He Started a Tote Rental Business for $2,000. Now He's at 61% Utilization
Summary
This episode features David Stilson, who shares his journey of starting a successful niche rental business renting plastic moving totes. Dissatisfied with cardboard boxes, David identified a market gap and utilized platforms like ChatGPT and online research to validate his idea. He details the initial investment, operational logistics like storage and cleaning, unique rental experiences, and marketing strategies focusing on referrals and premium customer service, exemplified by using high-quality cookies instead of paid ads. The conversation also touches on scaling, pricing, and the importance of mentorship in the rental business.
Key Insights
The tote rental business emerged from a personal problem with traditional moving boxes, evolving into a profitable niche rental service.
David Stilson's rental business began as a solution to his personal dislike for cardboard moving boxes when he needed to move his house. This personal pain point led him to research alternative solutions, eventually discovering the viability of renting plastic moving totes. The idea was validated through research, including using ChatGPT for initial financial projections and market analysis of existing businesses. This demonstrates how identifying and solving a personal problem can lead to a successful business opportunity, especially in the rental niche where convenience and cost-effectiveness are valued.
Customer feedback and unexpected demands can significantly shape and expand a rental business's offerings and operational model.
David emphasizes that the business model evolved based on customer interactions and demands. A key example is the corporate client who needed 150 totes and 40 dollies, a quantity far exceeding David's initial inventory. This forced David to quickly adapt, source additional dollies, and establish an upcharge system for extra equipment. This experience taught him the value of flexibility and adapting the business based on real-world customer needs, rather than sticking rigidly to an initial plan. This adaptive approach allows the business to cater to a wider range of customer needs and discover new revenue streams.
Premium, non-traditional marketing tactics like using high-quality cookies can build stronger relationships and memorability than standard paid advertising.
Instead of relying on paid advertisements, David's business uses a high-touch, referral-based marketing strategy that includes bringing premium, locally famous cookies to networking events and client meetings with real estate agents. This tactic creates a positive, memorable impression and establishes the business as legitimate and customer-focused. The emphasis is on the quality of the product (cookies) and the experience, signaling that the business values a premium approach, which can translate to how they treat their rental customers as well. This strategy is a deliberate choice to stand out and build goodwill, proving more effective than typical paid ads for their niche.
Sections
The Genesis of the Tote Rental Business
David Stilson's move sparked an idea for renting plastic moving totes as an alternative to cardboard boxes.
David Stilson was in the process of moving his house due to HOA regulations affecting his RV rental business. He developed a strong aversion to cardboard boxes due to their inefficiencies and mess, which led him to explore alternative solutions.
Research into tote rentals, including ChatGPT analysis, showed financial viability and low cost of goods sold.
David used ChatGPT to crunch numbers, determining that renting out totes just two or three times would cover the purchase cost. He found that the cost of goods sold for tote rentals is very low relative to the rental price, indicating a profitable business model.
Sourcing industrial-grade, interlocking logistics totes proved more durable and suitable for rental than typical retail totes.
Instead of cheaper Home Depot totes, David opted for higher-quality logistics totes with interlocking lids, which cost about $16 each when bought in pallet loads after shipping. This choice was influenced by supplier recommendations and a desire for a more robust product for rental purposes.
Initial inventory for personal use also served as the starting stock for the rental business.
David initially purchased 120 totes and 40 dollies, costing around $2,000, which was enough for his personal move and provided the initial inventory for his rental business. He used about 20 totes for his own decluttering and staging needs.
The business model was launched with basic online presence and direct outreach.
A basic website with a sign-up form and marketplace posts were used to announce the tote rental service. The approach was to be confident and broadcast the availability of the inventory to potential customers.
Early Rentals and Business Evolution
The first rental involved moving a large aquarium with live coral, showcasing a unique and unexpected use case.
David's first rental customer needed totes to move a 180-gallon fish tank containing live coral. This highlighted the waterproof nature of the totes and presented a unique challenge, prompting David to research how to ensure the coral's safety in the totes.
Initial marketing focused on building awareness through local advertising and networking, as the concept was unfamiliar to most.
Since tote rental wasn't a common or well-known service, David and his wife, Nikki, focused on building awareness. They took out an ad in Real Producers Magazine and attended networking events to introduce the service and seed the idea.
Gathering real-world content and photos was crucial to demonstrate the service's legitimacy.
To combat skepticism caused by early reliance on AI-generated imagery, they sought actual customers willing to let them take photos on moving day. Heavy discounts were offered for these initial rentals to secure visual content.
The business transitioned from a low-stress RV rental background to handling tote rentals with confidence.
Having experience renting RVs, David didn't feel overly nervous about renting out plastic totes. He reasoned that the financial risk of damaging a tote ($16 cost) was significantly lower than damaging an RV, and customers were generally trustworthy.
A large corporate order for 150 totes and 40 dollies revealed the need to adapt pricing and expand inventory.
An electric supply house required 150 totes and 40 dollies for a commercial move. This unexpected demand forced David to purchase additional dollies and re-evaluate his pricing model to include upcharges for extra equipment, demonstrating business evolution driven by client needs.
Business growth required securing short-term financing to purchase necessary inventory.
To fulfill the large corporate order, David utilized a cash flow feature from his business bank account (Novo) for a short-term loan. This allowed him to acquire the necessary dollies and inventory, with the expectation that future rentals would quickly pay off the loan.
The business currently stocks 380 totes and 49 dollies, with no lost inventory to date.
The inventory has scaled significantly to 380 totes and 49 dollies. David notes that, fortunately, no totes have been lost or damaged beyond repair, attributing this to having good renters and a sufficient inventory buffer.
Larger, industrial-grade totes were chosen based on supplier recommendations for the rental industry standard.
The chosen totes were larger than those sometimes sold on Facebook Marketplace. Suppliers recommended this size as it's typical for the rental industry and fits standard dollies, distinguishing them from smaller totes used for retail inventory.
All totes are a uniform gray, with branding applied via waterproof vinyl stickers and QR codes.
The decision to use gray totes was partly practical, aligning with a local warehouse's stock. Branding is applied using waterproof vinyl stickers with QR codes that link to the business website and provide contact information for customer convenience.
Pricing, Marketing, and Operations
Average rental is $180 for 39 totes over 23 days, with a tiered pricing structure based on duration.
The average rental generates about $180, using approximately 39 totes for an average of 23 days. The pricing is set at $5 per tote for the first two weeks, with a reduced rate of $2.50 per tote for each subsequent two-week period.
Bundle pricing, tiered packages based on bedroom count, simplifies the rental process for customers.
To avoid customer confusion with complex calculations, the business uses bundle pricing and packages based on bedroom count, similar to how Home Depot offers moving box kits. This makes it easy for customers to select a package that suits their needs without doing mental math.
Marketing efforts are evenly split across social media, in-person networking, and website SEO.
Lead generation is balanced across three main channels: social media (Facebook Marketplace, general posts, referrals), in-person networking (BNI groups, real estate agent connections, apartment associations), and organic website traffic driven by SEO. Even AI search optimization is noted as contributing.
Non-traditional marketing includes using premium cookies and donuts for networking, building goodwill and brand recognition.
Instead of paid ads, the business invests in high-quality, artisanal cookies and donuts from a local establishment called 'Cookie Cottage' for networking events. This premium offering creates a strong first impression, signaling excellence and customer care.
Totes are stored in the garage, with deliveries managed via pickup truck or rented U-Haul/Penske trucks for larger orders.
The 380 totes and 49 dollies are stored in David's garage. Deliveries are handled using a pickup truck for smaller quantities (up to 20 totes) and rented enclosed trailers or box trucks for larger residential or commercial moves. They leverage business relationships for better truck rental pricing.
Cleaning involves blowing out debris and sanitizing with a bleach solution, with tougher stains requiring extra scrubbing.
Nikki has developed a cleaning process involving an air compressor to remove debris, followed by wiping down with a bleach-water solution for sanitization. Some tougher stains, like grease from appliances, require additional scrubbing. The process also adapted to winter conditions by using a propane heater in the garage.
A real estate gifting program uses totes with custom printed inserts featuring agent details.
Special totes are set aside for a real estate gifting program. These totes have clear pouches to insert printed materials with the agent's picture and contact information, allowing agents to provide a branded service to their clients.
Customers are provided with dry-erase markers to write on lids, with guidance against permanent markers.
To facilitate customer use, the business provides dry-erase markers and instructs clients to use them on the flat surface of the tote lids. This prevents permanent markings and ensures the totes remain reusable and well-maintained. They also provide guidance on acceptable tape types like painter's tape.
The business primarily handles residential moves, with two corporate moves and one aquarium rental to date.
While the initial rentals included unique cases like the aquarium move and two significant corporate moves, the majority of business comes from residential moves. The corporate moves involved staging inventory around warehouses and offices.
Current utilization is 61%, with rentals booked out through April, indicating strong demand and forward planning.
The business is experiencing high demand, with 61% utilization and bookings extending into April. While many residential customers book on short notice, corporate clients and those working with real estate agents tend to plan and book further in advance.
Inventory is replenished based on selling out or overselling, with a buffer of about 100 totes maintained.
The policy is to purchase additional inventory when current stock is sold out or oversold. A buffer of approximately 100 totes is maintained to ensure availability. This just-in-time inventory approach is supported by a reliable supplier located an hour and a half away.
The business has had to increase inventory twice due to back-to-back large rentals.
The need to purchase more inventory has occurred twice: once for the large corporate rental and again when two significant back-to-back rentals required additional totes. The proximity and stock availability of their supplier facilitate these quick replenishments.
Advice and Future Outlook
The most helpful resource for business improvement is direct communication with other business owners.
David emphasizes the value of directly asking questions and learning from other entrepreneurs' experiences and lessons learned. He believes in paying this forward by sharing his own knowledge within the community.
Key advice for new rental businesses includes researching demand, identifying competitors, and validating the market before significant investment.
Researching local demand, assessing competition, and proving that customers are willing to pay for the service before buying large amounts of inventory are crucial steps. For small initial investments like totes, purchasing a small batch to test the market is recommended.
For immediate rental potential, simple items like basic plastic totes are suggested to gain market entry.
If diving in without extensive research, David suggests starting with something simple like basic plastic totes available at big box stores. The goal is to get your foot in the door and start learning by doing.
David can be found on X (formerly Twitter) at @davidstilson and leads a community for tote rental businesses.
David shares his presence on X and invites others to join a dedicated community for tote rental business entrepreneurs. This community serves as a platform for sharing experiences, asking questions, and supporting new entrants to the niche.
Customers shape the business; accept that the market will guide product offerings and operational adjustments.
David highlights the learning that customers defining the business by their inquiries and needs. He encourages entrepreneurs to be open to customer feedback and unexpected requests, as these often reveal opportunities for growth and refinement.
Positive mentorship and surrounding oneself with supportive individuals are vital for entrepreneurial success.
David combats the societal narrative of people pulling others down by emphasizing the overwhelming support received from mentors and peers. He stresses the importance of seeking out positive influences and people who are further along in their entrepreneurial journey for guidance and motivation.
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