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Ask the Experts: I just signed up to offer financing. What is the best way to bring up financing with a customer?

James Leichter: Good question. I think financing is really important. First thing you want to remember is rich people love financing. They use it to leverage capital and they’re always thinking about return on capital. And poor people love financing. They use it to acquire things they otherwise couldn’t have. The trouble is is rich people often act poor and poor people often act rich. So you can’t assume that you know who you’re dealing with, and a lot of us think, well if they’re rich they won’t want financing, they’ll think my interest rates too high et cetera. But that’s just not the case. I would say this: Always assume financing. So when you walk through somebody’s door always talk payments, always talk financing, always talk return on capital or return on investment.

So, for example, you might say for a total investment of $15,000, we can replace your entire comfort system. We can finance that for five years at 12 percent that’d be $333.67 a month and you might save — and I’m making up these numbers of course — you might save a thousand a year on your utilities, which would be $6000 for the next six years, or $5000 for the next five years. And if you think about a $20000 investment, if you’re going to save that much on your utilities, your return on investment is going to be 30 percent, which is three times better than the stock market.

So again I’m making those numbers up, but you get the idea. You think about the investment but you don’t walk in and say it’s going to be $15000. You say your total investments are going to be $333.67 a month. And then think about how much they’re going to save on utilities.

You might also throw in how much they might save on repairs, although that’s tough to predict. But you might be selling an extended warranty for five or ten years and talk return on investment. But again, remember: Rich people are always thinking about leveraging capital and they’re not always concerned about interest rates. They’re just concerned about leveraging capital — what can they do with that money. And poor people, poor people are using the financing to get a better system than they could otherwise afford. So to answer that question: just assume financing; always talk financing.

One thing I might add to that is if you have the software for it, or if you have the ability to do this, it’s really handy to track financing activity. So very briefly, when a lead comes in you should record five things:

  • Financing was offered and the bank approved
  • Or financing was offered and the bank declined and they paid cash
  • Or financing was offered, the bank declined and the sale was lost
  • Or client declined financing and paid cash
  • And finally no financing was offered at all; we forgot, we just didn’t do it

The reason why I would suggest tracking those with each of your sales leads is so that you can analyze your sales people based on if their offering financing. You’ll probably notice that closure rates are higher, gross margins are higher when you offer financing.

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