Financing
Financing
You Need to Offer
Financing Options
If you do not offer financing with simple payment plans, you will lose a lot of clients. The higher the cost of your home service installations, the more financing options are attractive to prospective clients. In fact, very few people have $10,000 lying around to spend on a new HVAC system. But what they do have is, $1-200 dollars they can free up for regular monthly payments.
Take Note: If you do not have payment plans, you will lose out on a lot of sales opportunities.
Find a financial service that specializes in financing for trade companies and create an agreement with them to take on the liability from the clients looking to pay later. This service comes with the benefit that you can close sales much easier with clients that have budget concerns. However, the downside is that every financed sale has a portion going to the financing company itself, so you will need to increase the final sales price if the client chooses to go with financing.
Think of it this way, the client is no longer paying you directly, but the financing company now takes on the client’s debt. Instead, the financing company pays your company for the sale but charges the client more via monthly payments that eventually outpace the total sale price. A furnace that would have cost $6000 upfront, is now $7000 split over 24 months. The more payment plans you offer, the higher the chance a client can find one that works for them.
Payments plans are an excellent sales tool, and you need to have them, but they are painful to track & set up, especially if you are already managing a lot of your HVAC business as a business owner. While the financial service you choose will help you, it is likely you will need to hire a bookkeeper to properly track this undertaking.
Why are payment plans critical to your success in sales volume?
- Financing is leverage. It teases out profits from many customers instead of relying on rare big paydays. Sell more installs, and you can clear overhead costs faster with a more cash flow.
- Financing allows you to remove fear from low-budget buyers early in the sales process, so they are more receptive to a larger sale. They will be more eager to add luxury features to the sale.
- It is a matter of fact that financing increase sales volume and in the long run that means more profit and more room to grow your trades company.
- Financing options attract buyers. When the financing company puts on promotions you can directly advertise and market to your clients. For example, 12 months of no payments no interest, 0% financing for 12 months, or fixed low-interest rates will all generate more sale leads.
Possible Financing options
- 0% interest for 24 months of equal payments
- 99% interest for 48 months of equal payments
- Flexible long-term payment plans for 60/84/120/or more months at 3.99%
- Low weekly and bi-Weekly payment plans based on long-term payments
- Present financing in smaller numbers. For example, a daily, weekly, or bi-weekly description of the cost will have less of an emotional impact than a monthly cost.
*These will differ depending on what service you go with
Common Players in Financing Service
- FinanceIt
- Snap
Take Note: You need to build in the loss of profits from using financing services (payment plans) into your prices by raising prices by small percentages in select areas of the business. More detail on how to bake the costs into pricing will be covered in our Pricing Point write-up located in the Consultative Sales Process Pillar.
When calculating the cost of financing to a trades company, the burden of carrying it, factoring 4% across all jobs + 1.75% credit card processing fees, an added 5.75% should be baked into your pricing. Approximately, 33% of jobs are financed.
Manufactures Offset Costs
On higher-end models, manufacturers will pay for a portion of the financing on an install if the client goes with the more expensive model and in this case, the HVAC company saves a bit of money. Depending on the promotion from the manufacturer it could benefit the client directly like cash back or interest-free deferral for 12 months or more so in this case your HVAC company doesn’t save money, but the client is more apt to buy a more expensive model.
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