Profit in a rental business doesn’t come from high prices — it comes from understanding your costs. Every rental transaction includes multiple hidden expenses that go far beyond the purchase price of the item.
Below is a breakdown of the operational costs you should account for when calculating pricing and profitability.
Before an item ever goes out, there’s labor involved:
Even five minutes of employee time per rental adds up quickly over hundreds of orders.
When the item comes back, the process repeats in reverse.
Employees spend time checking for damage, cleaning, and ensuring everything works. This includes:
These steps are crucial for maintaining quality and avoiding downtime, but they directly add to your operational cost per rental.
If an item requires maintenance or repairs, you need to factor in:
Even small recurring costs can add up over a rental season.
Every idle item takes up physical space. Whether it’s a shelf, rack, or storage unit, that space has a cost — rent, utilities, and management.
Including warehousing costs per item helps you better understand the true cost of downtime and incentivizes higher utilization.
If an item sits unrented for too long, you lose money in two ways:
The key is to monitor utilization and ensure each asset spends as much time rented as possible.
Running rentals efficiently requires systems to manage:
Platforms like TWICE Commerce centralize these processes, reducing time spent on manual tasks and improving turnaround times between rentals.
Understanding these cost categories is essential for setting pricing models that reflect your true unit economics — and for identifying where efficiency improvements can boost profit without raising prices.
Karri: What are all the operational costs or possible costs that are involved in a rental business? Starting with the idea that you have an item in your inventory that has never been rented out.
Tuomo: So it's just simply the order fulfillment costs. Essentially having someone find that item for the customer and set it up to be rented. If it's a walk-in customer, maybe click and collect, it's about having the item ready — not in its original package, but prepared for use.
Tuomo: If it’s a bike, it’s ready to be ridden. If it’s a complex item, you might need to spend a few minutes teaching the customer how to use it — which is a cost in terms of employee time.
Tuomo: Then, after that point, when it eventually comes back, you have the cost of receiving it again, inspecting it, and refurbishing if needed. That includes the cost of spare parts, cleaning supplies, or anything you spend to get the item back to rentable condition.
Tuomo: I’d also calculate warehousing costs here. Even if an item is sitting idle — on a shelf or bike rack — that space has a cost. You’re paying for the storage area, management, and overhead for the inventory that’s not out earning revenue.
Tuomo: So, from setup to return, every item in a rental business carries hidden operational costs — and understanding those is key to pricing, efficiency, and long-term profitability.