Looking for advice on renting my lights to people

[iammagicmike]

I've recently purchased some lighting gear and I've run into two other local lighting guys that are interested in renting some of my equipment.

I'm looking for advice on how to protect my gear as well as what is a fair rental price to charge.

I'm looking for some guidance on the following:

What should I include in a rental contract?

What should I charge to rent per day? Rent per week?

How should I handle security deposit?

Does anyone use credit card readers?

Thank you

 

[TJCornish]

Are you doing "dry rental" - i.e. to Joe Somebody off the street, or are you doing "cross rental" - to other qualified and trusted operators? Many of your questions depend on your clientele.

Your rental contract needs to include terms of the rental - time in/out, details of who is responsible for loss or damage, warranty and support terms - i.e. if something doesn't work, do you have to drive to their gig to replace it, payment terms, etc. Consulting a lawyer for a template may be a good idea.

The short answer is that your gear is worth what someone will pay for it. A general starting point is 3%/day of purchase cost and 7-10%/week, but these can vary wildly based on the lifespan of the item, its desirability and scarcity, your relationship with the client, and other factors. Things like projection screens, soft goods, and fragile items will have a significantly higher cost than long life items such as dimmer packs, LED fixtures, etc. Generally accessories like cables, spare bulbs, gel frames, clamps, and the like are not considered for rental cost - they are part of the daily rate of the item.

Your payment methods will vary based on your frequency of use. I only occasionally take credit cards, so I have a Square reader for my IPhone that has no monthly fee, but a higher transaction cost. If you do a lot of credit card business, it may make sense for you to pay a monthly fee but have lower fees per transaction.

 

[iammagicmike]

The two guys are other qualified lighting techs, they certainly have much more experience than I do with this kind of equipment.

They seem plenty trustworthy, but at the same time I have only met them within this last month.

Thanks for the cost percentages. Do you generally charge a security deposit?

 

[TJCornish]

I only do cross rentals to people I trust, so I haven't worried about a deposit. If it's a new acquaintance, it may be wise to take pre-payment or some kind of deposit. Some of this depends on the value of the rental, too. Are we talking $500 worth of equipment (purchase cost), or $50,000? If it gets to be significant, you may want to require them to provide proof of insurance.

 

[iammagicmike]

Replacement cost for all of my equipment is about $4k.

What kind of insurance are you taking about?

 

[TJCornish]

Equipment replacement insurance, often called Inland Marine - marine meaning it moves around, and inland meaning that it's not on water. An oxymoronic name to the uninitiated, but it is what it is. If the client has an insurance agent, they can find out if their existing insurance covers rental equipment. If it does, they can issue a certificate of insurance with your company as the beneficiary if it's a big enough deal ($4k probably isn't), or a letter stating that the client has insurance coverage. If they do not have insurance or their insurance doesn't cover rented equipment, they could get a special policy just for their event.

Where and when it makes sense to do this is up to you. The flip side to all of the paperwork is that it is a drag on the relationship. If you make it too hard to rent, they'll go somewhere else.

If it were me and assuming that losing $4K won't cause you to lose your house and be on the street, I would probably skip the insurance and just do a contract stating that the client assumes all responsibility for loss, damage, and use of the equipment. You might have to go to court to get your money if something goes down, but that risk can be mitigated by knowing your clients.

 

[iammagicmike]

Thank you for that reply, it's very helpful. I think I have enough information to move forward. I appreciate this more than I can write in a text reply.

I'm hoping to build a good relationship with these two guys, I'm blurry really interested (currently) in renting out to just anyone, but I have to start somewhere.

 

[len]

Assume that whatever you rent will be gone for the weekend, i.e., if they rent it for Friday, you won't have it available in Saturday. That way, if they unexpectedly can't return it, or if they break it, you already planned that you won't have access for the whole weekend. Most rental places around here rent for either 3 days minimum, or 7 day and beyond.
In addition to loss/damage, maybe consider having the renter sign a "hold harmless" agreement because if they injure someone using your equipment you could also be liable.

 

[iammagicmike]

That's very good advice, I'll look into hold harmless agreements. I didn't even THINK about that.

 

[derekleffew]

The following thread is old, long, and often veers ott-topic, but some posts may be pertinent. Be sure to read to its conclusion. http://www.controlbooth.com/threads/pies-new-enterprise-the-thread.6604/

 

[iammagicmike]

The following thread is old, long, and often veers ott-topic, but some posts may be pertinent. Be sure to read to its conclusion. http://www.controlbooth.com/threads/pies-new-enterprise-the-thread.6604/

thanks Derek! reading during my lunch break.

 

[iammagicmike]

The following thread is old, long, and often veers ott-topic, but some posts may be pertinent. Be sure to read to its conclusion. http://www.controlbooth.com/threads/pies-new-enterprise-the-thread.6604/

that was a good thread. I felt a little sad that he sold at the end....lol

 

[MarfaLights]

Go rent some lights from a pro and see how they do it. You'll learn a lot about the business and the types of paperwork. I know a sound guy who divides the cost of his gear by the number of events he will do in 2 years and then charges that much. After two years, all rental is profit or he can sell it and use the proceeds for an upgrade. I go with about 5 percent of cost per gig. It's a little higher than big city rates but I'm in a tiny market far from a rental place.

 

[Scenemaster60]

When I was gong to rent some of my inventory out last winter I talked to my personal insurance agent and this is what I learned:

There are two things you can get insurance for:
1. The equipment itself (Inland Marine as mentioned above)
2. Small business liability insurance.

His opinion is that the second is more important than former and this is why:

1. You can list the replacement cost of the equipment in your rental contract and stipulate that if the equipment is stolen, damaged or destroyed that the renter is responsible for UP to that cost. Now, if the equipment is lost, stolen or damaged you will have to follow up and possibly sue them (or their insurance company) to get the money to replace your equipment. It's a pretty simple legal argument and you will win in court, but you have to go through the process. If you have your own coverage for loss/damage this becomes much less of an issue but you have to factor the cost of that insurance into your rental fees.

2. Small business liability insurance. Imagine this scenario: I rent a dozen 360Qs to a colleague who I know and trust. I have personally maintained these instruments. Whips and cables are regularly checked, sockets replaced, c-clamps checked for cracks, all have safety cables. My colleague hangs and wires them properly. Turns out there is the beginning of a crack in some insulation that is barely noticeable on an instrument whip. It happens to touch something metal and it throws a few sparks before blowing the fuse. One of these sparks happen to land on some crepe paper that SOMEONE else put a little too close to the lights. There is a fire, a BIG FIRE. Building is a loss. After the forensic investigation it is proven that It was my light that threw the spark even though I insist that it was well-maintained. The owner of the building CAN come sue me personally for his loss. They can come after my home, my cars and and any other assets. If I have business liability insurance, they will sue my insurance company first for the maximum that the policy will pay out before they come after me personally. It is definitely worth the peace of mind, in my opinion!

 

[np18358]

First, let me recommend this book: The Business of Theatrical Design. It can be had for 15$ on Amazon, and a google search reveals that Walmart has it... Although it is more related to design than renting equipment, it discusses in depth liability and the importance of different types of insurance. It's a great book. I am not a lawyer, nor a tax attorney or financial planner, and I am certainly not familiar with tax laws in Michigan, however, I think you should consider forming an LLC. The other option would be an S-Corp or a C-Corp, but those are more complicated, and have disadvantages. (As Scenemaster said), If you as an individual are renting out items, you can be sued personally, and you can lose personal assets. The small business should also have liability insurance, but if that is too expensive, and you don't get it, it's not the end of the world if your are an LLC, and you never leave much in the way of corporate funds, always moving it to your personal accounts. Also with an LLC, you can deduct operating losses against the LLC's regular incomes. Some people will tell you that a S-Corp is better than a LLC, that's up to you to decide. Another thing to put in your Hold Harmless Agreement is that should any dispute that arises as a result of this business transaction, shall be litigated in whatever local jurisdiction you are in. Also, the prevailing party as a result of a judgement in a court of law is entitled to reasonable attorney's and/or legal fees. You will certainly want a lawyer to write a contract for you.

 

[iammagicmike]

First, let me recommend this book: The Business of Theatrical Design. It can be had for 15$ on Amazon, and a google search reveals that Walmart has it... Although it is more related to design than renting equipment, it discusses in depth liability and the importance of different types of insurance. It's a great book. I am not a lawyer, nor a tax attorney or financial planner, and I am certainly not familiar with tax laws in Michigan, however, I think you should consider forming an LLC. The other option would be an S-Corp or a C-Corp, but those are more complicated, and have disadvantages. (As Scenemaster said), If you as an individual are renting out items, you can be sued personally, and you can lose personal assets. The small business should also have liability insurance, but if that is too expensive, and you don't get it, it's not the end of the world if your are an LLC, and you never leave much in the way of corporate funds, always moving it to your personal accounts. Also with an LLC, you can deduct operating losses against the LLC's regular incomes. Some people will tell you that a S-Corp is better than a LLC, that's up to you to decide. Another thing to put in your Hold Harmless Agreement is that should any dispute that arises as a result of this business transaction, shall be litigated in whatever local jurisdiction you are in. Also, the prevailing party as a result of a judgement in a court of law is entitled to reasonable attorney's and/or legal fees. You will certainly want a lawyer to write a contract for you.

Awesome advice, I'll pick up that book today. I already have an LLC filed for this effort so I'm partway there. Thank you.

 

[Pie4Weebl]

that was a good thread. I felt a little sad that he sold at the end....lol

Haha, not at all! I quickly realized the amount of money I could pull in working on larger shows for an established company was a lot more than I could make renting to bar bands and shitty club promoters and much less stressful! The gig I moved to gave me the experience base for most of my future success, and I know I wouldn't be working at the level I am now if I had made my own company my focus at the time.

 

[iammagicmike]

Haha, not at all! I quickly realized the amount of money I could pull in working on larger shows for an established company was a lot more than I could make renting to bar bands and shitty club promoters and much less stressful! The gig I moved to gave me the experience base for most of my future success, and I know I wouldn't be working at the level I am now if I had made my own company my focus at the time.

So less of a "sell out" and closer to a "buy in". It was cool reading that thread nearly a decade later, it sounds like it's been very successful.

 

[mike1023]

So less of a "sell out" and closer to a "buy in". It was cool reading that thread nearly a decade later, it sounds like it's been very successful.

Drop me an email @ [email protected]. I'll send you a copy of our rental agreement, should help you get an idea.