Updates
Guides
Blog
Studios
Partners
Company

TWICE Studios > Shorts >

3 Key Metrics Every Rental Business Must Track

Description

Transcript

Mastering Rental Business Metrics: Item-Level Profitability

To scale a rental business effectively, you must move beyond aggregate sales data and understand the financial performance of individual assets. The core of a profitable circular business model lies in item-level profitability.

Key Metrics to Track

To determine the true value of your inventory, focus on these three specific areas:

  • Revenue per Item: Track exactly how much revenue each specific asset generates while out with customers.
  • Expenses per Item: This goes beyond the initial purchase price. You must account for ongoing maintenance and repair costs associated with keeping that specific item in circulation.
  • Depreciation & Shelf Value: Accounting for the loss of value over time gives a clearer picture of an item's current worth and cost to the business.

Why This Matters

By calculating the net profitability (Revenue - Expenses - Depreciation) for every item, you can identify your true revenue drivers. This data empowers you to make smarter purchasing decisions, retire underperforming assets, and optimize your inventory for maximum ROI.

Powered by TWICE Commerce, the Recommerce OS for rental and resale businesses.

Clip from The Anatomy of the Perfect Rental Business podcast episode.

Karri: Maybe it's good to kind of go over the most important metrics for a rental business to look for.

Tuomo: I'd say for the rental business, there's the profitability on an item level. So just looking at how much every item in your inventory has earned in terms of revenue. So being out there with customers and what has been that item's share of those earnings.

And at the same time, in order to understand the profitability, you need to understand the expenses per item. And the expenses usually come from the purchase price and then potential repair costs that you kind of connect it to it.

And if you want, you can also try to calculate like a shelf value or deprecation costs for the item. And then log that also as a cost then. And then just try to follow the profitability of your items. Because that then helps you understand which part of your inventory are the revenue drivers.