Our partners at GreatAmerica Financial Services commissioned a 3rd party research firm to conduct a survey with 194 C-level partners at MSPs and UC Solution Providers. While a variety of information was collected, perhaps some of the most notable is what the partners listed as the top benefits of financing.
The benefits of financing are plentiful for both Managed Service Providers (MSPs), systems integrators, and their customers. Financing allows customers to make large hardware and software purchases with low upfront costs.
The top 5 benefits of selling As-A-Service through financing include:
1. Closing deals is easier
2. It’s easier for customers to say “Yes!”
3. Enhanced cash flow
4. Higher margins
5. Fewer Days Sales Outstanding
This infographic summarizes top perks UC Solution Providers and MSPs said they have experienced from selling an As-A-Service model with Hardware as a Service (HaaS) backed by financing.
Let’s dig a little deeper into each of these benefits from the infographic below.
Many Solution Providers and MSPs struggle with extremely long days sales outstanding (DSO). Relying on the customer to pay you after you make the sale can be uncertain and strains your budget. Especially when it’s for a large sum and you’re already out the cash but they’re still trying to find the check, or ‘it’s already in the mail’.
In fact, 40% of those surveyed said their DSO decreased by 20 days or more and an even higher 76% of those partners said their DSO decreased by five days or more when GreatAmerica pays them upfront. You’ll get paid faster so you can invest that money back into your business sooner (and your accountant will thank you too).
In fourth place is one benefit that Solution Providers don’t always realize comes with monthly payments. However, as the results show, our partners found their Managed Services deals have higher margins. That is because when someone sees a large lump sum they are more likely to price shop. They’ll try to lower the price by slashing parts off of your solution. That is not the case when they see a monthly payment. Their mind frame shifts from ‘how do I reduce that total cost?’ to ‘can I afford that in my monthly budget?’
In fact, 71% of the surveyed Solution Providers said that their customers on financed agreements acquire additional products and service lines. Since add-ons and upgrades don’t have a large effect on the monthly payments, they are more likely to purchase them.
One of the biggest struggles with switching to an As-A-Service model is that it can be very hard on a company’s cash flow. Most companies that go it alone end up fronting the cost of all the hardware in the deal, which is a cost they won’t make up until a year or so into the contract. Then there is the risk of the customer defaulting and you taking a loss. This model can quickly tie up all your cash so you don’t have any left to continue funding managed service deals or invest in other areas of your company.
That is probably why our Solution Providers said that their enhanced cash flow is the third best benefit to using financing with their As-A-Service model. All of that burden and risk is shifted off of them and onto the financing company. You get all the cost of the equipment upfront, and you don’t have to worry if the customer defaults, we take the hit – not you!
Coming in at benefit #2 is that the customers have an easier time saying “Yes” to your solution. When you think about it – it makes perfect sense. When you are in the market to buy a new house, the total price of that house may have you thinking there’s no way you can afford that right now. However, once you see the price as monthly payments instead, you realize that you can fit that into your budget. Suddenly, it becomes possible and you’re ready to move in! The same thought process applies to the hardware for MSPs customers looking to purchase your technology solutions.
Plus, you’re not fighting for your customer’s Cap Ex dollars anymore. Your monthly Managed Services will use their Op Ex dollars, which makes them more agreeable to your As-A-Service solution.
Finally the #1 benefit to offering monthly payment is arguably also the most important – it’s easier to close deals. That’s really what your primary goal is all about, right? Gaining more customers, selling more and ultimately increasing your company’s value. Plus, it’s better if those are longterm Managed Services customers and not just one-off cash sales.
As with #2, if your customers have an easier time saying yes for the reasons mentioned above, then you’ll be closing more deals in less time. The faster you close deals, well, the sooner your sales team can move onto the next deal and the one after that!
Get All the Benefits of Using Financing to Sell As-A-Service
Thanks to offering monthly payment options, you’ll be selling more deals with higher margins, have fewer days sales outstanding and an enhanced cash flow, along with happier customers that will be long-lasting and easier clients for you (since they didn’t remove crucial parts of the offer to cut the price and got add-ons instead).
As you can see, it is a domino effect that all leads to you having a larger, more profitable business with a high valuation. However, you won’t see any of it unless you push that first domino and start offering monthly payments on every deal.
Not sure if offering financing is the right alternative to the traditional As-A-Service method of using your own business cash to fund the deals? We’d love to help answer your questions.
Read the full story at GreatAmerica Financial – What You Said: The Top 5 Benefits of Financing and As-A-Service