, for 2 reasons: one, since most purchase companies will only install what they sell, current customers can't get other companies to install and maintain the items they already own, and two, customers tend to want to recover the cost paid up front the first year by enjoying a lower cost than rental over the next 5-7 years of product service. At the end of the service life of the product, when product needs to be repurchased, purchase customers cancel much like rental companies. You will find the same type of companies doing purchase Christmas lights as the rental list, but other companies tend to add when you talk purchase, like landscape installation companies, electricians, landscape lighting, irrigation, HVAC guys, etc. These folks tend to be used to asking customers for 2-5k the rest of the year for coming to a customers home and doing a service. It is a bit easier to capitalize purchasing vehicles and warehouse space in a purchase business, but they tend to grow slower as the upfront cost leads to a lower number of new customers on a year to year basis. They do tend to purchase and equip trucks primarily for Christmas. Profits tend to be good at first and then improving over anumber of years until reaching the end of service life of product, then tend to flatline based on size. Holiday Bright Lights and Brite Ideas tend to be purchase companies. but some do rent. Purchase companies tend to top out in the 400 customer range, at the 100 customer range and down, some lose 5% or less, at 100 and up, most lose 10% of cutomers per year, and in really bad weather or just bad employee years, they lose 15%. but most average 10%. or you gain 40 new customers and you lose 40. again, major markets or number of competitors can change the numbers. Again, there are a few companies out there selling more than 40 per year, but not many. you still tend to multiply new customers by 10 and find your max size.

    There are some hybrid mixes out there, and many rental companies do charge a bit more the first year in an attempt to recover some capital investment on their part for the lights, and to compensate them for additional time it takes in the first year as opposed to future years. But fair or not, the customer rarely has any ownership in the lights they just paid more for in the first year. I have heard of some companies allowing customers to rent at a higher rate, kind of a lease purchase thing, to buy product over a number of years, but not many.
    Last edited: Oct 7, 2011
  4. GreenI.A.

    GreenI.A. LawnSite Silver Member
    Messages: 2,131

    Thanks, that answered alot of questions I had aswell.
  5. turf hokie

    turf hokie LawnSite Silver Member
    Messages: 2,753

    David got pretty detailed with info I dont recall seeing posted before...

    I will say that no matter what method you choose, you will run into people that want the opposite, guaranteed....

    Choose what you feel comfortable with, I rent, the reason I chose to rent was, that when I started, CD was just starting the rental model and I felt that since nobody in my area did it that way it was a good way to go. Reasons being, lower initial investment, customer can change their design/colors from year to year and I dont need to charge for service/repairs once the warranty runs out.

    I have people that feel we charge alot of money for them to not even own the lights... I have offered them the option to purchase in year 1 and have us re-hang after, but when they think my rental price is crazy, you should see the reaction when I give them the purchase price.....

    The way I see it is this, if a customer sticks with the service for 3 years, it makes no difference if they own or rent, it will be about the same price over the 3 seasons. IF the material lasts longer, then theoretically you will make more in years 4 on by renting than you would by selling, but the wild card is how long the material will last, if it doesnt last the guy that rents will be out replacement material, whereas the guy that sells gets to charge repairs/replacements.

    Again, my personal opinion is to choose what you are comfortable with and what you feel will work in your area. I think if you look at the long term the margins work out to be pretty similar.

    That being said, the one major difference that I almost forgot to touch on, and David brings it up. When the guy that sells loses a customer, he loses the material as well. When I lose a customer, I get to keep and re-use as much as I can on the next job. Therefore, over time, I should have less layout for new material due to customer loss. We all hate to lose customers, but it is just a stark reality.

    Our retantion was 85-90% until the 2009 season, since then we are turning over a higher percentage, hopefully that will change but it looks like this year is going to be somewhere in the 30% turnover rate if early indicators hold, this is from a number of reasons that I wont get into,but it is not all economy driven.....

    Good luck whatever you decide to do.
  6. TimNNJ

    TimNNJ LawnSite Senior Member
    Messages: 321

    wow thanks for a great response...answered a lot of questions..thanks for taking the time to write all of that.....I will call Mike and ask him for that calculation set up and see what I can do with that..Thanks again

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