Why does a profitable rental company run out of cash in winter?
Because the bills don't follow the season. Rent, insurance, loan payments, software and your own paycheck show up every month. Bookings don't.
In summer, the bank account looks great. It's easy to buy a new unit, fix the truck and give yourself a raise. Then bookings drop off, the account drains, and by February you're wondering where summer went.
Austin, who started 10.4 Financial, ran an inflatable rental company for five years and grew up in his family's rental business. He's seen this happen from both sides. The business wasn't bad. Nobody had planned for the slow months.
How much cash should you hold for the slow season?
Start with what you must pay when it's slow. Here's an example for a company with four slow months.
| Monthly cost in the slow season | Example |
|---|---|
| Warehouse or storage rent | $2,000 |
| Insurance | $600 |
| Truck and equipment loans | $800 |
| Software, phone and website | $300 |
| Minimum crew | $500 |
| Owner pay | $3,000 |
| Total per month | $7,200 |
Four slow months at $7,200 is $28,800. Now subtract the income you can count on in those months. Be careful here. Say you expect $2,500 a month, or $10,000 total. That leaves $18,800.
Add a cushion of one month's costs, $7,200, for the surprises: a blown blower, a truck repair, a late tax bill. That's about $26,000 you want in the bank by the end of your busy season. Anything above that, you can spend.
Your numbers will be different. The method is the same: list what you must pay, count the months, subtract what you can count on, add a cushion.
Why are next season's deposits a trap?
Deposits for spring and summer start rolling in during the slow months. That cash feels like a lifeline. But you haven't done that work yet, and if those events cancel, you may owe the money back.
That's why we hold deposits as money you owe until the event happens. You can see how much of your bank balance is really yours, and how much belongs to next season. Our guide to deposits, damage waivers and cancellations explains how to record them.
When should you buy new equipment?
After you've set aside your slow-season cash, not before. The best time to order is usually late in the slow season, with your cushion still in place, so the new gear is ready for the first busy weekend.
Before you buy, ask whether the new unit can do its three jobs: pay itself back, pay for the space it takes up and pay for its own replacement. If an older unit isn't doing those jobs, selling it may free up more cash and space than buying a new one. See how this works for inflatable rental companies.
If you finance equipment, remember the loan payment keeps going all winter. Add it to your slow-season list before you sign.
How do you plan week to week?
A simple 13-week cash plan works well. List each week for the next three months. Put in the cash you expect to come in, using event dates, not booking dates. Put in every bill and payroll you know is coming. Look for the lowest week.
If the lowest week dips below your cushion, you'll know months ahead, while you still have time to act.
What if you're already short this winter?
Start with a list. Write every bill due between now and your first busy weekend, with its due date. Then list the cash you know is coming in, by event date.
- Call lenders and landlords early. Asking for a short delay before a payment is late goes much better than after.
- Look at your dead weight. Units or stock that barely rented last season can turn into cash now.
- Don't spend next season's deposits on old bills unless you're sure those events will happen.
- Write down what happened. Next summer, it becomes the number you set aside first.
What should you do while it's busy?
- Set the slow-season cash aside first. Move it to a separate savings account if that helps you leave it alone.
- Be careful with new monthly costs. A new truck payment or a bigger warehouse feels easy in July. It has to be paid in January too.
- Check your pricing. Busy months are when underpricing hurts most, because every rental is a chance to build your cushion. Read how to price your rentals for profit.
Want help seeing this in your own numbers? See bookkeeping for party and event rental companies.
