Episode 91 PART 2 - The Keys to Implementing Financing

Foreign. Things. Like if we're thinking about adding financing to our business, or maybe we want to improve what we're doing with financing right now. What are some of the key things a sales guy really needs to understand and know about? Positioning that and then closing on it. Or should we maybe talk about the decisions the owners have to make first?

You know, it's a more logical progression to talk about the owner. Okay. As far as the experience that I go through, because until the owner says, this is the lender that I want to do business with and selects the products, it's a very specific how whenever you're talking to the sales reps and it's tailored to that tool.

That was always our issue. Like you would have multiple lenders, right? Like we had all kinds of lenders that we would use. And I'm not going to mention any names, but there was so many choices. There's like all these different ways, you know, money, no money, down 18 months, same as cash. There's traditional, you know, you know, short term, midterm, long term loans. And you have all these different choices and, and each one of those cost a different amount too, right? You have a dealer fee on some, some of them. Maybe there's no dealer fee. Like there's all these different parameters that it falls into. No sales guy can keep up with all that. And so we had to sit with our rep and talk with him about, okay, which ones are the right ones for us. What does that conversation look like for you guys?

Yeah, I think you exactly nailed it, Jim, that what you have here is you have two different interests in mind. You have the business owner and the consumer. Right. And the ideal offer for a consumer might not be ideal for the owner because there's higher cost. So it's having that conversation on here's the different plans. Before we get into like the different types of plans, we'll put your audience to sleep with that maybe next. But when we talk about the owner conversation, it's about, look, here's the offers, here's the cost. This is what it is. It is a cost of goods sold. Financing is just like the gas you put in your trucks. It's just like that price increase you receive from your manufacturer or multiple this year. You have to embed this as a cost of goods sold because it's the way people purchase today. And that's the very first conversation I have with an owner is the need for financing. Look at what's happening in the space today. We can talk the numbers about the affordability and Homeowners not having access to the capital in their savings account these days, those are all real situations. But let me prove it to you. Go on Amazon, go on Walmart, go on any type of E commerce platform today and see a product that's over $100. And you will see a buy now, pay later solution right there, tied behind it at $100.

Jim, I'm like, no, I'm not doing that. I can't afford to pay cash flow. I'm not doing it.

So if you're going to stretch 100 bucks over four payments, what's your $8,000 roof, what's your $20,000 window package going to be? We have to talk about how it's affordable to the consumers today, because if we don't, either our competitors are or our customers are going to have to source their own financing. Both of them mean that we're losing the sale if we're at the kitchen table.

Yeah. So back in the day, and when I say back in the day when, when I Left Contracting in 2009, the average roof price was about 8 to 8, $500. Siding job, about the same, maybe a hair more. And then windows were usually about double that, maybe triple. Today those numbers are way, like almost double what those numbers were. You know, average roof price out there between 12,515 grand. So that's a significant increase. It's become almost like buying a car nowadays. And if you don't have this option to say, hey, would you like to pay cash or would you prefer to finance that? You're cutting yourself off. Right. Immediately. Like, if you can't make it affordable for them, they're going to find another solution. So it's something we almost have to do at this point. Would you agree with?

Absolutely. So if we're at the owner conversation still, it's. We look at that. So we know that our customers need that. You know, I love your comparison to the automotive market because the pricing point's about the same. And look at how we ask their sales force to go to market. The first thing they ask when you walk up on the lot is what kind of payment were you looking for? You know, like, they don't even talk about cash anymore. So let's look at that. If we know that the consumers need that, then let's look at what is it costing you. Now, we know the average cost per lead has just tipped a scale of $400. So by your rep, by not closing the sales, kitchen table cost you $400. Now, how can we Quantify the amount of no's that your reps hearing because they did not offer financing. It starts stacking up pretty quick when you look at it in that way.

Yeah. And if you got a sales team that closes at approximately 33 to 35%, you, you're looking at $1,200 cost per acquisition. And so you're literally setting on fire 800 bucks on two of those sales calls. So how do we move that number? By being able to offer an affordable payment option. And so that number goes from 30 to maybe 40 or 50. And then learning how to actually do it. It takes technique. But before we get there, what does it look like for an owner? Like if you could generalize it, pick like three different packages, you know, what does that look like?

Yeah. And I'm happy to share a little bit about how we tailor a unique solution at Artist Credit, where I am today, to really speak to the, to the consumer at that point of need. But for the owner, what we're doing is we're going to go through the rate card and this is for all lenders and you're going to see different types of loans. You're going to see what we call promotional offers or special financing is a better blanket term. What special financing means is that there's going to be zero percent interest that your customer incurs. And guess what? Because your customer's not paying interest, there is a cost for this service that means it's a higher fee to you, the contractor. That's right. And then you have other offers that are reduced interest rates. You could see an offer, you know, you see 799, 599, 299 types of interest rates that are very, very attractive to a homeowner. Well, to get attractive interest rates, there's a cost for those loans as well because the bank's not making as much. There's not as much opportunity. We had to be made whole. So there's a little bit of a fee and there's a little bit of an interest rate. And then you have those that are more on either a risk based model or a higher interest rate. We see in the market typically starting around 9.99 and higher. You have the opportunities to get very low or no fee programs. And those may work if you stretch out the term to where those that need a low fixed monthly cost, that they don't blush at that interest rate. But you're missing the two other buying behaviors of those that are interest rate sensitive or those that want special financing. So I put them into those three different buckets and talk to the owners. I'm like, look, there's a cost for these. You want to have this blend so that you complete the experience that your customer is going to actually pull the trigger and do business with you.

Now, if I understand things correctly, I can build those into my pricing, though. Like, I can build it and say, hey, you know, I'm incurring a cost. So I'm going to build that into my pricing. And if somebody wants to give me a cash discount, I can. A cash situation, I can give a discount. Absolutely right.

Absolutely. That's the only way to really do it. Jim, I'm old enough to remember back in the year 2000 where there is this little restaurant with the golden arches that did a pilot program on whether or not on having credit card processing available at their counter. And would you believe it that just 21 years ago they said there's no way that someone's going to pay for a lunch with their credit card. And they pulled it from market. Fast forward. You don't even talk to a human now. I went to one where I just, you know, punched stickers or pictures of what I wanted to eat and swipe my card and it came out to me. So that's what's happening in the market today. It's a true cost. Now, whenever my Big Mac went up 8 cents, did I even catch it? No. You know, so where home improvement contractors are, two do very well is selling themselves, the business, the scope, the project. And that's what we want them to focus on. They often pause at financing because, look, we're not bankers. We didn't want to be bankers. If we would have done that, we'd have gone to school and become a banker. We love what we do for a reason. So let's make the finance part as easy as possible. And what we're seeing today is that there's new technologies, new fintech partners that are making that conversation very easy for reps to sell the job and then use this as the closing mechanism.

So if I understand things correctly, you have had a conversation with the owner, you guys have decided what the packages are that are going to be available to my guys, and then we're going to send the guys out after a little bit of training, I hope, and they're going to be able to start offering this. What are some of the keys to making that transition from the owner and his understanding to the sales guy and what he needs to do out in the field?

Yeah, absolutely. So let's How I understood it was this is maybe new to an organization. It's their first time offering financing. So we had that talk with the owner. We said, look, there's, there's some costs. We made sure that that's embedded. And now the reps know they have that lever to pull for a cash discount. The first time affordability or financing is offered inside an organization, we say you need to market with that. There's an old rule of 30s in here that look around at how the TV commercials, the televisions ads, the billboards that you're seeing today, more than likely, if it's a good or service similar to yours, it's being led with an affordability offer. Whether that's special financing and affordable payment, you're going to see that because that's how people buy. You need to also shift your marketing. And that really tees up the conversation for how did this lead come to you in the first place? It may have come in because of that interest in that affordable solution. So your reps need to be able to talk to that and they need to be able to do that early and often throughout the process. And that's what I loved about the top rep conference was I saw just the blueprint of how you walked a sales rep down. The experience of this is what you do with the customer. And in order to get them to that point where it just comes down to price and you need to sprinkle in every now and again some of those affordability solutions if you're getting pushback.

Yeah, I think a lot of the reason why a lot of guys don't do it is they just don't know how. They haven't practiced it. They haven't gotten the training on it that they need. But like you said, most buyers, there's buyers like me that I would prefer to pay for cash if I can for the reason that it makes economic sense. And so if I can get a lower interest rate than what my cash can earn, for me, I'll finance. There's a reason I find I could pay cash for my house. I didn't. I would have been stupid. I got like a 2.2% interest rate. I can earn 10% on my house. Why would I take that cash and go put it into this big loan and not, I mean, sorry, into this big asset and not go earn interest off of that in an investment? It makes no sense at all. I think a lot of times guys don't have that conversation if it's the right product for the client. Now you Talked about some of those higher end, higher risk things. You're getting into the 9.9 nines and above. Those are like break evens and maybe a little worse, possibly for what a person could invest for. So then they start making that decision. Right? Like, okay, so should I just pay cash for it and not have to incur that charge? How do you handle those? Yeah.

So let's talk about why those products exist, the nine nines and up products. Because no one wants to pay double digit interest on anything. The reason that they're being positioned in the market is because it's the lowest cost to the contractor. And I'll tell you from coast to coast, I have always heard the common objection that Mike, whenever we talk about financing, you don't understand. I only work with the most affluent customers or I'm in the most competitive market in the world and I have to have the sharpest pencil to deliver the best price. And then I look around and I jump on Google and I'm like, I'm seeing three of your competitors leading with financing. And I just visited them and they're like $200 a square more. And I know they're growing their business because they're meeting the customer's needs. So if we start looking at it through the homeowner's eyes of a nine. Nine is not going to win business when they're given an alternative. Don't be that one person who's stuck on the fee. Be a couple hundred dollars more because you're saving your customer thousands.

Yeah, so I see a lot of this. I've noticed it really over the last three to five years. And the very first place I ever noticed it is the funniest thing. Whenever I would drive out of the road that I lived down and hit the main intersection was a T. Right. It wasn't an actual intersection, just a T. And across the road was a giant pine tree. And on that pine tree was nailed a little sign. It said, New roof 99amonth. Yeah. I'm like, okay, so this financing thing's a thing. How is that guy pulling that off? Was my first question. Because I'm in the business and trying to figure all that out. But that sounds a lot better than new roof, $12,000. Right. Nobody, nobody calls that sign. But $99 a month. What, what plays into that? What, what's making people do that?

Yeah, well, once again, it kind of goes into that. Rules. Rule of 30 that I was looking to that. If you embed that into your marketing, it got your interest it maybe made that call. And then whenever the rep went and sat down with you and discussed the finance plans, once you realize that $99 a month was an interest rate that you didn't like in a term that was much longer than you didn't like, you wouldn't buy on it. But you're the kind of guy that you just told me that if you saw a very attractive interest rate tied to it or maybe a special finance offer that you don't have to write the check and you're given more time to spread that out that you would buy on that. So it's knowing the three different buying behaviors of a consumer and that's what we covered in Top Rep is that if you have one of those offers presented for the three buying types in just one offering, so three plans under one offer, you're going to see the customer have one of them speak to the way that they want to buy.

So go into more detail on that. Like I know you kind of hit it on the surface of three different buying types earlier, but I want to make it clear to everybody what say what those three types are again.

Yes. Okay. So we know the consumer behavioral types are one, you have a special financing customer. Those are the ones who are interest rate sensitive to the fact that they want a zero percent, they have cash today, but they don't want to write the check. It's also the ones who have the opportunity within a short period of time to have access to that cash. Meaning if you're running an insurance job and you have those checks that are coming in that are going to alleviate the out of pocket cost, maybe a 12 month, 18, 24 month, 0% offer is a good fit, but allows them to also choose something better than liking kind that the insurance company was going to eliminate to move to a better roofing solution. So your cash customers and those tax returns, bonuses at work, those type of short term, that's your first consumer behavioral type. It's a promotion motivated buyer. The second one's your interest rate sensitive buyer. Those are the ones who hear. You're going to hear the objection in the home of, you know, oh, I'll get my own financing or I'll work with my bank, I'll get a heloc. I can beat that. If they want to start talking interest rates with you, you know, you have an interest rate motivated buyer. And I don't know about you, I'm not a banker, I don't want to be a banker. I wanted to sell gray boxes and basements and So I knew if they wanted to negotiate those terms, I had an offer or plan that was going to speak to them. And so you're going to see interest rates as low as 2.99 with some lenders. That's beating, almost beating your mortgage there, Jim. And it's tied. You know, it's unreal how low they can get. Now, the, the third buying type is what we're seeing a ton of todays, and those are those that are more budget conscious. They need an affordable payment solution to tie this in. And that's where you need to have an offer that not only does the payment work, but the interest rate's still palatable to them. So if you're going to run out to market with a 19% offer stretched out over 100 years, I could probably get you that $99 roof. But is it really going to sell at the kitchen table?

Probably not, but there might be something just less than that. It's $200 a month, and it's not, it's seven years instead of 20.

So.

Okay, I get that. Now, you said something earlier that drew my attention. You said that takes the three buyer types and gives them one offer. What do you mean by that?

Well, that was me really talking about what makes Artist Credit special. The lender that I work with today is that we understand the psychology of in home sales. And what we're seeing other fintech providers do is make the reps go through and pick the plan ahead of time or maybe go through a whole list of offerings and it gets a little confusing. We want to eliminate that, that, that need to talk about specific plans and do that for the in home rep. So we really color code the, the different three buying behaviors. We discuss the behavioral types and say if you have one, select one of these for each category and then when it's shown to your customer, it's going to pull through to a sale. Now, you can do that on your own with another lender and have those conversations, or you can have technology do it for you.

Now, are there some key questions that a salesperson could ask to determine one of those three buying types?

Well, I'll tell you, the first thing you don't want to ask Jim is, do you need financing? Because that's, that's how it always starts for a new contractor is like, well, I don't get it. I asked all my customers, do you need financing? And they say, no. There's a negative connotation. Financing is an F word. I get it. Like, there's a lot of assumptions that go in when I just said that in front of my customer and it puts me in a bad light. So guys, please don't ever ask that. Just know when you to talk about the experience, when you open the door, get invited into their house, you know, thank them for that opportunity and talk about how we're going to talk about affordability solutions at the end and just kind of setting those expectations. Now to your question about how do we know which type of buyer they are? Once again, our technology does that for you. But if you're going to talk around to it, you mention words like same as cash. You talk about interest rate and terms. And these are once again, you have to have a base knowledge about the lender you're working with and those products and the ones that you're allowed to offer before you go down that road. And if you're well versed in that, 100% is a great tactic to do.

Yeah, like that's a big thing for us is to. We call them objection defeating questions. Right, right. And earlier in the process, we're asking questions that once we get to that whole price thing and how much it cost, we kind of know that, hey, this person is more about, I've got the cash, I just don't want to pay for it all right now. I want to pay for it over time. I want that zero percent thing. Like we've asked the questions that tell us like this is really the one for them to fit. But you said something about your software that before, like we don't have to ask those questions. What do you mean by that?

Yeah, well, and look, your scripting is amazing because it really does help identify the best way to close that specific personality when you're in place. And to do that, you have to be able to ask those probing questions and you have to be able to plant those seeds. Like I could go into a house and I already knew before I even knocked on the door, basically around what size system they're going to need. And so my three different types, my different efficiency levels, I kind of knew the cost and what those payments were going to be. So I would start planting the seeds and being able to talk about the benefits and I would tie the benefits towards a dollar amount. So that was one of the questions or one of the seeds that I planted along the way on how they buy. So I knew if I was around $150 right now. But I talked about the increased efficiency and the increased air circulation with a humidifier tied in for just another $15 a month would be able to keep you from that runny nose that you have all the time. You know, things like that and sink see how they react. What's that?

That's only three Starbucks coffees. Maybe two today.

But you know what? $15 a month is 50 cents a day. I can't even get a can of pop for that.

All those sales guys, analogies, right? That's what we do. We, we have to make it real for them so they can like logically go, oh, that makes sense. Like could I do without three Starbucks this month to not have a runny nose? Yeah, maybe so. That's right. So what, what have you seen that makes a guy better at selling financing versus a guy that might not be great at it?

You know, what are the heavy hitters great at? The heavy hitters? Stay, stay the course. Persistence. You know, too often I see a contractor that's new that brings this, this tool in and says because it didn't work in this one situation that they, they go ahead and deviate away and their competitions quickly passes them up. So stick with a process that works. And once again I really see the technology. There's a huge appetite to give you a little under the covers of what we're seeing here is that there are many, many banks that want to come into this space. There have been recent acquisitions of fintechs. There's a lot of banks that want to partner in and give us their money to share with your contractors. So those that understand that there's a huge appetite on this end, we as a technology provider are here to make it so easy that it's your go to and that's who's winning is those who never take a tool out of the tool belt and financing is a big, big closing tool.