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June 23, 2014: Construction Today

How a Peer-to-Peer Sharing Economy Model Can Provide New Revenue Streams for the Construction Industry

The concept of “shared economy” is nothing new but has now become a growing trend in multiple industries. It has aided small and large companies in creating new revenue streams along with saving money on expenses and losses.

Examples of Peer-to-Peer Economy Models

  • Airbnb, founded in 2008, helps owners of houses and apartments earn money on their real estate by booking rooms to fellow travelers. It currently lists more than 600,000 private apartments and houses that are available to rent to more than 11 million users.
  • Uber and other ride sharing companies like Relay Rides are enabling people to share cars and allow for cheaper taxi rides. In a matter of a few years, Uber is now worth more than Avis or Hertz.

Construction Industry P2P Examples:

The construction industry is certainly starting to benefit from the same trends. Companies are now being more transparent around sharing resources, equipment and even dirt.

  • Dirt Market was conceived as an online marketplace where large developers and contractors could meet to trade dirt, rock, sand and other basic construction materials.
  • Contractors already rent equipment to each other bare or operated, but there was not a larger network where it can be done in a transparent way until now.

Idle Equipment Can Be a Money-Pit for Contractors

In a project based industry like construction, companies can be hot and cold in a matter of months. When things are cold, assets like equipment continue to accumulate depreciation and interest expenses which can be financially damaging to contractors; particularly on larger equipment which can cost upwards of a million dollars. Missed revenue opportunities from idle equipment can be very costly.

Why P2P Online Equipment Rental Services Can Help

An online service helps make rentals among contractors easy. It standardizes contracts and insurance, makes scheduling transparent, and takes on some of the more administrative tasks like payment collections.

It also allows renters to gain transparency by viewing real pictures of equipment and user ratings on quality or performance. Lastly, it minimizes the fixed costs of traditional rental companies which can be passed onto both the renter as savings and the owner as income.

The Impact on Contractors

Keeping equipment utilizations levels high and operators working can have a huge impact on contractors. This allows companies to retain their people and continue to generate revenue when equipment would otherwise be sitting in their yards.

  • On larger equipment including larger dozers, scrapers and excavators (greater than $100,000), contractors can earn up to $20,000 per month per piece of idle equipment, which certainly adds up when you have larger fleets.
  • On mid-sized pieces of equipment, equipment managers can keep their operators working and generate additional income in between projects. Examples include mid-sized excavators, compaction equipment, wheel loaders, motor graders and skip loaders.

How This Business Model Will Evolve

As long as the community of contractors continue to treat each other with respect and honesty, contractors could rent all sorts of things: from heavy equipment to supplies and materials like K-Rail, steel plates, concrete forms, traffic control equipment, etc. P2P could even help contractors help share transport trucks, mechanics or specialized operators.

Colin Evran is founder of San Francisco-based Yard Club. The company’s platform enables heavy equipment owners to maximize utilization by renting to other trusted members of the construction community. Colin grew up in the industry with his family owning a construction company for more than 40 years. He received an MBA from the Stanford Graduate School of Business and a BA from the University of Western Ontario. Contact Colin at colin@yardclub.com.

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