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Home > News & Events > Newsletter > Archives > February, 2014 > Leasing Digital Signage Networks

Leasing Digital Signage Networks

Leasing can grow your profits with a full deployment without all the up-front costs.

StrandVision is in the business of selling hosted digital signage systems through the channel. We use a subscription approach with monthly, quarterly or yearly renewals so the upfront costs of the service itself are low. However, there is often a lot of new digital signage hardware involved, which increases upfront costs - great for resellers - not always so great for customers.

Occasionally, these upfront costs can be deal breakers. Also, some companies just prefer leasing because of their business models. It's in your best interest to be able to accommodate prospects that want to lease.

With leasing, the supplier (you) gets paid up front for your out-of-pocket expenses for equipment, software and peripherals, and you can include consulting, installation and services costs. The customer is able to defer the cost over the life of the lease contract with potential for tax and cash flow advantages.

Technology Leases Work Well

There are companies that specialize in providing financing for electronic equipment and have programs to work with resellers. Most of the major equipment computer and network suppliers have programs that cover the equipment that they sell. There are also a number of specialty leasing companies that are not tied to any particular brand or type of equipment. For instance, we at StrandVision have used Advantage Leasing with good results to put together equipment packages with several components from multiple suppliers.

The beauty of a technology lease is that it enables the reseller to make incremental sales, get paid up front and offload all of the payment risk to a third party since the leasing instrument is between your customer and the leasing company. You can concentrate on selling and servicing the customer and leave the financial details to others.

A Quick Leasing Overview

Now, I'll admit that I had a steep learning curve when I approached leasing mostly because I wasn't fully up to speed on how it works. I thought that adding a third party to the sales mix would be complicated. In fact, it didn't make much difference. The customer has to pass a credit check but this is something that somebody should be doing anyway for any major sale.

Once the credit issue is settled the rest of the sales process is the same except that the supplier (you) are paid by the leasing company rather than the customer once the transaction is completed. The sale itself is not affected - you still work directly with the customer and your suppliers.

You essentially invoice the leasing company for the customer's cost and you receive your markup - the difference between the net and sales price, including your StrandVision subscription markup - directly from the leasing company.

There are a few things that you should be aware of:

  • You have to make sure that you include everything (equipment, software, networking, peripherals, StrandVision subscription, installation, consulting and services) if you and your customer want to include these items in the lease. Make sure that your estimates are rock solid because it's difficult to add costs at the last minute;
  • All software, peripherals and services will have to be sourced by one entity (you) in order to be included in the lease;
  • You'll have to make all of the purchases on your account up-front, under your normal vendor agreements, as you normally would with a regular customer sale. The leasing company may make some interim pre-payments but you have to expect that the full payment will be made by the leasing company only after the customer certifies that everything is installed and accepted;
  • That last comment is key. Payment is only made after the leasing company receives certification from the customer that the equipment is installed, running and accepted.

Here's what to look for in a leasing company:

  • A company that understands and has a track record in leasing technology equipment. Look for someone with specific experience in computers, telecommunications, data capture, digital signage, etc. It should be a company that understands the lifecycles, residual values and other aspects of technology-specific leasing;
  • Check into the leasing company's processes and paperwork. The most streamlined process is probably the best. It should be as uncomplicated as possible for you and your customer;
  • A company that has established programs for channel sales. Generally the lease is with your customer, but it is still necessary to work with someone who understands the channel sales process - markups, installation, service contracts, etc. After all, you will most likely be on the receiving end of the check that's issued when the lease is signed, so you want the process to go smoothly;
  • Find a leasing company that will look good when your customer checks its financials with Dun & Bradstreet or Hoovers. The size and sophistication of the leasing company should match or exceed the customer's;
  • Check to see if and how the leasing company will factor in installation/service costs. The ideal situation would include all of those costs for immediate (or incremental) payment with the actual costs amortized over the life of the contract;
  • Perhaps, most importantly, work with a leasing company that you are comfortable with as a business partner. The actual transaction may be between your customer and the leasing company but the "buying experience" ties you to your leasing partner in your customer's mind. You want your customer to be happy for the life of the lease.

Leasing can be a way for you to overcome pricing issues and fit more smoothly into your customer's budget cycle. Sometimes it also gives your customer the opportunity to move a capital expense to an expense line, or reduces the upfront costs to the point where executive sign-offs are reduced or eliminated. It is something that's worth looking into if only to understand how it works and how it could benefit your business.

Let me know if you'd like leasing partner information from StrandVision.