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"Every ounce of everything that we do every single day is analyzed and sized up and addressed," Sedillo says. "There isn't anything that I can think of that hasn't at least been talked about and even if it isn't the highest priority, it's on the radar screen to do better."

Clawson put together a plan to expand the company. His goal was to increase its penetration in the markets it was already in - and all of the existing locations doubled their annual revenue, no small achievement during a recession - and expand the company throughout the Wasatch Front, a range of mountains that Salt Lake City nestles against and extends north and south for about 150 miles, where most of Utah's population resides.

Diamond's specialty is that it can appeal to just about everyone. With wide varieties of compaction, concrete, drilling, breaking, excavation, floor care, heating, landscaping, material handling, generators, lighting, aerial equipment and more, Diamond makes the one-stop shop approach work. Another Sedillo initiative was to develop the sale of merchandise, providing point-of-sale items such as gloves, tape measures and other items that complement construction and homeowner tasks. Sedillo brought in dozens of items that now are offered at Diamond branches. The result has been a double-digit increase in merchandise sales that have enhanced the company's bottom line while providing more convenience for customers.

Although it specializes on the smaller end of the tool and equipment spectrum, Diamond's inventory includes full-size backhoes, 60-foot boomlifts, skip loaders, skid-steer loaders and 26-foot scissor lifts.

Sedillo has developed a strong connection with the company's managers. They hold bi-monthly meetings where "we talk about revenue, we talk about expenses, about accounts receivable, customer service and safety," Sedillo says. "We have open discussions."

Diamond practices an open-book system. Since managers' bonuses are tied to the bottom line, they are privy to company financial information at all times and a sense of team is strongly encouraged. Clawson and Sedillo's management methods must be effective because the company has had very little turnover, either on the senior management or second-tier management level.

"A lot of the key people have stayed and we haven't had a lot of turnover among top management," Clawson says. "There hasn't been that turmoil and churning that so often happens."

Spurring growth

Shortly after Rubicon acquired Diamond, the company purchased a local events company to expand its party division. About a year later it acquired Universal Rent-All, an equipment rental company in Ogden, slightly heavier on the contractor end than most of Diamond's branches. In late 2002, Clawson's partner sold his stake in Diamond to pursue other business opportunities. In early 2003, Diamond moved into a large modern facility that formerly belonged to United Rentals in the nearby community of Tooelle, about 30 miles west of Salt Lake City and one of the fastest-growing counties in the state. It also opened branches in Park City and downtown Salt Lake City. After a strong 2002, spurred by growth related to the 2002 winter Olympics, Diamond's new acquisitions ensured the growth would continue.

Clawson gives every indication that he is a different breed of investor, one who is committed for the long haul. "Our idea is to build a sustainable long-term business rather than a buy and flip strategy," he says. "The dynamics are great for this company because the underlying market that we're in should keep growing for a long time. The population should continue to grow, both from people having a lot of kids and from people moving into the area." The demographics favor fast growth with the majority Mormon population favoring large families.

But the Diamond management team doesn't take growth for granted. From the beginning Clawson realized that growth can only take place with a solid infrastructure, with systems and procedures that provide a foundation. After doubling the company's revenue since the acquisition, the Diamond staff began more efforts to develop systems and procedures. Clawson and Sedillo have been working on preparing the ground for growth from the beginning of their involvement with the company as has another strategic management hire, chief financial officer Steve Schaefer. With a background in senior financial positions with public technology companies, Schaefer has played an integral role in the development of company procedures and systems.

"Initially, we were focused on increasing revenue and implementing our growth strategy, so we didn't necessarily have time to refine processes and controls," Schaefer says. "Now with a major growth spurt behind us, the standard progression is to focus on really building the underlying processes, controls and quality initiatives to allow the company to grow to the next level.

For 2004, we have some bold quality initiatives that will fundamentally change our operations."

Schaefer also put in place a more robust accounting system and is currently working with software provider Alert to develop matrixes to compare the various branches to enable management to see what procedures are most effective in operating efficiently and building revenue and profitability.

"Where the cost is justified, we are trying to leverage technology in everything from the simplest of counter tasks to more robust initiatives such as computer-based training," Schaefer says. By 2005, Schaefer aims to have virtually paperless customer interactions and branch management.

Another use of technology to improve customer service has been a program to monitor phone calls to the counter. Diamond's management wanted to develop a standard for how to talk to the customer on the phone, how to ask questions, how to ensure customer satisfaction, how to improve their ability to diagnose the customer's needs.

Diamond contracted with a Utah company on a program that tapes calls so the Diamond management staff could monitor phone calls so they can suggest ways the staff member can improve. The staff agrees that they can be monitored at any time, but never knows when a specific call is a monitored call.

The result has been far more effective telephone techniques that enable staff to service customers better and to maximize the opportunities for revenue that can come in with each phone call.

Pixie dust

Improved infrastructure and use of technology, enhanced inventory, a new level of communication, beefed up delivery and merchandise sales and expanded territory have all contributed to Diamond's fast growth. But management is quick to credit the development of a customer service culture, always focusing on customer needs first.

But when asked how they develop a customer service attitude, the Diamond senior managers like to laugh and talk about the use of a lot of pixie dust. "It's energy," explains Sedillo.

"It's the intangibles of service and quality and focusing on taking care of people and bringing energy and enthusiasm to the table," says Clawson. "That's the pixie dust."

Part of the culture of Diamond is a belief that every customer is important, from the big project contractors to the homeowner renting a small item by the hour. "What's important to us is we don't have grand-slam syndrome," says Sedillo. "We're not passing up the nickels to reach the dollars. Every dollar that comes in is a celebration."

THE FLOW OF THE RUBICON

Clawson sees his Rubicon Ventures as different from most of the investors in the rental industry. "We have shareholders spread out across the country," he says. "We have to report to them, but they are extraordinarily patient. What they are focused on is a good aggregate return on their investment. They know there are going to be quarterly fluctuations and they are content to let us run the business. We don't have to live quarter by quarter.

"One of the key things when we were soliciting money was that we have high-net-worth individuals and institutions, so this isn't anywhere close to a material investment for any single investor. And that's good because this way people can be patient with it, they can just let it go; they have a portfolio of investments and it's one of many. It allows us to not manage quarter to quarter with the need to provide a great return to investors in, say, the third quarter of 2003. They are willing to be patient and let the company develop."

Just like most of the investors that backed the industry's large public companies, Rubicon investors knew no more about the equipment rental business than they did about thermonuclear physics.

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"They didn't know much about equipment rental, but the risk in this was on the leverage and on the management team rather than the type of business, because the underlying business was pretty solid and stable," Clawson notes.

Clawson says the investors are pleased with Diamond's growth and future prospects, but he knows the company must continue a solid performance to keep their confidence. While the company has no plans to go national or set up branches far from its base of operations, it does plan to grow by deepening its penetration into existing markets, expand further along the Wasatch Range and look for opportunities to expand in the Intermountain West. It appears to be laying a solid foundation for future growth, in a region where continued growth is likely.

Rubicon Ventures was named for the Rubicon River in ancient Rome, that generals were forbidden to cross with a standing army or be charged with treason. When Julius Caesar crossed the Rubicon, he had no choice but to conquer or be conquered.

It looks as Diamond Rentals is flowing in the same direction, not to conquer Rome, but to succeed in the world of rentals.

AN RER CAPSULE

DIAMOND RENTAL, SALT LAKE CITY

History: Diamond Rental was founded by Maun Peterson and Lorin Winegar around 1980. After growing to seven branches, it was acquired by Rubicon Ventures in 2000, a small investment firm led by Mark Clawson and a partner who later sold his stake in the company. They retained the original owners and staff and hired general manager Leonard Sedillo. Peterson and Winegar stayed for a transition period.

Since the acquisition, Diamond acquired a party rental company in Boise, Idaho, and an equipment rental company, Universal Rent-All in Ogden, Utah. It also opened tool and equipment branches in Park City, Utah, and downtown Salt Lake City and moved into a location formerly operated by United Rentals in Tooelle, Utah.

Key managers: Mark Clawson, CEO; Steve Schaefer, chief financial officer; Leonard Sedillo, general manager.

Employees: 130 to 150 depending on the season.

Branches: Tool and equipment locations: Salt Lake City, Bountiful, Holladay, Kearns, Layton, Mill Creek, Ogden, Park City, Sandy, South Jordan, and Tooelle, Utah. Diamond has party and events locations in Salt Lake City and Lindon, Utah, and Boise, Idaho, and a convention equipment business at its Salt Lake City headquarters.

Revenues: Total company revenue for 2003 was $12.7 million, about 55 percent tool and equipment, 45 percent party.

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