Andris Pavlovs already had a successful experience in the equipment rental business when he and his like-minded partner Andris Bisnieks founded their own company - Storent - in 2008. This was the beginning of a new chapter in the history of the equipment rental business in Latvia and one of the international success stories of Latvian entrepreneurship.

Fifteen years later, Storent has become one of the market leaders in the Baltic States and has expanded to Finland and Sweden. In the spring of this year, Storent made a strong stock market entry, raising €10.5 million from almost 1,000 different private investors through a bond issue. A fourth bond issue is currently planned. In this interview, Andris Pavlov will talk about Storent's strategy and potential, as well as the future of the construction equipment rental industry.

You call yourself the most innovative rental company in Europe. What does that really mean?

We founded Storent with the aim of offering our customers the possibility to rent equipment quickly, easily, without unnecessary bureaucracy and at the best possible price. To achieve this, we have focused on integrating IT solutions into our work from the very beginning and invested heavily in IT solutions from day one. This approach was unprecedented in the construction equipment rental industry, neither in Latvia nor in Europe, so we had to think and develop everything ourselves in collaboration with an IT company, thus becoming pioneers of innovation.

Storent's rental processes are automated to the maximum. We have developed an ERP system for the management of sales activities (integrated CRM), the organisation and planning of repairs and maintenance, financial accounting and management, as well as all other business processes related to the operation of a construction equipment rental company.

In addition, digital solutions also play an important role in Storent's cooperation with the customer. Without calling or driving to us, a Storent customer can carry out all activities remotely: book, collect and hand over the required equipment. In his virtual customer cabinet, he can access comprehensive information about his orders, invoices and other important information. Neither the customer nor the employee has to waste paper or wait in line - everything is done electronically and in a flash. Our competitors are only now starting to try to implement what we at Storent have been working on since the company was founded in 2008. By being first, we are setting industry standards.

Digitalisation has arrived rapidly in almost all sectors. Are there any solutions found elsewhere that Storent has also used in its business?

Of course! For example, Smart ID - when we saw it, we realised it was the future and the last link in the chain so that all customer interactions can be done online. In particular, the unit value of our rented equipment often exceeds tens of thousands of euros, so if we want to provide remote customer service and electronic signatures, we need to authorise people remotely, which is where Smart-ID, eSignature and other similar solutions in different countries help us. In 2020, just before the Covid-19 pandemic started, we introduced Smart ID authorisations in the Baltic States and similar authorisation solutions in the Nordic countries. Our figures show that this was and continues to be one of our biggest competitive advantages.

In the Baltic countries, we have achieved that nearly 50% of customers place orders online and 95% of customer transactions are signed electronically. This result is fantastic! But we will not stop there. We will go further.

What will be the next step?

This "next step" consists of many components that we have combined in an IRMS (Intelligent Rental Management System) - it digitises all our internal processes, some of them fully automated, significantly increasing efficiency as well as collaboration with our customers.

So is IRMS the key to your success?

Yes and no. It is not enough. The system needs a competent team. People are our most precious and valuable resource. It is people who will manage the processes, coordinate them and take the important decisions. Only a human being can choose, based on data, what equipment we buy for our rental fleet. We also have professional salespeople in our team: each one is able to find the best possible solution for the customer's project. Automation is for the customer who already knows what they need. But for example, when starting a new type of project, a professional's advice on the choice of machinery is very valuable because it helps to get the job done faster and cheaper. Humanity must not be lost. A builder doesn't just need speed, he needs an expert who will advise him on the best way to do the job and make sure everything goes well.

For us, the client is not just a bag of money. We are building a team of consultants and project managers with a purpose: to help solve the client's needs. And the most important element in our industry, however, is the equipment itself and its technical condition. This is where our team of highly skilled mechanics play a key role. Here too, technology helps us, as the organisation of work and detailed cost accounting allow us to be efficient both in the maintenance and repair process and in the procurement of machinery. We can make the right decision at the right moment to sell machinery when it is no longer economically viable to continue using it. 

So we did everything we could to automate routine work and free up time for our team to focus on what really matters. The combination of digitalisation and a strong team is what drives our results.

Changes in the construction industry can be quite dramatic. Do you have a contingency plan in case of a downturn in the construction sector?

First of all, we have a very broad client portfolio, so we are stable. In addition to construction, we also work in road infrastructure, military, manufacturing, agriculture, renovation and events. Diversifying our portfolio is also an additional growth strategy that helps us to grow steadily. Economic situations and trends change, as one area declines, new opportunities emerge in another. We have learnt to adapt, we cannot do without it.

Secondly, from my own experience as an entrepreneur, as construction finances shrink, machinery rental volumes increase because builders do not have the funds to buy new machinery. Financial considerations have an impact on market development at all times. We have seen how market trends change in different countries. In the Baltics, on average, builders choose to rent 30-40% of the equipment needed for a project. Most of it is now more affordable for them to buy themselves. In the Nordic countries, where the construction market is more developed, the proportion of rented equipment is higher. In Finland, 50% of the equipment is rented, in Sweden 60%. In the Baltics, builders buy more than they rent. But we see great potential to achieve a higher share of rented equipment in the Baltics over time as well. After all, if the quality of the work is the same or better, the most financially viable way of doing the job will always be the best in business.

Thirdly, Storent was founded in 2008 in a time of crisis, so our experience is precisely working in a crisis. We make the right decisions and it is in a crisis that we go to the next level. Because it is the difficulties and instability that give those who see the opportunities in the difficulties and seize them, the best chance of moving forward. Downturns, recessions, crises - these are the best moments to take a big step towards the future. The construction equipment rental industry is undergoing major changes, and we are moving ahead.

What exactly are these big changes in the construction equipment rental industry?

At the moment, as in many other sectors, there are a few players in the equipment rental market that tries to get the best share. But if all the other players in the market cooperated with each other, everyone would win. That's why we created platforms like PreferRent and Cargopoint alongside Storent. These are solutions that are accessible to everyone and will improve the industry as a whole.

PreferRent is a platform where you can find information on almost all rental equipment on the market: its price, location and availability. From there, the customer can also rent the equipment and the rental companies can re-rent to each other. This is a new solution for the equipment rental business worldwide.

The Cargopoint platform, on the other hand, facilitates the logistics organisation of machinery. By entering the size of the load to be moved, the dispatch and delivery points and the delivery time, the user of the platform will receive quotations from different transport operators and will be able to choose the one that suits him best.

What are the main advantages of these platforms?

Speed, choice, transparency and competition.

On the PreferRent platform, users can receive multiple offers from rental companies and choose the best offer for them. The platform promotes competition in the construction equipment rental sector and increases the efficiency of rental companies. Cargopoint allows the user to receive several offers from different transport companies and also to choose the best offer.

Are PreferRent and Cargopoint solutions available for companies all over Latvia?

Latvia, the Baltic States and Europe! Currently, more than 500 businesses from all Baltic States and Poland are registered on the PreferRent platform. These are not just rental companies, they are also companies that have their own equipment and are willing to rent it to other companies when they are not using it themselves. Cargopoint covers all the Baltic States for the time being. And we are planning to introduce these platforms in other regions as well.

Does Storent also use the PreferRent and CragoPoint platforms?

Absolutely! PreferRent sends a rental request to all rental companies that have a demand for equipment in a given location. Storent also receives those requests from customers and creates its own rental offer. PreferRent also helps you to identify re-rental opportunities. So if a Storent client has a project to deliver and Storent has 80% of the equipment in its fleet, we find the remaining 20% and provide the full package so the client doesn't have to scratch its head. Storent also offers the customer optimal solutions for the delivery of the equipment, with Cargopoint the range of carriers used is much wider and the solution offered to the customer is therefore better. As a result, everyone wins! Smaller players in the market can also get a deal, and Storent can offer to re-lease their equipment to them. We are focused on working together to increase the efficiency and sustainability of the entire construction equipment rental industry.

Digital tools improve both the cooperation between industry players and provide a convenient cooperation model between the end consumer and service providers.

Do you believe in cooperation?

Working closely together benefits everyone. It was Storent that once introduced the equipment leasing model in Latvia. Now, PreferRent and Cargopoint have been created in partnership with Storent. We are innovative and ready to share our experience with other companies. Raising the level of the whole industry will benefit both the business players and the end consumer.

We are aware, however, that innovation in the industry is not a simple process, because to do things differently you have to change both your mindset and your habits. There may be a number of market players who are not ready for this yet, but we are convinced that sooner or later the market will have to change. Although the construction and construction equipment rental industries are slow to change, generations are changing there too, technology and innovation will have to come in. At Storent, we are not only keeping up with changes in the industry, we are shaping them ourselves.

Thank you for this insight into the future of the field. You are already planning to raise finance through bonds again on your expansion path.

Yes, we had a very successful launch in the spring, raising more than EUR 10 million. Now we will launch again to achieve our big ambitions, raising a total of our planned EUR 15 million.

What investors did you attract in the spring?

The geography is wide, we have almost 1000 investors from 13 different countries. The most interested were private investors from Estonia. Private investors are what we wanted to attract because I see a future in it, given the nature of our industry and of our clients. These expectations came true and I am very happy about that, because it allows us to grow and reach new heights.

What have you achieved with the EUR 10.5 million raised in the spring?

The main objective was to invest in the faster development of the business. We primarily invested in our most valuable asset: the renewal of our machinery. Our machinery fleet is worth more than €160 million in new value and needs to be constantly looked after. We are selling older equipment and replacing it with more modern equipment that better meets the needs of our customers. In total, this year we have already invested EUR 12 million directly in equipment renewal projects, adding another EUR 6 million to the EUR 6 million already planned. Part of the money raised was used to cover financial commitments. We are also continuing to look for companies to buy in the Baltic States, Finland and Sweden to expand.

What are your goals now?

This time we plan to raise EUR 4.5 million, reaching our current bond ceiling of EUR 15 million. I always aim high, while making decisions based on concrete data only. Finance helps us grow faster - we are on a wave of innovation that is carrying us towards our development goals. The industry is changing, we know exactly what to do to take advantage of this situation for ourselves and the industry. By raising an additional EUR 4.5 million, we will fulfil a number of strategic objectives, driving our business forward.

For detailed information about the Storent Holdings bond issue, please visit our website.