Facing Financing Challenges
In the spring of 2009, Water Quality Products (WQP) talked to Steve Webb, EcoWater VP of dealer sales and marketing, about the current state of financing for independent dealers. WQP Managing Editor Rebecca Wilhelm checked in with Webb to talk about what has changed since their last discussion.
Rebecca Wilhelm: How has the financing issue impacted dealers?
Steve Webb: It has been difficult. In addition to dealers having to cope with the credit crunch, they have also had to deal with higher unemployment and less consumer confidence. It is difficult for a dealer to plan their financials when their cost structure keeps changing because of not knowing how much of a sale will be discounted through financing.
Financing issues have made it necessary for dealers to reevaluate their business model, which, for some, has required changing their target customer and sales model.
Dealers are more open to making cash or credit sales and are working hard to offer value-based incentives to close the sale. It will be interesting to see if some of the new revolving credit card laws redirect financing back to installment lending.
Wilhelm: What are dealers telling you about the availability of consumer financing?
Webb: They tell me that it is loosening up a little bit. Dealers are finding that some finance companies that took a break back in 2009 are starting to get back into the business again but they are very particular about the credit being extended.
More than a year ago, EcoWater partnered with UCFS, a Berkshire Hathaway sister company, to create an exclusive program for EcoWater dealers. This partnership has made weathering the availability and cost of financing more bearable. Through this program, we have been able to maintain overall stable approval rates and as a result, we are attracting more new dealers.
One of the keys to a successful program is understanding the commitment that is required when offering long-term financing to direct sales companies. I am confident that UCFS understands the direct selling process and the important role consistent financing plays in dealer growth and profits.
Wilhelm: What advice can you give to dealers trying to stay profitable until credit loosens up more?
Webb: Increase revenue, control costs and eliminate waste. It sounds simple but it’s not always that easy. People in the water business know that selling is a numbers game and successful dealers know “their numbers.” They know how many leads result in appointments and ultimately, sales. What’s difficult is that the numbers have changed in the past year. To get the same result, dealers have to evaluate their lead sources, eliminate those that have dried up and find effective replacements. The bottom line is that it’s taking more leads to generate the same number of sales.
Another way dealers can remain profitable is to understand where there is waste in their dealership. Sometimes the easiest thing to do to control costs is to start cutting and, unfortunately, advertising and lead generation efforts takes the first hit. But that does not mean these are the right things to cut. Successful cost cutting involves evaluating waste across the dealership. This means the dealer has to first understand where the time, money and energy are being spent. For waste reduction to be effective, everything has to be up for evaluation. A great way to reduce waste is to ask employees for suggestions.
Wilhelm: What are some steps dealers can take to make their businesses stable?
Webb: People are still buying water treatment products today; it’s a matter of getting to the people who have the need and filling the need. When the need has already been established, the sales process is much more efficient. A dealer can spend the time building a relationship, selling the dealership and the brand. Dealer organizations have to remain open about who we consider our customer. If we want to expand our customer base, we have to continue selling on value. Value is what drives the direct sales business. Value takes time, it takes the demo and it takes the basics. We cannot keep looking for needles in the haystack.
Wilhelm: In 2009, you mentioned that EcoWater was offering a new program that would provide financing alternatives. How is that going?
Webb: Great! The SLP Plus Lease Program has given dealers a financing alternative that has helped avoid losing a sale. The program offers something for the dealer, the salesperson and, most importantly, the consumer.
The program allows the dealer to put a new unit out in the field with no cost to them and provides an allowance that covers various up-front sales and installation costs. The salesperson is happy because they get their commission at the start of the contract. The consumer receives interest-free financing for up to 48 months, plus their warranty does not start until the end of the lease. It’s a win-win situation all around.
In addition to the SLP Plus program, we have other rental programs that provide recurring revenue. The recurring revenue helps pay monthly bills, creates value for the dealership and increases the sales price when it’s time for dealers to enjoy the fruits of their labor. Without a doubt, these financing alternatives have helped attract new dealers.