Monday, December 11, 2017
Interview with Scott Cannon, CEO of BigRentz
Our interview this morning is with Scott Cannon, the CEO of BigRentz (www.bigrentz.com), which is creating an online marketplace for big equipment--an industry known notoriously as not adopting new technology. Scott tells us how the company--backed by St. Cloud Capital--has managed to coax those equipment rental yards into the digital age, and how the company has tackled other challenges in focusing its business. BigRentz is based in Irvine.
What is BigRentz?
Scott Cannon: We are an online marketplace for companies in the rental construction equipment space. If you think about what you see with marketplaces in the more traditional areas of hotel rentals, airline reservations, and marketplaces like Priceline, Expedia, and so forth, we're bringing that to the construction rental industry. The industry is relatively large, near $60 billion in revenues, but it's heavily fragmented. The top 10 companies only make up 45 percent of the entire space. The rest is spread over little yards, across the United States. They've been resistant to technology for a long time. In the last few years, we've seen a spurt of activity where technology has started to penetrate the industry, and has started to change it. We're riding that wave, and really changing how things are done.
So where are you now?
Scott Cannon: We started in 2012, when it was basically a couple of people on a telephone and the yellow pages. They were putting online advertisements through Google Ads to solicit people to rent equipment, who could not figure it out on their own. In 2014, we raised quite a bit of money from St. Cloud, and really went full force. The company has grown about 200 percent since 2014, in terms of revenue. We do thousands of rentals on a monthly basis, and in terms of scale, we're now at 65 employees, and we're growing at an average pace of 25-30 percent, year-over-year.
This industry is not particularly known for its rapid adoption of technology. How are you getting people to adopt your system?
Scott Cannon: On the supplier side, really, the key to getting them to adopt our business model has been to have them see us as an ally, and not someone who is there to disrupt or take business away from them. The biggest hurdle, initially, was getting suppliers past the “friend or foe” question. They don't use technology, particularly smaller ones, they don't use the technology they could to understand their utilization, or to know where their equipment is at any time. So, you can't make it complicated for them. We had to simplify all of this for them to use us. From a customer standpoint, though, it's pretty clear. They all understand online search, which they use for most of the other parts of their lives, so they go online, get what they want, pay for it. That's how they use Uber and other applications. So, from the customer side, it was much easier. The supplier is the hard part.
So why is it those rental yards have been willing to work with you?
Scott Cannon: It's because we drive revenue. When you can drive revenues, it makes any relationship easier. We help the small independent rental yards. As fragmentation starts to go away and there's consolidation in the space, the bigger guys get bigger. We bring value to those small guys who can't compete against a $60 million marketing budget. Really, we're the sales and marketing arm of those companies. How we made it easy, is a system we call Quickrentz. It's a method of getting suppliers to take an opportunity from us. Instead of having to integrate with a system that doesn't exist, they get a text or email, or a phone call, to ask if they have equipment around and if they'd like to accept or not accept, and let us negotiate it, which makes it simpler for them.
How did you get involved in the business?
Scott Cannon: I ran an international logistics company, MNX. When I joined, they were a struggling business, and redefined what they were doing, and they grew by 3X in the seven years I was CEO. We sold that to a very large private equity company. One of my partners was St. Cloud Capital. They invested in 2014, and asked me to meet with Dallas Imbimbo, the CEO and Founder. Dallas talked to me about business models, and I built a relationship with Dllas. If you meet Dallas, he's one of the most persuasive people on the planet. He convinced me to come out of retirement and help. Dallas had been seeking a true operator, who could take the business, make it very efficient, and scale it quickly. He stepped down, and had me take over as CEO. We've been going at light speed every since. Dallas, and his partner, Nick, created an awesome business model, and we've taken those good practices and really driven it home since.
What's the biggest thing you've done to be able to scale the business?
Scott Cannon: The biggest and most important thing, was getting things operating with the unit economics where they needed to be. One of the mistakes that most startups make, is they get impatient, and throw lots of capital at something. You cannot grow your problems. You have to make sure your cost of acquisition, retention rates, and conversion metrics are all in place. Those need to be in place before applying capital. That's one of the lessons I've learned with BigRentz as well. We went a little too fast, and took on too many categories at first.. One of the things we did was simplify the business, so that we compete where we can, and where we can't, we don't. The results speak for themselves. We've had an absolute dramatic growth in profitability of the operations. The number one thing we did to succeed in this business has been touchless rentals. That's allowed us to have true scalability. What we had set in place before, is you had to call an 800-number to talk to someone. That person would take your information, and either accept it and get back to you, and then place a bunch of phone calls to suppliers to see if could or couldn't be done. Then there was haggling back and forth about price. We've removed all of that from the equation. Since we moved to online order entry in October, we have had 30 percent of those rentals completely touchless. A person doesn't get involved. You go online, you get a piece of equipment, you check out with credit information, we accept it, it goes into the Quickrentz system and is automatically dispatched, and no person every touches it the whole way through. That's been the most exciting thing, because it allows us to scale and grow quickly, without bodies.
What's the biggest advice you'd give a startup in a similar situation?
Scott Cannon: I had to go back, and really get operating metrics in place to know how to look at the business. You have to know what is important, and what is not important, and have to grit and grid and be hyper focused on those results. Most of what I've seen, sitting on the boards of other startups, is that most startups have attention ADD. Entrepreneurs are great at coming up with ideas, but it takes a different kind of person to really scale a business quickly. That' usually two different people, as it's rare to find someone who can do both. The thing is to focus on what is important, and what is not, and don't pay attention or put any resources on things that get you distracted.
What is BigRentz doing next?
Scott Cannon: We are going to have our shopping cart online shortly. That will allow people to rent multiple things online. We'll also be doing significant enhancements to our customer portal. Internally, although the customer won't see this, we're spending significant amounts on automation and on internal systems to support significant growth. We want to make sure we have the visibility into the business, and avoid potential customer experience problems. That's one thing I took from my prior company. We started out having a very manual business, and by the end, we have 30,000 orders a month, and 90 percent of those people never touched. If you look at BigRentz, we want to do the same thing.
Thanks, and good luck!