For this very special episode of To The Point, Chris and “Tall Paul” sit down with Chuck Upshur, VP of Business Development for Service Finance Company, LLC. Chuck operates out of sunny Boca Raton, FL, and has dedicated his entire adult life to the home improvement industry. As he puts it, the trades are all he knows! He shares with us some strategic advice around his area of expertise, and that’s how to incorporate finance into your business to make your company more successful.
When Chuck joined Service Finance almost ten years ago, they were a smaller company with only one loan program. Now, they’re a super prime lender working with companies both small and in the multi-million dollar ranges. They offer 60 different loan programs, and strategically pair them to help you close the kitchen table by helping the customer from an affordability standpoint.
Resistance to Financing
Even today, many contractors are hesitant to offer financing. Chuck recommends that you consider your average customer for an expensive service, like a new system installation. They usually aren’t writing you a check for 10 or 15 thousand dollars out of their pocket. They have a relationship with their bank and a line of credit. That’s how you’re getting paid! You have to think about financing from an affordability standpoint for your customer. Especially right now during this COVID crisis, financing is more important than ever.
Types of Finance Buyers
There are two types of customers that finance, and each has their own nuances that are important to note and understand. It’s all about matching the right program to the right buyer.
The Promo Buyer
The first type of finance customer is a “promo buyer”. This is typically someone who is not interested in paying interest. They don’t want to disrupt their cash flow, but rather want to spread out their payment into chunks. This is usually your more affluent clients, but not always.
The Payment Buyer
The second type is what we refer to as the “payment buyer”. This category is the majority of consumers today. They understand that by paying interest over time, they can afford something out of their immediate liquid budget. Most of the time, they will be considering short term versus long term financing. Long-term finance customers are the most common, and are really just interested in a low monthly payment. There’s a magical number for this category, and it’s $150/month. If you can keep the payment under 150/month, most buyers can make a decision on the spot and not have any buyer’s remorse. They won’t have to change their behavior and lifestyle to afford their investment.
Financing and Revenue
Think about your business, and answer this question: What percentages of your revenue in 2019 were from cash, credit card, and finance? It’s important to consider your business from this perspective. Are you even offering finance? Many larger companies float between 50-70% revenue from financed services, simply because they’re offering it. If you’re in the 10-30% range, it has nothing to do with the market you’re in. It’s all about how often you’re offering it. If you’re waiting for your customer to ask for financing, it’s too late. Most buyers simply won’t ask for it out of pride.
If you want to keep up with the bigger companies, you absolutely must offer financing. Financing is a way to add to your overall dollar amount. Plus, it just makes sense to have it as an option for your customers. It’s the only way for you to make higher quality products affordable for your customers, which consequently adds to your revenue. Plus, the paperwork and hassle of financing isn’t what it used to be. Service Finance is completely paperless now, and it’s so much simpler to incorporate financing into your business than say, in the 90’s. You can get credit scores digitally in a few seconds, the customer can sign documents online, and the whole process is pretty hassle-free for both the seller and buyer.
Integrating Financing Into Your Business Model
So, you’re thinking about adding financing to your business but not sure where or how to start? The most-asked question from a business who hasn’t offered financing before is usually “how do I incorporate financing into my pricing, because financing isn’t free?” Look at any major retail stores. They make the total cost of goods all-encompassing for the consumer. That sticker price has a built-in assumption of costs, like the cost of a credit card transaction. Make sure your price books that you’re giving to your sales reps and people in the field incorporate different costs, including financing. You can’t raise your prices, but you can certainly offer cash discounts. It’s true, it will require a bit of strategic work to incorporate financing, but not offering financing just isn’t a viable option if you really want to succeed.
Charge Forward, and Ask For Help!
During this crisis, the worst thing you can do is nothing. Make sure that you’re going out there and getting business. RYNO and Service Finance are here to help! If you’re interested in adding financing to your business, you can email Service Finance and someone will reach out to you. Or, if you have a question for Chuck personally, you can email him directly. He loves to help! Get out there and kick some ass!