Equipment purchases typically slow in summer months. Sales teams are often challenged with indecisive customers during this time period. But have you ever wondered why sales follow these similar cycles from year to year and what you can do about it?
The real reasons for the “summer slump” are many, but the consistent behavioral pattern follows the yearly result. At the beginning of the year companies are building and at the end of the year there are tax benefits in addition to knowing with some certainty how the year will wrap up. In the middle, there may be more concern over how the company is tracking toward performance goals. The result…a summertime haze on your pipeline.
73% of small business owners spend less on capital equipment from June to August. The top reason: conserving cash for the big year end push and handling seasonality in the creative services industry.
With some out-of-the-box thinking and a focus on affordability, equipment sales teams have an opportunity to build a pipeline for a busy summer. One best practice involves a simple email communication combined with a finance offering to indecisive prospects, 2-3 times throughout the slower months.
THE EXAMPLE EMAIL:
SUBJECT: Keep your cash, reduce your expenses…new equipment made affordable
Summer might be the best time to think about your next machine purchase. And we make it easy whether you have the cash on hand or not. At XXXX, we offer the best solutions for embroidery equipment combined with the most competitive finance solutions that allow you to preserve your cash and for a low monthly payment…gearing up for your busiest time of year!
In fact our (ASSET MODEL) is available for you as low as XXXX/mo with no money down. As you have equipment needs this summer or just need an idea how to improve your business, give me a call!
We feel a commitment to this simple activity will allow you to more easily meet the needs of a previously indecisive market. At Red Thread, we think finance is at the heart of selling more equipment. We help dealers achieve more with simple, competitive commercial equipment financing. Let’s talk.
It’s summer. And for many of you that can mean your busiest time of year. For others, maybe a time to gear up for your busy season. Busy schedules from seasonal business fluctuations mean stronger revenues, but it can also mean sudden expenses. Whether paying for the unexpected maintenance issue, the urgent office technology need or considering the equipment need to keep up with growth, developing financial options now could lead you to a stronger bottom line when schedules are less hectic. Here are a few tips:
Just because you have the cash now, don’t get crazy.
With stronger cash flows in in peak seasons, you might be tempted to just pay cash for the equipment need. But be careful, preserving that cash for less active months by financing your equipment could give you more predictable cash flows and a financial cushion in the slower seasons–when you need it most.
Expenses now…revenue later.
We often see companies adding staff and more revenue producing equipment to meet demand in the seasonally active months. That growth has terrific long term implications, but in the short term, can put you in a cash crunch. The steady cash flows afforded by well managed equipment financing can help you meet growing needs without struggling in the short term.
Quick money is not always the best money. If you are getting a loan for equipment or working capital, be careful. Some lending options can put big money in your account quickly, but the payment structure is really harmful long term. Make sure you know what you are agreeing to and find partners that can help you quickly AND fairly.
Work with people that know your business.
Let’s face it, very few lenders really understand businesses like yours. So, find a partner with deep experience in the seasonality, unique customer demands and other issues that are very unique to your industry. A partner that has deep knowledge of the equipment you count on and strong understanding of the cash flow implications you face.
At Red Thread, we help business owners dream big and manage the peaks and valleys of seasonal demand. Let’s talk!
The big picture includes the total cost of a solution, above and beyond the thing itself— services, maintenance contracts, and all those extra pieces that turn the piece of equipment from a dumb box into a smart, connected machine. It also includes understanding the opportunity cost. Will this machine replace a less efficient machine? What happens to my business if I don’t have this equipment? And if I do have it, what other costs are involved with running it?
When considering adding assets, leading business owners say TCO—total cost of ownership—is clearly part of the transaction’s bottom line. Forecasting everything, right down to the bank conveyance, they pretty much know all the costs for the asset. They know the cost to staff it. They know the cost to maintain it, etc. They’re forecasting the full P&L, all capital investments they make.
Carrie Radloff of Red Thread Financial, provides an example of how TCO can influence equipment decisions: “An experienced business owner will look at assets that are 3 years old, and will say, ‘Our quilting output is far lower that what newer long arm technology can produce and reduce maintenance issues. If we get a new asset, we’ll be able to all but eliminate downtime issues and increase our production by as much as 20%.’”
These days, total costs are just as likely to include software upgrades as they are to include oil changes. When a company is installing thousands of dollars of equipment, that’s great. But understanding the software needs, maintenance and help desk support system just begin to round out the TCO.
Technology is changing the face of financing decisions as software and services are becoming a bigger part of the deals. But there is more software and services within all kinds of equipment. There are the diagnostics that you use to measure performance of embroidery output. There are telemetric devices that you put in your fleets of cars. Even for something as basic as quilting equipment, you are finding front-end systems that run them. People aren’t just standing at the machine and cranking things out anymore. They run it via a control network.
As a result, smart borrowers now have the ability to bundle all of those things into a transaction and offer our customers a seamless product, with financing and servicing all on the same invoice. Equipment-driven financiers offer an even easier solution as their depth of equipment knowledge makes the “bundling” of TCO an easier process.
At Red Thread, we help small businesses find the balance of TCO for their business. Across a wide variety of assets and industries, count on Red Thread to help you dream big. Let’s talk.
As a seller of smaller ticket commercial equipment, there are a number of finance options you can offer your customers. But be careful, many of these options may not be healthy alternatives.
When it comes to financing the small ticket commercial equipment purchase, many dealers find it easy to offer more “retail credit” solutions. Retail credit alternatives are either similar to—or actually are– credit cards. The approval process is very simple and approvals happen at the end of a computer screen. While the speed may feel like a positive experience, the devil seems to be in the details.
Like a credit card, the interest rates can skyrocket to 20% or more. These high rates are born from essentially unsecured credit programs where most of the offering is based purely on personal credit score and only a few minimal business inputs—least of all commercial equipment. These lenders rarely have any real knowledge of the equipment and the businesses that actually use it. As such, the payment terms are a “one size fits all” solution. They may not understand that a certain asset could easily be financed for 48 months rather than the 24. That lack of understanding just doubled your payment. Another very important factor to consider is that these “credit card-like” solutions may require your investment as a dealer. A real equipment finance partner would never charge you for offering financing to your customers.
But don’t lose heart, there are alternatives out there. Seek lenders that understand the equipment you sell and the businesses that depend on it. These lenders primarily work with smaller businesses and understand the cash crunches they face. They understand the importance of monthly cash flows. And they can help them with a fast, reliable process to acquire the equipment you need without resorting to the “credit card-like” options. A relationship with lenders like these will position your dealership to move beyond a single sale to a long term relationship with the equipment buyer.
Financing a $9000 commercial asset is NOT a point of sale decision. At Red Thread Financial, we know that our finance programs can help dealers achieve with a stronger program to sell desperately needed small ticket commercial equipment. And we never charge dealers for our programs. Tell them to keep their credit cards in your wallet and count on Red Thread. Let’s talk.
- 6 out of 10 business owners secure their financing at the dealer that leads with payment
- Business owners are 4 times more likely to buy from a dealer that leads with a finance program over one that doesn’t.
- Nearly 7 of 10 business owners prefer to finance equipment with an equipment lender versus their bank.
- 6% of commercial equipment sales teams lead with a payment
- 69% of business owners value payment over purchase price
- 88% of business owners look to price/payment as more important that asset specification and brand
- Equipment dealers that lead with a payment program have less sales volatility in a slowing economy than those that lead with a purchase price
If you’re sweatin’ right now, we can help. Red Thread Financial helps dealers achieve more with competitive equipment finance offerings that can help a wider variety of your customers. We have Wall Street level resources with a Main Street level approach. Let’s talk and let’s go.
As a small business owner, you’ve probably been a little underwhelmed with how little some finance alternatives may know about your business. Sure, they can talk about blended interest rates, residual values or even operate a funny calculator that uses something called reverse polish notation. Yes—that’s really a thing. But what they can’t seem to do is “get” you. Because of this business owners try to figure things out on their own and stop seeking advice. Well…stop that. You’re looking in the wrong place.
One of the hardest things about being a small business owner is feeling the overwhelming requirement of being the Jack-of-all-trades. The thing is, Jack was a master of none. And most mid-sized business owners will tell you they grew beyond small business status by realizing they can’t know it all–and were willing to seek advice from experts. This is never more true than in matters of finance.
Once you face the need for real advice, spend your time finding the right experts rather than spending your time trying to figure it out on your own. And sure, this may involve lots of time up front, talking to finance partners about their real experience in your type of business. It will be obvious, quickly, how much they really know about the challenges you face.
Once found, this partner can open doors for you that were previously unimagined. They can guide you through quilt production calculators to determine ROI or talk about screen printing equipment life cycles. They can talk to you about tax benefits your accountant may even have to look up. They can position you for success with financing whether newer to the business or a seasoned pro.
At Red Thread Financial, financing equipment for creative businesses is what we do. It’s in our name. Help smaller creative businesses dream big is how we work. It’s in our blood. We know your business…how can we help you?
When evaluating an equipment purchase, business owners will review a minimum of 3 different options–on average–before making a purchase decision. New/used, brand, features, benefits and of course price play a major role in each decision. And after heavily negotiating these factors with each purchase, business owners usually take the first finance option without looking at options. In fact…
A recent survey of small business owners indicated that 68% only seek one option for financing commercial equipment. And they choose that option 92% of the time.
Why would you spend so much time and energy finding the right asset and so little time ensuring you have the right financing? The structure, term, payment and other components of the financing could drastically impact ROI and how affordable the purchase can be. But the cumbersome reality of the finance process can feel so painful, most business owners simply settle for fast…over best.
Choice inspires competition and ensures the delivery of value. And it’s what most small business owners lack when it comes to financing their commercial equipment. Could there be a smarter approach to financing your equipment?
A different kind of finance solution. And a smarter one.
Imagine how different things could be if a single business relationship could ensure you are getting the best deal possible with your equipment financing. One equipment financier with access to a wide variety of programs, most not available to your bank or dealer. These experts are uniquely on your side of the finance process, fighting for your best interest and only receive compensation when finding the best solutions for your needs. They work to know you, your company and how you buy and use equipment. They can pre-approve you in most credit situations and help you buy confidently. And their unique flexibility gives you more options as traditional lenders ebb and flow in economic conditions.
At Red Thread Financial, our history and smarter approach to equipment finance bring more options to your business for smarter choices. As you look to evaluate the impact your next equipment purchase has on your business, give us call.
Often, we get so busy finding the next deal and pushing it over the finish line that it can be easy to lose focus of the real value equipment brings to small businesses. Sure, in any company cash flow is not just a thing, it’s a life-blood kind of thing. So the amount of the payment certainly plays more than a small role.
That said, a connection back to the value the equipment offers a small business just might be the key ingredient to overcome the “rate is too high” objection. Almost every time a small business is looking to acquire a new asset it’s an opportunity story.
The total cost reduction or revenue opportunity for acquiring needed equipment often dwarfs the impact of an interest rate. And many times, smaller businesses find themselves in a position where they are not really choosing between 5% financing versus a more expensive option. Too often they are comparing a rate they got years ago in their personal life to the rates they are offered in the business today, despite their company or their personal situation not being the prettiest of financial pictures.
If you spend more time on the positive benefits of having the newer equipment, you can show them that the opportunity cost of not moving on it at a higher rate now, is far less expensive than waiting on a lower rate at some point in the future that might not happen anyway. Many times it’s hard for a small business owner to improve their financial picture unless they have the equipment to win new business or reduce expenses that will help them turn things around.
You can also demonstrate that by getting the newer assets earning revenue or reducing costs now, they’ll be strengthening their credit circumstance so that when the next opportunity comes to acquire equipment and improve the business, they’ll be better positioned for financing success. And you’ll be there, as their strategic advisor, guiding them and building loyalty while doing another deal.
At Red Thread Financial, we help dealers achieve more. So leave the financial conversation to us. We can help you move beyond the “rate shopper” and grow your business. Let’s talk.
THE COLLOQUIAL DEFINITION OF INSANITY:
DOING THE SAME THING OVER AND OVER AGAIN AND EXPECTING DIFFERENT RESULTS.
Yeah, but what do they know about commercial equipment sales? Well, nothing. But considering the author of the quote was Albert Einstein and he basically was the smartest dude ever—I wouldn’t count him out when applying this to the behavior of commercial equipment sales teams. Here’s what we mean:
- Only 9% of commercial equipment sales teams lead with a payment despite the fact that customers are 48% more likely to choose a less preferred brand if a payment is offered up front.
- 76% of sales people said they feel “pushy” when talking about a payment despite the fact that salespeople that offer payments up front are 600% more likely to hit their annual quota.
- 82% of sales people will only bring up payment if the customer does, despite 73% of commercial equipment customers saying they are more likely to keep shopping until someone brings it up to them.
This data comes from annual research on the buying and selling behaviors with commercial equipment and guess what, the gap is WIDENING. That means the disconnect between what sales teams do and what customers want is increasing for the 3rd straight year. But beyond the stats, our favorite part of the research is the most common explanation that was given for the gap by commercial equipment sales teams:
“IT’S JUST WHAT WE HAVE ALWAYS DONE.”
How dumb does ‘ole Albert look now? Most commercial equipment sales teams are afraid of trying new things. The data shows that finance options drive more sales conversations than any other activity, their customers clearly want more finance options and those options would be a big differentiator among the competition—but—they are doing what they have always done. And hey, that’s comfortable. But how can you do anything truly great by doing only what is comfortable? Was your first big job comfortable? The first date, wedding, child, big sale (maybe that was the first date)…were any of those things in the category of “what you have always done”? Of course not.
To grow our businesses we have to try new things. Even fail. Absolutely fail. But not trying new things or attempting to look at matters in a new light will have sun revolving around the earth again. And maybe’s that’s the biggest failure of all. At Red Thread Financial, we can help you overcome the fear and close the gap between what you have done and what you need to be doing while giving you the confidence of delivering a better solution along the way. We help dealers achieve more. Let’s talk.
Many industries are upgrading equipment to include GPS asset tracking technologies. IT equipment needs to be upgraded seemingly every hour and a half. The commercial truck industry is requiring everyone to upgrade to more emissions friendly engines. Whether part of a regulatory move, efficiency gains or the requirement to keep up with the competition, the word “upgrade” is a big impact on business owner’s lives. And a bigger impact on their cash position.
A little planning helps
Most of the time, businesses understand the seemingly never ending need to reinvest in their commercial equipment. They just don’t plan for it. More than 8 of 10 small business owners only think about upgrade or replacement in the break/fix emergency. Waiting until these big events to look at upgrade or replacement can be a very costly endeavor. Did you know that businesses that plan for capital equipment acquisitions versus ones that wait until the wheels fall off have nearly 20% lower equipment acquisition costs?
Sinking cash into equipment is a sinking feeling
Another major reason why businesses feel the pain of upgrade in the cash drain. Big hits in cash flows for unplanned equipment needs hurt. So why do it that way? Virtually all classes of commercial equipment lose value. You wouldn’t knowingly invest $50,000 in a stock you know is going to be worth $25,000 in five years. But time after time business owners drop huge down payments on their commercial equipment or pay cash outright. Even if you produced 3x the revenue for equipment cost, what’s your return on that investment? There is no real merit to owning 100% of an asset worth half of what you paid for it in the near future and when the upgrade comes…it hurts.
Ease your pain
What if you just paid for what you use? A simple monthly payment budgeted for each month for the use of the equipment you’ll pretty much always need. And when the equipment is ready for replacement or upgrade, you just get the new model and keep the monthly payment stream going. Even mobile phone companies have caught on to this. With the introduction of no down payment monthly financing of your phone, nearly 40% of cell phone users are now on the monthly plan. Rather than it being a $200-$500 hit to personal cash flow every few years or when your phone goes swimming, customers just pay their $25 per month. And then every few years pick up the new model. Taking this approach to commercial equipment will ease your pain as well
At Red Thread Financial, we help businesses with a simple, painless and affordable way to handle the constant need for upgrade. In fact, our programs can keep you on the cutting edge of technology while taking the surprise out of the budget. If you’d like to reduce some pain in your upgrade cycle, let’s talk.