Time to Act More Like the Car Companies?

By Mike Strand, StrandVision Digital Signage

I’m going to go out on a limb here and recommend something that I don’t think you’ll hear from anyone else these days – you should act more like the automobile industry. Ridiculous! you say. As strange as it seems, the auto industry did get one thing right over these last years – and then proceeded to take it to its destructive extreme.

What they got right (for a time) was leasing. They successfully expanded the overall automobile market by enabling customers to receive many of the benefits of owning a car without the upfront costs. By expanding the market -- I mean they actually made it bigger. Companies sold cars to customers who would not have otherwise purchased a new vehicle from them or anyone else. It seems that car companies are heavily investing in this strategy again with the poor economic conditions of the past few years.

A variation on the car leasing theme can be applied to technology distribution channels - specifically digital signage hardware and software, deferring the upfront costs of technology over the life of the lease. A major difference of technology leasing from car leasing is that it is generally lease-to-own rather than lease and return to the dealer after a few years.

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 – great for resellers – not always so great for customers – especially in tight times.

This is where leasing comes in. The resellers get paid up front for the equipment and, in some cases, the installation and services. The customer is able to defer the cost over the life of the lease contract with potential for faster tax write-off for the fees that are paid.

Leasing companies service the market

As technology vendors you, thankfully, don’t have GMAC or Chrysler Financial at your disposal, but 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, several StrandVision resellers have used United Leasing Associates (www.ula.net) with good results.

The beauty of technology leases is that it enables resellers 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.

Here’s what you should look for in a leasing company for digital signage and other technology sales:

• 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. True, your customer’s lawyers may complicate the process when reviewing the contract, but try to find a leasing company that will not burden your customer (the actual IT or business line purchaser) with shepherding the process through his or her own organization.
• 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. You get paid up front, or as the work is competed, and the customer avoids large payments.
• 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..

Mike Strand is founder and CEO of StrandVision LLC, an Internet-based subscription digital signage service that is distributed through resellers. Previously, Mike founded StrandWare, a leading bar code software and AIDC company. Prospective resellers may contact Mike at mjstrandweb at StrandVision.com.