How to Start a Party Rental Business

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Quick Reference

If you’ve ever thrown a large-scale party, planned a wedding, or been in charge of a large corporate event, then you may already have experience in renting party equipment, like tents and tables. Starting a party rental business of your own will mean you can help other party hosts find the equipment they need. If you have great organization skills and an awareness of the types of equipment needed, you’ll be well-suited to running this type of business. Plus, if you love throwing parties and have creative ideas, you can make suggestions to increase your sales while helping hosts create unforgettable parties.

Business Overview

Party rental businesses offer a large volume of expensive supplies that are must-haves for larger parties. These are supplies that occasional party hosts couldn’t justify buying themselves, like tents, bounce houses, inflatable slides, chairs, tables, lighting, decorations, linens, and more. These businesses often have a comprehensive inventory of items for a host to choose from, allowing a customer to do nearly all of their supply shopping from one business.

As part of the rental service, a business will deliver and often set up the equipment. After the event, pickup is also included in the rental cost, though some customers may choose to pick up and drop off smaller pieces of equipment.

Industry Summary

From 2013 to 2018, the party supply rental industry has undergone steady growth. According to IBIS World, the industry experienced an annual growth of 4.5 percent during that time, and the number of businesses increased to 12,583. Industry employment also increased to 54,606, and in 2018, the industry brought in $6 billion in revenue.

The industry’s growth correlates with the increase in disposable income and corporate profit from 2013 to 2018. With more disposable income and profit, more people and corporations host parties and events, and they’re more likely to make those events larger and rent more party equipment as a result.

Industry Trends

According to Current, several major trends are currently shaping the event rental business industry. Event hosts are increasingly turning to new, creative, and non-traditional venues. These non-traditional venues can include barns, warehouses, lofts, and different outdoor settings. They give rental businesses a chance to create setups that are unique and work with these different settings.

Party hosts are also increasingly focused on sustainability. Party rental businesses can embrace this trend by replacing plastic tablecloths with cloth ones, supplying energy-saving lights, and even using electric delivery vehicles to cut back on fuel use.

With the constant development of technology, there’s always a demand for the latest technological party equipment, like lighting and AV supplies. Rental businesses that can clear out old equipment and invest in new technological equipment will probably see more bookings than companies that have outdated equipment.

Related Industries

Bounce House Rental
Event Planning

Target Market

The target market for a party rental business will depend on the business’s area of specialty if there is one. Businesses may specialize in wedding, birthday party, or corporate event rentals, and each will have a different target market. Some businesses take a more general approach or choose to offer products for each specialty area to appeal to a wider potential market. Businesses may market directly to people who are throwing these parties or market to event venues and event planners or managers.

Skills, experience, and education useful in running a party rental business

While you won’t need a business degree to start a party rental company, certain skills and experiences are useful and can increase your business’s chances of success.

Understanding of party and event trends. A party rental business owner needs to have their finger on the pulse of party and event trends. This awareness can help to keep a business’ inventory current and appealing to potential customers.

Party planning experience. While not a requirement, a business owner with party planning experience can better understand the target audience and the challenges and pain points they face.

Knowledge of party equipment. A strong knowledge of party equipment, from AV technology to tents to folding chairs, will allow a business owner to identify the types of equipment that will be most in-demand and to wisely make inventory purchases.

Customer service skills. Great customer service skills are important, especially since emotions can run high around special events. A business owner needs to be able to communicate clearly and quickly solve problems.

Organization skills. With large volumes of inventory, organization is important in keeping track of supplies and in preparing orders. Attention to detail is also highly important.

Networking skills. Networking is essential in this industry since connections with event planners, business owners, and event facilities can lead to potential bookings.

Management experience. Nearly any party rental business will require multiple employees, so experience in hiring, training, and managing staff is valuable.

 

Educational Resources

Amazon has several books that go into detail on starting and running a party rental business.

 

Moonwalk Biz Playbook: A Complete Toolkit For Owning and Operating a Party Rental Business (Free on Amazon Kindle Unlimited)
Party Rental Business Playbook (Free on Amazon Kindle Unlimited)
Progressive Business Plan for a Party Rental Company (Free on Amazon Kindle Unlimited)

 

Costs to Start a Party Rental Business

Because party rental businesses require large amounts of inventory, starting these businesses requires a significant initial investment. To keep costs down, try focusing on a certain specialty, like inflatable toys for parties or supplying just decorations for weddings. Expect to spend about $25,000 to start up a smaller, specialized business, and as much as $300,000 or more for a more extensive and comprehensive supply business.

Common startup costs include:

  • Inventory
  • Delivery truck
  • Tables and chairs
  • Supplies, like cleaning equipment
  • Signage
  • Working capital to cover the first few months of payroll, lease, insurance, marketing, etc.

 

Steps to Starting a Party Rental Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Writing the plan forces you to consider and research important aspects of the business, such as who the competitors are and what makes your business different, pricing, and whether the business can be profitable. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

Related: Comparison of Business Entities

Step 3: Name the Business

Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips and ideas for naming a party rental business

Step 4: Select your Location

A rental business will need a physical location to store equipment, and customers may also place orders or even pick up smaller supplies at this location. Because of the size and volume of a business’s inventory, it may be necessary to rent a large building or even a small warehouse, expensive. Exact rental costs will depend on the building’s size and location.

Related: Choosing a business location

Step 5: Register for Business Licenses and Permits

There are no licenses required specifically for party rental businesses; however, there are general local, state, and federal business registrations, such as a sales tax permitEmployer Identification Number (EIN), and Occupancy Permit, among others.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a party rental business is another.  Funding to start a party rental business can be difficult.  In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the business’s income and expenses.

Step 8: Get your Marketing Plan in Place

Party rental businesses rely on active marketing to bring in new customers, especially since customers may only throw occasional parties, so repeat customers result in only occasional repeat business. Marketing can include print marketing, direct mail, radio, online marketing, social media platforms like Pinterest, Instagram, and Facebook. Marketing expenses will vary according to the type of marketing and its volume.

Related: Low-cost ideas to market a new business

Step 9: Get Business Insurance

Party rental businesses need several types of insurance to be fully covered:

  • General liability insurance protects the business if customers or event attendees are ever injured because of the rental equipment. This insurance can cover costs like legal fees and will generally be required when setting up events for corporate and municipal customers.
  • Commercial property insurance protects the business against the financial loss of inventory and property after an event, like a fire.
  • Commercial auto insurance covers the expenses, like legal fees and medical bills, that can occur if a company-owned vehicle is ever in an accident.
  • Worker’s compensation insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while on the job.

The cost of insurance policies will vary depending on many factors like the business’ location, the value of its inventory, and the number of employees. To get the most accurate idea of what insurance will cost, request quotes from multiple insurance companies. When comparing the quotes, be sure to think about factors like coverage limits and exclusions, premiums, and deductibles.

Related: Types of insurance your business may need

Step 10: Hire Employees

A business will need at least a few employees to take and prepare orders and to deliver and pick up equipment. According to Payscale, sales clerks make a median rate of $10.27 per hour, with some clerks earning up to $14.82 per hour. Payscale also reports that delivery drivers earn a median income of $14.32 per hour, with some earning up to $21.58 per hour.

In addition to budgeting for salary expenses, a store’s budget also needs to include worker’s compensation insurance, paid time off, and health insurance contributions for employees.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

 

How much can you potentially make owning a party rental business?

Data on the specific income you could expect with a party rental business isn’t available, but keep in mind that your income will depend on many factors. A smaller business intended for backyard parties won’t bring in the same income that a larger business that caters to weddings and corporate events might see. However, startup costs for a smaller business will be more manageable. The number of years that a business has been operating and its reputation will also affect its income. Finally, a business owner who understands the equipment that is most in-demand and who understands how to source these types of equipment at the best prices can help to keep profits up for increased overall income.

Things to consider before starting a party rental business

It’s important to realize that the party rental business can fluctuate, especially since it’s closely tied to disposable income and overall economics. This can also be a very seasonal business, with events occurring more frequently around the holidays or during times of good weather. Branching out into multiple event types, such as corporate holiday parties and weddings, can increase your bookings, but it also means that you’ll need to invest in and store more equipment.

This is also a competitive industry. Customers will want new and quality equipment and supplies, so as a business owner, you’ll need to stay aware of evolving trends and be one of the first businesses in the area to offer trending equipment.

Networking is an important element in a party rental business’ success. Establishing and maintaining connections with local event planners and event venues can bring in new business and open up new opportunities.

 

Resources:
American Rental Association