In my last article, I spoke about customer financing in a retail sales situation, with the main point being the need we have in sales to discuss
A sale ain't a sale until you get paid
financing, as well as fill out any financing forms, at the beginning of the retail sales process. Regarding in-home sales, the order of operations is the same, and this will be the theme of this article’s discussion.
In the past, especially in the early 2000s until late 2008, most in-home sales persons didn’t feel the need to discuss financing with homeowners until a price agreement had been reached. This pattern was mainly due to the fact that just about any homeowner could get financing due to a combination of skyrocketing home values and undisciplined bank loans. Such flaws in our economy have lead many sales persons to a false sense of security over the past 10 years. But with the market collapse at the end of 2008, many people in the sales world have now been introduced to a rude awakening: Finance Rejections.
I know I’m speaking for every sales profession when I say make statement:
When you’ve already made a sale, finance rejections really, really STINK.
But I guess if I’m following the frank and accountable sales person theme of The Sales Lion, I’ll have to make this little addition to my statement:
A sale ain’t a sale unless the customer can pay for it.
And in this day and age, especially when it comes to larger ticket items, customers aren’t paying for ‘it’ more and more. In fact, I’m constantly hearing sales professionals tell me how frustrated they are because even though they are going on appointments and getting a committment to buy, the sale stops with the lack of financing.
Although such a roadblock can happen to the best of us, it is most often preventable, which brings us to the point of this article.
As in-home sales professionals, the days of our customers getting financing ‘after’ the sale, at least in most cases, must come to an end. This means that the subject of money, price, cost, financing, etc needs to be addressed in our initial conversations with a customer. Although discussing one’s method and ability to pay for a product may be adverse to what many sales professionals are used to, it has become one of the most important skills needed by sales persons in 2010 and for years to come.
Considering the average product my swimming pool comapany sells is 35-75k, about 90% of our customers finance in some way shape or form. In fact, during my first 8 years of owning our business, I’d venture to say we only had somewhere between 10-15 sales fall through because the customer couldn’t get financing. Last year in 2009 however, we had about the same amount of sales fall through because of a lack of financing. This lead to a ton of frustration on my part as well as much dissapointment and time wasted for all involved parties. But as we all know, with trials and dissapointments often times we experience our greatest growth. In our case, we implimented a ‘finance first’ approach with all of our retail and in-homes sales presentations.
Upon seeing so many of our customer sales fall through(much to the surprise of the customers I might add because their homes weren’t worth nearly as much as they thought they were) we knew our approach had to drastically change. Let me reinact a conversation I had with a potencial customer shortly after this realization of ‘finance first’. This was essentially our initial phone conversation:
(After talking for a few minutes)
Me: Well it sounds like you’ve got a great feel for what you want as well as what your costs for the project will most likely be.
Mrs. Jones: Yes, I do. And your company, considering I’ve already had 3 others come to my house, will be the last quote I’m going to get. After that, I’ll be able to make a decision.
Me: That sounds great. Let me ask you another question that’s quite important. Since the economy started having its issues, many of our customers have struggled getting financed for their swimming pool because their home values aren’t what they used to be, therefore making a second mortgage or home equity line an impossibility. Were you planning on financing your pool Mrs. Jones, or will you be paying cash?
Mrs. Jones: Well, we were going to finance the pool but we hadn’t started that process yet as we wanted to know how much the project would cost.
Me: I can understand your thinking. Tell me, how long have you been in your home?
Mrs. Jones: About 3 years.
Me: Based on the drop in the economy, you’ve likely lost value during those 3 years in the home, making a second mortgage or home equity line very difficult unless you were able to put a substancial amount down on your house when you bought it. Based on this, do you think you have enough equity in your home?
Mrs. Jones: That’s a good question. I really hadn’t thought about it that way. We might not have very much.
Me: That’s certainly understandable Mrs. Jones, but let me tell you why this topic is so very important. The amount of equity in your home may allow you to borrow 30, 40, or 50k, or even more for that matter. But I’ve seen many cases where homeowners had to downgrade their pool and options, or even had to put the project on hold, simply because they didn’t have enough equity. This is why it’s always a smart idea to know the financing amount available to you before we meet and reach an agreement. Does this make sense to you Mrs. Jones?
Mrs.Jones: Yes, it makes a lot of sense. How should I start the process?
Me: I suggest you do two things. First, fill out the finance form on my website. It’s a short form and they’ll get back with you quickly. I also strongly suggest you contact your local bank or credit union and let them know your plans. I will follow up with you in a couple of days to see how it went. How’s that sound?
Mrs. Jones: That sounds like a plan. I’ll take care of the financing and then we’ll go from there.
So how did the story end up? Well, unfortunately, Mrs. Jones, as I expected, did not have enough equity in her home to receive enough financing for a swimming pool. She called me two days after our conversation to inform me of this, but in truth I already knew her answer because after she filled out the online financing form, I received notice that she hadn’t been approved.
Now, I don’t share this story in an effort to convince sales people to over-qualify and kill every opportunity for an in-home sales appointment. To the contrary, what I’m attempting to do is change the antiquated paradigm so many professionals have regarding when to deal with the subject of financing. Think about it for a second. Why didn’t the 3 other pool companies bring up financing? These companies, some of which had visited the homeowner more than once, had invested their valuable time and money on a person that had no shot at purchasing a swimming pool. I don’t know about you, but I’m not interested in sales appointments just for the practice. I go on a sales appointment with the expectation to make a sale. That’s the goal. And if the sale is an impossibililty, I’d rather stay home and be with my wife and kids.
Because every business and product is different, your method of ‘finance first’ will most understandably vary. But the principle argument is the same in every situation:
The sooner you get a handle on customer financing, the sooner you’ll make progress, and the sooner you’ll make the sale.
It really is that simple. I very much look forward to hearing your thoughts on the ‘finance first’ sales method and hope it benefits you greatly in 2010!
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{ 3 comments… read them below or add one }
sure would like to be be able to buy a 75,000 swimming pool and just right a check…what percentage of customers pay cash???
Good question Phil..about 90% of our customers finance…which makes the subject one of tremendous importance.
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