Customer Finance Programs Key to Increasing Sales
While studies show that technology spending is once again on therise, there's a reason you haven't heard a collective sigh ofrelief from the software industry. While many budgets are onceagain allowing for the purchase of enterprise software, hardwareand peripherals, there's no question that today's purchasers aresmarter, savvier and more selective than ever.
Even though the purse strings have loosened, competition is atan all-time high. It's no longer enough to provide a softwaresolution that meets the potential customer's needs, or even toprovide it at the best price. Today, smart vendors are constantlylooking for ways to stay one step ahead of the competition.
While increasing sales is always part of a competitive businessstrategy, software development companies often overlook a simplemethod of accomplishing this objective - making it easier forcustomers to buy.
One option increasing in popularity among software vendors is toestablish a customized finance program that provides no-hasslefinancing solutions for your prospective clients. In addition to"one-stop shopping," your customers can reap the other benefits offinancing that make it easier for them to commit to technologypurchases, including:
100 percent financing - Many finance companies offer 100 percentfinancing for the cost of software and maintenance contracts, whichrequires no down payment. Because customers don't have to come upwith a down payment, they can make a purchase immediately, ratherthan hold up the sale with a "wait and see" mentality that oftenaccompanies a dip into cash reserves. It also allows your customersto invest more capital in revenue-generating activities.
Improved cash flow management - With software financing, yourcustomers can conserve capital for reinvesting in their businessand improve budgeting accuracy through fixed monthly payments.Financing also makes it easy for customers to access multiple-yearbudgets by paying for the benefit of your software over its usefullife.
Flexible payment structures - Customers can optimize projectbudgets by taking advantage of the flexible payment structuresavailable through financing to maximize the return on theirinvestment. Forexample, with software financing, customers can ramp up payments to match the revenue generation of a new technology project that is utilizing the software being financed.
While financing provides a clear advantage for the buyer, when aprogram is well planned, the list of advantages for softwaredevelopers, distributors and resellers can be even morebeneficial.
Improved Customer Relations
As noted above, financing packages add value for the customer byenhancing their buying power, offering greater flexibility andproviding convenience. It also increases their satisfaction throughthe ability to leverage their budget to acquire the totaltechnology solution - which could include software, hardware,service, support, integration and training - rather than only theparts and pieces they could afford through an outrightpurchase.
Shorter Sales Cycles
On the sales side, any customer who expresses some interest in aproduct seems like a good lead. However, there are many times whenthe question of how to pay for the new software prevents the salefrom happening. Time lost on dead-end deals can be eliminated whenfinancing is part of the sale, as the ability to pay is immediatelyconsidered in the equation. In addition, many finance companies nowoffer fast, easy credit and documentation processes, so you cancomplete a sale quickly and avoid costly processing delays.
Another benefit is that as software needs are being discussed inthe sales process, the finance specialist can work with the chieffinancial officer or accountant to determine which financing optionand payment plan best suits business needs and cash flow.
Direct customer financing can also save software vendorsmillions of dollars each year by reducing the number of days a saleis outstanding. Consider a company with quarterly cash sales of $50million. On average, it can take 45 days to collect payment.Assuming a borrowing rate of 6 percent, the 45-day lag in paymentresults in a carrying cost of $371,204. If the same numbers are runwith a leasing finance program that generates payment within 2days, the carrying cost drops $82,253, saving the company more than$288,951 in one business quarter.
The Big Picture
Overall, equipment financing programs can:
Generate larger, more profitable sales faster;
Increase account control;
Improve sales efficiency and productivity;
Lower days-sales-outstanding;
Improve cash flow;
Differentiate your company from its competition; and
Provide complete solutions for your customers.
Taking the Next Step
After identifying an interest in offering flexible financing aspart of the sales process, the next step is to develop a financeprogram. By partnering with an experienced leasing company todevelop a finance program for your customers, you can transfer allof the uncertainties of extending terms to your customer to thefinance company.
Partnering with an experienced finance company also means youcan concentrate on what your company does best - developingsoftware - while letting a finance expert handle the intricacies ofa finance program. Put simply, by working with a thirdparty, your company will receive all of the benefits with none of the risk.
Whether you choose to refer your clients directly to yourfinancing program partner or to work with a third-party financepartner to develop an in-house program, it is essential to choosean experienced equipment finance partner. During the sales process,the finance expert will be working closely with your customers, andit's important that his or her actions and service levels reflectyour company's ability to meet your customers' expectations. Whensearching for a finance partner, look for a company that:
Is flexible and willing to work with your management team todevelop a program that will meet your financial objectives;
Is experienced in the IT and software finance world, since thesales process, client-decision criteria, and revenue recognitionissues are different than that of capital asset sellers;
Providesmarketing support and materials to help you promote your financing program
Is willing and able to provide your sales team with materials andtraining to ensure sales team members are comfortable and easilyable to raise financing as an option with their clients; and
Is a financially stable, long-term business partner.
Companies in search of a leasing partner can visit Choose Leasing(www.ChooseLeasing.org), a Web site developed by the EquipmentLeasing Association, where you can find answers to commonly askedquestions about leasing and search for an experienced leasingcompany specializing in vendor finance programs.
RJ Grimshaw is director of sales, vice president of KeyEquipment Finance's Information Technology Group. Key EquipmentFinance (www.KEFonline.com) is one of the nation's largestbank-affiliated equipment leasing companies. Grimshaw has more than10 years of leasing industry experience. He can be reached forquestions at 713.354.4545.
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