How to Increase Profit Margin | How to Make More Money for Rental Businesses

“Rental businesses often have up to $20,000 hiding in plain sight.”

– The Warnick Group

🎶 Money, money, money, must be funny… in a rich man’s world! 🎶 – ABBA

If we had to take a wild guess at the reason you clicked on this blog, it’s probably because you’re wondering how to make more money with a rental business. The easy answer? Raise profit margins. But how do you increase profit margins, maintain quality, and stay competitive all at the same time? 

This is a common conundrum for small and large businesses alike in the party rental industry. In this industry, profits can be narrow, so you’ll need to be proactive to get the most out of your business. 

In this blog, we’ll tackle some smart and easy-to-implement strategies you can use to increase your profits and meet your equipment rental KPI’s without having to… 🎶work all night and all day to pay the bills [you] have to pay. 🎶

Ready to find out how to work smarter, not harder? Let’s dive in!

What is the Key to Increasing Profit Margins?

Increasing profit margins in the party and event rental industry boils down to several core strategies that focus on both reducing costs and maximizing revenue. Since every dollar saved is a dollar earned, effective cost management is as crucial as finding ways to increase your income. 

What are the keys to profitability in the event rental industry:

• Efficient operations management

• Pricing that stays competitive but maximizes ROI

• Controlling costs related to maintenance

• Increasing transaction values

• Leveraging marketing to attract more customers

• Improve inventory utilization

• Understand which jobs are the most profitable

• Using smart financial strategies

In the following sections, we’ll dive into each of these ways to raise profit margins in the event rental industry. 

How to Reduce Operational Costs to Increase Profit Margins

When you think of ways to raise profit margins, the first things that come to mind are often raising prices and/or getting more customers in the door. And those are great ways to increase profits! But before we dive into those strategies, we want to draw your attention to one of the biggest money suckers in the rental industry: operations.

Poor decision-making in operations can cost your business up to 3% in profits! And while that might not seem like much, that means that you are – quite literally – just throwing 3% of your profits straight into the garbage. For a small business, or even for large businesses, that is a huge deal. 

So, how can you reduce operational costs? 

1. 1. Automate processes: Implement automation in your business for tasks like booking, invoicing, and inventory management. Automation not only reduces labor costs but also minimizes errors and speeds up operations. 
   2. Simplify customer interactions: Make the rental process as easy as possible for your customers and warehouse workers. This might mean investing in an online shop, which allows your customers to shop online and automatically book inventory from your inventory management system.
   3. Protect your business from theft and fraud: Believe it or not, theft is becoming a bigger issue in the rental industry. If your inventory is stolen or you are defrauded, it can cost you a ton of money. Learn how to protect your rental business from equipment theft and fraud here!
   4. Ensure deliveries are efficient: Minimize delivery costs by creating efficient routes and charging for delivery services. You can also develop a driver efficiency score and offer incentives for team members who achieve high scores! 

• Minimize damage/loss: Every broken chair or missing extension cord chips away at your bottom line. Establish clear procedures for inspecting equipment before and after each rental. Damage waivers can also help offset losses, but prevention is always more profitable than replacement.

When you focus on these strategies, you can significantly reduce operational costs, which automatically raises profits!

How Pricing Can Increase Profit Margins 

Effective pricing strategies are vital for any rental business looking to increase its profit margins. First things first – you need to make sure that you are making the money you spent on your inventory back as quickly as possible. 

This is also known as the return on investment (ROI). And if you’re not sure what prices you need to charge to maximize ROI, use our free ROI calculator to get insights into how much profit your items are actually generating.

Once you understand the base price you need to charge to start working toward reclaiming your investment, look into adjusting prices based on a few factors: 

• Demand: Adjust your prices based on how popular or in-demand your items are in your specific area. This doesn’t just mean responding to busy periods but also recognizing which of your items are consistently sought after or rarely rented out. For items that are always in high demand, you might consider setting a higher price point.
• Seasonality: The rental industry often experiences fluctuations due to seasonal trends. For example, outdoor event equipment may be in higher demand during the summer months. Recognizing these patterns allows you to adjust prices in anticipation of higher or lower demand based on the season.
• Competitors: Keeping an eye on what your competitors are charging gives you valuable insights into market rates. If your competitors lower their prices, you might need to review your own to ensure they remain competitive without undervaluing your service.

This approach helps you capitalize on peak times when demand is high and adjust for slower periods to stay competitive. 

For a deeper dive into pricing your rental items effectively, check out our detailed guide on how to price rental items.

How Does Inventory Utilization Impact Profit Margins? 

Inventory utilization refers to how effectively a rental business manages and uses its inventory to generate revenue. Proper inventory utilization is one of the most overlooked ways to increase profit margins in the rental industry.

When inventory is utilized effectively, it’s not just sitting around in your warehouse collecting dust; it’s consistently rented out, meaning you’re recovering your investment faster and moving into profit territory sooner.

So, how do you make sure your inventory is being used to its full potential?

Start by tracking your utilization rate. This metric helps you understand how often an item is rented compared to how often it could be rented. You can calculate this using a basic utilization rate formula:

Utilization Rate = (Days Rented / Days Available) × 100

For example, if a tent was rented for 45 days in 90 days, its utilization rate would be 50%. If your utilization rate for an item falls below 30%, consider retiring or selling it, especially if it takes up a lot of space or requires regular maintenance. 

Replacing it with a higher-performing item will boost your margins by increasing inventory turnover and reducing deadweight costs.

Be strategic with new purchases, too:

• Track what customers frequently request.
• Only buy new items if they’ve been requested at least three separate times.
• Prioritize multi-use items that rent well across seasons and event types.

Looking for ideas on what to buy next? Check out these helpful guides:

• Purchasing the Best Tables and Chairs
• Top Tent Manufacturers
• Best Heaters for Outdoor Tents

And don’t forget: Review your rental and inventory data often. Keeping tabs on rental history, payments, and item performance helps you make smarter buying and selling decisions. The more dialed in your utilization strategy is, the more profit you’ll see from every square foot of storage space.

How to Raise Profit Margins by Managing Maintenance Costs

Maintenance costs can sneak up on you fast, especially if you constantly deal with broken equipment, surprise repairs, or replacing items that could’ve lasted longer. And those costs eat directly into your profits.

Here’s how to rein in maintenance expenses:

• Implement a maintenance schedule. Just like a car, your rental inventory needs regular upkeep. Build a checklist and timeline for cleaning, repairs, and inspections so you can catch issues early.
• Track damage trends. Keep notes on which items break most often. If certain products always come back scuffed or broken, consider replacing them with something more durable or charging a higher damage waiver.
• Train staff on proper handling. Both warehouse and delivery teams should know how to handle gear safely to avoid unnecessary wear and tear.
• Tag and track maintenance. Use your rental software (like TapGoods PRO!) to log maintenance by item. This helps you predict future repairs, monitor costs, and plan replacements more accurately.

Over time, tighter control of maintenance lowers repair and replacement costs, which will boost your margins without an increase in prices.

Increase Profit Margins by Increasing Transaction Values

Want a simple way to increase profit without finding new customers? Raise the average value of each order.

Here’s how:

• Bundle popular items. Create packages like a “Wedding Essentials Bundle” (tent + tables + chairs + linens) and offer it at a slight discount compared to renting each item individually. This increases convenience and your average order value.
• Offer tiered pricing. Provide standard and premium versions of similar products. For example, plastic folding chairs vs. white resin chairs with pads give people a reason to spend more.
• Create minimums for delivery. Require a minimum rental value for delivery service, encouraging customers to add more items to meet the threshold.

These tactics not only increase your per-order revenue but also make your service feel more premium and helpful.

Understand Which Jobs Actually Boost Your Bottom Line

Not all jobs are created equal. Some might look great on paper—big dollar amounts, prestigious venues—but once you factor in labor, delivery logistics, and potential for damage, the margins might be razor thin (or even negative).

That’s why it’s critical to track profit by job or event, not just by item.

Here’s how to get started:

• Break down job costs. Include labor hours, mileage, setup/breakdown time, damage risk, and special handling.
• Compare profit margins across job types. You might discover that smaller backyard parties bring in more consistent profit than high-maintenance weddings or corporate galas.
• Use profitability reports. Some rental software lets you generate reports that show profit per order. Use that information to your advantage!
• Say no to bad-fit jobs. Once you know what’s worth it, don’t be afraid to pass on jobs that drain your team or deliver little return.

Understanding job-level profitability helps you make better decisions, price smarter, and focus your energy on events that actually grow your business.

Can Rental Businesses Expand Streams of Revenue to Increase Profit Margins?

Yes! Diversifying your revenue is one of the smartest ways to increase profit margins. You already have the equipment and logistics in place, so why not add services and partnerships that build on what you’re already doing?

1. Offer Value-Added Services

Go beyond just dropping off tables and chairs. Consider offering:

• Event setup and breakdown services so clients can show up and enjoy their event stress-free.
• On-site support for high-end or complex events.
• Event consulting, especially for DIY brides or first-time planners who don’t know what they need.

Customers will pay a premium for convenience, and these services create a more hands-on, profitable experience. Here’s a guide on how to price labor for rentals.

2. Build Referral Partnerships

Form strategic partnerships with:

• Venues, who can recommend you as a preferred vendor
• Caterers, who often help clients figure out what they’ll need for seating and tables
• Event planners, who are constantly sourcing rentals for clients

These partners can send you a steady stream of warm leads in exchange for a small referral commission or a mutually beneficial vendor spotlight. It’s a low-effort, high-return way to expand your business network and bookings. Check out this post to learn how to become a preferred vendor.

Utilize Marketing to Increase Profit Margins

A great way to increase profit margins for your rental business is pretty simple – bring in new customers. And online marketing is a fantastic way to do it! There are a couple of go-to ways that we recommend for businesses looking to get ahead of the competition without a bunch of heavy lifting or hiring a marketing team:

1. Use Google Ads to Reach High-Intent Shoppers

Google Ads can be one of the most effective tools in your marketing toolkit. Why? Because it targets people actively searching for rental services. Whether it’s “tent rentals near me” or “wedding table rental,” these are people ready to book. With the right setup, you can appear at the top of search results and start converting clicks into rentals immediately.

Learn how to set up and optimize Google Ads for rental businesses

2. Invest in SEO to Build Long-Term Traffic

Search engine optimization (SEO) takes longer to pay off than ads, but it’s worth the investment. By creating content and optimizing your website for the keywords your audience is searching for—like “bounce house rentals” or “backyard party rentals”—you can attract organic traffic without paying per click.

Check out our beginner’s guide to SEO for rental businesses

This two-pronged strategy, paid ads for immediate traffic and SEO for long-term growth, will help you build a sustainable pipeline of customers year-round.

Watch Out for Common Profit Leaks

Did you know that many rental businesses let up to $20,000 leak from their profits every year? In addition to the issues discussed in this blog, there are a couple of other red flags to watch out for to ensure that your business isn’t leaking profits:

• Bank Balance ≠ Business Health:  If you’re only tracking how much is in your bank account, you could be blindsided by surprise expenses. Instead, use tools to track what’s coming in and going out, and plan for slow months.

• Your Prices Haven’t Changed in Years: If you’re not reviewing your pricing annually, rising costs could be eating away at your profits. Check what competitors charge and adjust based on industry trends and inflation.

Want to learn more about how your business could be leaking profits? Download the full guide from the Warnick Group here! 

Make More Money – Stress Less

In the event rental business, making the most of your money is key to success. By managing operations efficiently, setting smart prices, using your inventory well, and adding new ways to make money, you can raise your profits. Want some more info? Check out this downloadable PDF on raising profits!

Start increasing your profits and reducing your taxes by getting advice from experts who know your industry. Talk to The Warnick Group to learn how specific strategies can help your rental business thrive. Work smarter and watch your business grow!