How can rental be “more awesome than ownership”?

In the latest episode of HappyPorch Radio, Bob Jansen, founder of Firmhouse, a recurring commerce platform powering rental businesses across Europe, offered a candid perspective on where the industry stands and what it will take to unlock its full potential.

The Financing Challenge: Real Problems, Creative Solutions

The rental industry's most persistent challenge remains financing, but innovative approaches are beginning to emerge. "The key thing for the past seven years that we've been involved in this industry, which is not solved and is very hard to solve is finance," Bob acknowledges. "Just financing a business that will be, you know, in the red for a predictable 5 or 10 years, selling to consumers having assets where they can't locate them or repossess them. It's just like a really tough business model." This is as much so for the company as for those that would consider investing in it. 

The economics are undeniably challenging: rental businesses require substantial upfront capital to purchase inventory, then face extended payback periods as customers pay over time rather than making lump-sum purchases. "It's cash heavy, you need a lot of working capital and it's super high risk," Bob notes, creating what he describes as a situation where "we're limited in our growth by basically how much capital is flowing into the market for rental and Product-as-a-Service."

Investors, we have found, view different types of products and rental models quite differently. Even those that are interested in circular business models, will have strong opinions about the markets and product types that fit their thesis.

Yet entrepreneurs aren't waiting for perfect solutions. Companies like Tiny Library and Baboodle are pioneering revenue-sharing partnerships with manufacturers, creating hybrid models that distribute risk more effectively. While these approaches don't completely solve the fundamental financing challenge, they demonstrate the industry's capacity for innovation in working around current constraints.

Barry O'Kane, co-host of our show HappyPorch Radio, recognises that while entrepreneurs in this space face the additional burden of educating investors about unfamiliar business models, this pioneering role also positions them at the forefront of business model innovation that others can learn from and build upon.

The "Obviously More Awesome Than Ownership" Litmus Test

Bob's most valuable insight centers on a deceptively simple principle that separates successful rental businesses from those that struggle. "Renting the product has to be obviously more awesome than buying it," he explains. "And I think a lot of companies fail being able to add that into a product and we have to be honest, a lot of products don't have a service component, or a convenience component that can turn it into a rental and make it awesome in rental. That's just the truth."

This lens by which to consider your path forward is both liberating and limiting—it provides clear guidance while acknowledging that not every product is suitable for rental. 

Research conducted by Bob's team on laundry machine subscriptions revealed that while sustainability matters to consumers, "The lowest one, the last ranking factor was sustainability." Instead, consumers prioritise convenience and affordability. While this certainly doesn't apply across the board, it's worth bearing in mind. 

The best rental models excel in categories where this "obviously more awesome" standard can be clearly met. Children's products offer some compelling examples, where natural lifecycle needs align with rental benefits. "People want the best for their kids and there, you bring down high purchase cost for a consumer into a subscription cost," Bob explains.

Service excellence is proving to be a key differentiator. Swapfiets, the Dutch bike rental company, demonstrates how superior service drives adoption: "Why do people get a Swapfiets? Not because they can't afford to buy a bike for €200. It's because when it breaks down, somebody shows up, fixes it, repairs the tire, it's convenience again." This service-first approach creates loyal customers and sustainable business models, showing what's possible.

The right processes supported by relevant tech can play a substantial role in creating a “more awesome” experience for the renter: Making the finding and booking experience pleasurable while also having timely, supportive communications during the receipt, use and return of the product can make all the difference. 

AI: Transforming Operations and Possibilities

Bob illuminated how artificial intelligence represents a significant opportunity for rental businesses to overcome operational challenges while improving customer experiences. 

"Instead of building the software that allows a person to configure something that does something in their business... you're getting a digital teammate that you give a set of instructions that you delegate a task to in human language," Bob explains. This shift allows smaller businesses to access sophisticated operational capabilities that previously required large teams.

The practical implications are significant: companies can now automate complex workflows through natural language instructions rather than complicated programming. For example, determining when to swap a child's bike for a larger size based on growth patterns, something previously requiring custom software development, could be handled through AI-powered systems.

Barry emphasises the dual benefits: AI improves internal development speed while enabling new customer-facing features. This combination can help rental businesses scale more efficiently and provide better service experiences that reinforce the "obviously more awesome" principle. Which we at HappyPorch can deftly help you realise, in a variety of ways. 

Market Forces Creating Long-Term Opportunity

Two significant trends are emerging that could fundamentally improve the economics of rental models, though their timeline remains uncertain. Bob identifies these as potential catalysts that businesses should prepare for rather than rely upon.

The first involves true-cost pricing: "If you really take the supply chain and everybody gets equally paid everywhere, products that we have in our lives are gonna be much, much more expensive in retail." As markets gradually move toward reflecting genuine environmental and social costs, rental becomes more economically competitive.

The second involves evolving regulatory frameworks around producer responsibility: "If you look at Europe, you know these things might happen at some point. Like a company has to get back 50 or 60 or 70% of their resources. Repurpose them, put them into products and become circular,” says Bob. 

Bob bottom lines it this way: "The company should be responsible for what they produce. They should end up with the products. The products shouldn't end up in some kind of trash heap somewhere in the city or somewhere outside the city and be sold to another part of the world. The companies should deal with that end of the cycle.”

Barry adds important context, noting how society currently bears hidden costs for waste management. As these externalised costs become more visible, rental models offer increasingly attractive alternatives—though the pace of this shift varies significantly by market and region.

Building for Impact in an Early Market

Rather than waiting for perfect market conditions, Bob advocates for a pragmatic approach focused on measurable progress. "I've always struggled with the term circularity because what's circular, and everybody's been debating what circular is," he reflects. "So I think as a company, as a tech company, or as a player in this field, you have to strive to make impact that you know is progression."

This philosophy drives Firmhouse's development approach, supporting diverse business models beyond just rental. "Our energy is not rental only, not buyback only, but really ‘Here's all the tech and infrastructure with a bunch of AI digital colleagues that will help you build the business’," Bob explains.

The vision is democratising access to sophisticated business tools: "It makes it more accessible for somebody with an idea to go out there and to be building a sustainable, small business with the technology that only big businesses could get in the past."

The Road Ahead: Early Stage, Real Potential

Bob is refreshingly honest about the industry's current position: "We're very early on this shift of consuming, we're very early on the curve." This early stage presents both challenges and opportunities for those willing to navigate them thoughtfully.

The financing challenges are real and won't be solved quickly. Consumer behavior change takes time. Many products simply aren't suitable for rental models, and entrepreneurs must be honest about which categories can realistically meet the "obviously more awesome" standard.

However, for businesses that can deliver genuine convenience and service advantages, opportunities exist and are growing. When you factor the increase in circularity specific technology, enhanced by AI, and evolving market forces, this creates conditions for sustainable growth. Even if that growth takes longer than some might hope. 

We don’t believe AI to be a panacea, but when judiciously applied in the creation of software and the experience with customers, it can be quite helpful. 

As Bob puts it, "You have a great idea? Hit the ground running and let's go!" The key is ensuring that idea can truly deliver on the promise of being obviously more awesome than ownership.

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Want to go deeper? We invite you to take in the full episode, both in audio and written form, along with all associated links, here. Beyond that, we are always here to support your circular ambitions, with a nuanced, long term approach to technology inclusion. Learn more about our services here.