The leasing model is popular in many sectors: in agriculture, nobody thinks twice about using it to acquire tractors or combine harvesters. In materials handling, warehouse managers are perfectly happy using it to replenish and expand their fleets of forklift trucks.
It’s not the case in IT, however, where leasing is underused. Yet businesses require up-to-date IT and telecoms solutions to run effectively, and outright purchases can be prohibitively expensive. Resellers miss out on considerable commercial opportunities while buyers miss out on a flexible, cost-effective means of financing their IT solutions.
Here are four ways ICT resellers – and their customers – can benefit from this kind of finance.
1. Cash flow
Between 80-90% of businesses fail due to cash flow issues. Your customers are suppliers too, and when they get paid late (or not at all), it has a domino effect; hence why many rely on short-term and often expensive finance facilities e.g. bank overdrafts. If anything goes wrong, their pool of resources can become decidedly shallow – even if their operational needs mean they still require your services.
If they’re feeling the pressure, they’re unlikely to expend more money than they strictly have to on new technology. Even if they’re not, why would a business with limited money tie up capital in equipment which may be borderline obsolete in a few years?
A chief advantage of the leasing model is that it mitigates the impact that acquiring new technology has on a cash flow-sensitive business. Paying in monthly increments over a two-year contract is often far easier on a company’s finances: when they can spread the cost of operationally important equipment, they can invest the rest of their budget in other areas of the business.
IT systems can be complicated things. Throwing new hardware or software into the mix can upset the status quo – costing the end-user time and money. For example, according to the International Journal of Computer Science and Engineering, the average ERP implementation takes 16.1 months.
With leasing, it’s much easier to mitigate the cost of implementation for customers – and at little expense to the reseller. When you’re offering this kind of agreement, it’s easier to wrap up support, maintenance, and even training than it would be with an outright purchase. Buyers are accustomed to paying for implementation upfront, but that doesn’t mean they necessarily like it. A leasing agreement can roll “soft costs” such as consulting and customisation into the deal alongside standard equipment costs, offering a far better deal for cash flow-sensitive end-users.
All equipment and software comes with built-in obsolescence. If a customer purchases the 2016 edition of the best accounting software on the market, it will be with the nagging understanding that, a year from now, there will be a newer and better version on the market while they’re stuck with an increasingly outdated application.
Leasing allows resellers to tackle the problem of obsolescence head on: with the burden of ownership gone, end-users can upgrade at the end of their contract for little-to-no extra cost – much as you’d upgrade a mobile phone at the conclusion of your agreement. It mitigates the upfront cost of replacing technology and alleviates customer concerns about investing in a depreciating asset. It also gives resellers a more flexible offering to put before end-users and helps secure future business when customers want to upgrade.
4. Corporate social responsibility (CSR)
Finally, at the end of the agreement, users can return all unwanted hardware to the provider – meaning they don’t have to worry about disposing of it. This is safer, greener, and cheaper than disposing of it themselves as the provider can ensure that all (possible) elements are recycled. The benefits of leasing start when the buyer signs the agreement, and don’t stop until the agreement’s over.
When resellers put this kind of finance at the centre of their sales, they can offer more attractive software and hardware packages and close deals more quickly. Of course, you also need to be able to sell these packages. Offering a finance option can help you win more customers but if you’re not accustomed to providing this finance, it can be hard to know where to begin. To win and retain more customers, it’s important to take a thoughtful, strategic approach to the sales process.
Our Finance Unlocked training is one of the services we offer to our partners to make selling finance easier and to provide them with an in-depth knowledge of all the finance products on offer through BNP Paribas Leasing Solutions.
At our free Finance Unlocked taster session on November 22nd, you’ll get the chance to receive world-class instruction from BNP Paribas’ leasing experts. Experienced in finance and equipped with a peerless knowledge of the IT sector, these experts will provide valuable advice on short and long-term leasing strategy.