Strategies to compete against cash

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In a recent messaging blueprint session with a new client, we had a long discussion about their competition in the marketplace. The client spent the significant majority of the time talking about “Somebody” Bank or “Soandso” capital.  But little mention of their largest competitor by far…CASH.

While you all compete against the cash payer for capex, rarely do you see sales and marketing strategy for attacking this universe of prospects. So we put together some thoughts for the 3 primary segments of the equipment finance business, Vendor & Small Ticket – Large Corporate – Mid-sized Commercial.

Vendor & Small Ticket

We’ve graduated from the mess of 08 and 09 but the scars still remain. While there have always been cash payers in this segment, small transportation, construction, manufacturing companies in particular carry the memories of scarce access to financing, the embarrassment of declines, unbearable cash flow burdens from withdrawn working capital lending and more. Many survived by adopting an almost throwback “Great Depression” era attitude of paying cash for capital expenditures. So how do you thaw the icy, predetermined cash buyer?

  • Good ‘ole consultative selling. Too many times you are taking apps and processing apps.  Be a sales professional. Find out what buyer is actually looking to do with his purchase and how they are looking to grow their business. Keep in mind these are revenue producing assets much of the time, so more assets, more revenue. More scale allows them to bid on bigger contracts and business opportunities. Kinda hard to get there this century paying cash for everything. Instead of using all that cash to make one revenue producing asset purchase, drop a down payment on 2 assets with an affordable monthly payment for each. Or buy a newer asset that will have a longer, lower maintenance life cycle.
  • Educate your vendors. Consistently stay in front of them with stories and examples of how end users have been able to buy more and better (more expensive) equipment by leveraging equipment finance. Give them the tools to be successful, easy finance quote tools, case studies, even spiffs where possible to get the engine going. GET A FINANCE PAYMENT ON EVERY QUOTE.  The consistency will break the cash payer mindset more often.

Large Corporate

Tougher, but many of the most profitable relationships are. Throughout the crisis most large corporations have built war chests of cash. If they have $6B in cash on the balance sheet and are paying cash for laptops, you’re going to have one hell of a time convincing them from a pure finance geek perspective that financing is the obvious way to go. So stop playing their game and play yours.

  • Why do so many forget the life cycle management/asset management approach?  This approach is far underutilized and how occasionally you big guys will run into some really small players financing assets in really big cash paying companies. In olden times leasing was an operational solution at least as much as a financial one. Of late we find ourselves cufflink-wearing financial engineers, but maybe…particularly with the cash payers…we need find opportunity in the old ways of doing things. Talk about budgets with asset class operations managers, maintenance expenses, disposal techniques, secondary markets strategies, etc. It might take a bit longer in a sales cycle, but if you win a deal like this, you have established a value far greater than an implicit rates or a small margin over like T.
  • Selling and Marketing Life Cycle Management. Identify the assets you are targeting in these cash paying organizations. Don’t do a one size fits all approach to financing as an asset management tool.  It will fail. Create some great content demonstrating why having an asset management strategy for this class of equipment is important. Interview your asset team. Get them to publish their outlook on the secondary market and the production issues with major manufacturers. Create success stories, infographics, flowcharts defining a process driven solution. Remember: Acquire, Finance, Manage, Dispose.  This is an education process that requires smart selling, information, marketing content and time…but could lead to big bucks that have eluded you for years.

Mid-sized Commercial

The problem with the Middle Market (a phrase that from a marketing perspective we are not fond of) is the almost dizzying diversity of the space. $30MM companies will share more of the experiences of a $3MM smaller ticket company and $400MM will share more of the experiences of the $1B Large Corporate animal.  Selling against cash in this market is first about data segmentation.

  • Data and the mix of messages. Segment your targets by size of company. $30-100MM, $100-$300MM, $300-500MM. From there mix your messages between the successful sales and marketing tactics of the smaller ticket solutions and the large corporate ones from earlier in this article.  You might be 70/30 get more and better assets with financing/life cycle management in the $30-100MM space and vice versa in the $300-500MM space.

The common elements

Any way you approach the cash payers, regardless of size, you need to understand this is an education process.  A real consultative sale. It requires information, data, tools, marketing content, case studies, examples and more. It takes more work, time and energy but can lead you to better more value driven relationships that are less about price. If you ever wanna chat about how to build a “Competing against cash” strategy, give us a holler.

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