Peter Millard, divisional manager of Schroder Leasing, explains why he believes resellers are missing a trick when it comes to leasing
A tough 1999 is forecast for resellers and a squeeze on margins adds to the unhappy lot of those who are trying to maintain the cashflow on the back of a strong sales proposition. What is surprising, despite these pressures, is that few resellers have switched to leasing as a sales tool.
Most recognise that finance could play a role, but it's rarely part of the final proposition. However, the industry is beginning to see a change of opinion among customers, particularly SMEs. They understand that leasing can help them shift a gear when it comes to implementation, by freeing them from the usual capital restraints.
The reticence within the channel is partly due to the perception that finance is for the big boys and setting up a scheme is time-consuming.
Why worry about the ins and outs of leasing when you are busy focusing on the core business of selling? Because the beauty of leasing is that there is no need to be a large company to offer finance as part of the sales proposition.
Resellers of all sizes can have access to financial services through the right finance partner.
There are many benefits for the reseller. Leasing can generate turnover and higher average order values. And because customers are able to purchase technology that suits their requirements rather than their capital budget, a wider range of systems becomes affordable. Flexible upgrade options can be built into the lease so resellers can work with customers to upgrade their original installation.
As a result, customer retention can improve significantly - research has shown that more than 60 per cent of leases are renewed and the customer stays with the reseller. It's a case of 'buy what appreciates, rent what depreciates'.
But where leasing really works is in helping resellers - not just customers - to improve cashflow. Smaller businesses, which are most concerned with expenditure, will hang on to their money for as long as they can. This can be a problem for dealers that have their own outgoings. If the customer is leasing, however, the finance company will ensure resellers receive fast payment for equipment - it will go into a bank account within 24 hours of installation and correct documentation. This relieves the cost of chasing customer invoices and removes the risk of non-payment.
Customers may see resellers as a one-stop shop, but in reality it's the leasing company that does all the work by liaising with the customer on payment. Individual agreements are tailored to meet the needs of each business, ensuring that payments match the customer's existing budget and everyone is comfortable with the process.
Many resellers see services as the key to future growth. Box shifting is unlikely to hold its current value and the pressure is on to compete against direct efforts. Total asset management is where customers see the value too, and it involves the reseller from the implementation of a system right through to its disposal. Managing the entire process, integrating the customer's strategy with resellers' own goals and steering them through the upgrade maze is where the real value lies. And all of this can be driven by leasing. Finance is a powerful sales weapon - resellers just need to use it.
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