All in the family: John Wyatt talks to André Véronneau

Celebrating its centennial, Montreal–based Simplex Equipment Rental is an industry role model. John Wyatt talks with President André Véronneau about the company's entry into the earthmoving market, multiple acquisitions, fleet investment and what it means to be a fourth generation family business.

What a way to turn 100. Since his great grandfather Louis Henry Véronneau began Simplex in 1907 as a floor sanding business, André Véronneau has helped – along with the generations in between – transform the business from a small tools rental house to a one–stop rental shop with a big fleet including aerials and handlers.

Within the last year, the company introduced earthmoving equipment into its massive catalog, and has already proven to be a lucrative market. With approximately 30 models in its fleet, JCB loaders and Kubota compact excavators among those, the company says it hopes to further expand its earthmoving product line.

Strong growth

In the last 10 years, the Montreal–based rental firm has tripled sales. Hard to imagine, but in 1998, the company had 55 workers and sales of C$18 million (US$17.2 million). This fiscal year, ending in April 2007, revenue was C$65 million (US$62.3 million) and the company has a staff of 525. ALH's sister publication Access International ranked the company 32 in its Access 50 poll of the biggest fifty aerial fleets in the world. Furthermore, the feature reported the rental yard had a 62% growth of its aerial fleet.

When finishing school in the late 1970s Véronneau and his brother Louis started Jalon Tool Rentals in Ville d'Anjou, Montreal. This was a way for the siblings to get their feet wet separate from the family business. After running this tool rental house, Véronneau was invited by his father Louis to be the general manager at Simplex's L'Acadie location, and in 1992 the brothers reunited by merging Jalon Tools with Simplex.

Strong management

Now, Simplex is the largest independent rental yard in Canada, running 32 outlets in the Quebec region, which includes largely Montreal, Quebec City, Ottawa and Sherbrooke. According to the company's Director of Marketing Dany Gosselin, the past 10 years has seen continuous annual sales growth of 10 to 15%. This strong financial streak has allowed the acquisition of several smaller rental yards in their local Canadian region and the launching of new branches in Quebec.

For fiscal year 2008, the company projects sales revenue of C$70 to 72 million (US$67 to $69 million).

“The way we run the company, we don't give any financial goals,” says Véronneau. “You cannot expect 25 to 30% growth each year. That is unreasonable and we wouldn't be able to manage it. I'd say anywhere from 8 to 10% is very decent.”

Simplex views its management as key to company development. Both Véronneau and Gosselin cite that strong employer/employee relations are important, emphasizing that it asks its workers to do the best they can rather than simply asking them to meet financial quotas each period. Véronneau strives to know each name of his workers, though he admits that now with 32 outlets, it's become a difficult task.

Aside from brand identity, the company can credit other factors to its high growth rate. For one, it has 20,000 open accounts; out of this number, approximately 4,000 to 5,000 are active. According to Véronneau, his client base is 50% construction, 20% industrial, 20% services and 10% walk in. The “walk ins” mainly use the tool rentals business, which supplies items such as concrete saws, paint removers, fasteners, and much more, where either customers with or without an open account can rent.

Simplex also has found some niche markets. When the US dollar had some mileage, Canada was heavily used by Hollywood where Montreal and Toronto studios were used as filming locations. Gosselin cites Catch Me if You Can, The Mummy and most recently, The Fountain as productions n in which Simplex has rented scissors, booms and telehandlers. Although it's a lucrative market, it's also a tough contract.

“It's quite demanding, to be honest,” says Gosselin. “They need a lot of equipment, so we better be able to supply them for a couple weeks.” He says there is a lot of quoting involved, as well as management of equipment on the film sets. Sometimes, the film's production staff ask for technical expertise.

For its boom and scissor line, Simplex is an authorized Genie dealer. Its outlet branch has several rough terrain and electric scissors in its inventory. Most recently, Simplex added to its catalog Genie's BIG Z–135/70 articulating boom. For telehandlers, the company has Ontario's CareLift ZoomBoom models, and the JCB 520 compact unit.

Unlike other rental yards that buy both new and used machines to add to their fleet, Simplex says that “all” models purchased are new.

“It's all new,” says Véronneau. “But when the US had a recession in 2001, the price of used equipment was so low we bought a lot.” Gosselin says that the company has renewed a lot of its older products.

The fleet is evolving, of course, but Gosselin says that in his opinion, not much has changed in the market. However, he says that as soon as JLG brings into North America its big European–built scissors – formerly known as Liftlux – Simplex will be in the market for one.

Simplex management views acquisitions as the primarily element to the company's growth strategy. Since 1998, the company has acquired 10 small rental businesses.

“There's actually two or three ways to do this,” says Véronneau, when asked about the company's growth. “You can buy actual existing rental houses – that's the way we prefer to approach it.

“But also if there is no expansion on the branch standpoint…we can expand by adding new equipment. To be specific, the manlifts [self–propelled booms]. Ten years ago, we had 150. Now we have over 600.”

Fleet investment

This begs the question: what products, if any, Simplex is removing from its fleet? The company is quick to point out that it doesn't operate like the large rental houses by selling off its older machines a few years after purchased. Simplex typically holds on to its products for eight to ten years. Throughout its 32 locations, the company carries 550 forklifts, 1,000 scissors and 650 man lifts.

Véronneau says the company has largely invested in its mechanics team, which currently is 150 technicians. The company wants its units to look new, so it spends its time and resources rebuilding machines, painting, etc., so the fleet always looks like it came off the factory line.

One of the biggest challenges the company faces is its extreme seasonal changes. With its latest venture in earthmoving, the company can only rent this equipment six to seven months of the year, as the winter lasts longer in Quebec. According to Véronneau, the biggest challenge the company faces is not enough equipment. During the late fall, he says a lot of contractors are rushing to complete outside projects before the end of the season. He says that pretty much all equipment is rented out during this period.

“October and November is the big period and everyone wants to finish before winter,” says Véronneau, adding that scissors are never idle. “But if you have too much equipment just for these two months of the year, you will have it in your yard.”

Another factor that has impacted Simplex is the presence of the US rental consolidators and profit centers, competition the company views as “hard and solid.” Véronneau says these companies drive Simplex's prices downward. However, Simplex will not be wooed into the lowball game, and is trying instead to maintain its prices.

The company believes its advantage is not only well–maintained machines, but fast transportation and quick turnaround when a mechanic is needed for on site repair. In regards to rental rates, the company lists all rates online as well as in its catalog. Four rates are given: day, week, weekend and month. Véronneau believes this is the most honest approach to price, with customers viewed equally and no side deals and favoritism coming into play.

There is no question that business for the company is at its peak. The lure of the United States is just south of Montreal, and opening branches in Vermont and Maine isn't the most outrageous suggestion. Véronneau has thought of this, and confesses that given the right opportunity it isn't impossible. However, that's not the company's ambition right now.

No, its focus is to remain in the Quebec region and build its earthmoving product line. It also has no plans to go west in Canada and open more outlets but to expand in its regional territory.

At this point in Simplex's long and profitable history, the company seems committed to its home roots. Since the late 1990s, the company has focused its growth by acquiring small yards and opening new outlets. With its 30 plus locations and now entering a new market in earthmoving equipment, the company is in good health.

Véronneau hints that fifth generation ownership is quite possible. Given that many family run businesses fold after the third generation, reaching the fourth is a milestone. A fifth would be remarkable.