Office Automation Sales in for a rocky ride.

[HyperBudgie]

I'm an Office Automation Sales Rep and I'm a little concerned.

Our business revovles around "Rentals". Due to the cost of office equipment (copiers,telephone systems etc.), it is more affordable for our clients to rent the equipment rather than purchase.

These rentals are "glorified HPs" with a few tax benefits. Long term agreements are signed and the deal is actually financed through a bank.
Most banks are now withdrawing from this type of transaction and our financing facillities are diminishing. The only bank left doing these deals is also becoming very sticky and getting an approval is almost as hard as findin Bin Laden!

I guess we just have to bite down and ride it out.

 

[Hosehead]

I'm not surprised. We rented from a big service company two copiers for 36 months and the price was pretty steep but now with the contract up the equipment belongs to us and as it was so lightly used we don't need to renew.
The good thing was the convenient maintenence, but after the contract expired the company billed us for 3 further months until I threw a fit - They still haven't refunded me.
It's a tough business I suppose but when we started there wasn't much choice in heavy duty copiers/fax combos other than lightweight HP etc at incredible Con. Now there's far more choice and better quality so it makes sense to buy (if you are a small outfit) rather than rent what the copier rental company tells you is a R30,000 copier/fax with a free colour laser thrown in at R4000-R5000 per month

 

[The_Unbeliever]

In a way it makes sense to rent - if the machine breaks down it's not your problem.

But in light of the current financial climate, everybody's clamping up left, right and center to minimize their expenses.

The rental centers will have to come up with a better business strategy to keep afloat.

 

[ToxicBunny]

A better business strategy is actually suggesting the right equipment to their clients, and offering to sell a small model rather than renting a big one if the small one will do the job.

Give a client good advice like that, and they'll keep coming back as they get bigger and bigger.

 

[DJ...]

Why are the banks pulling out of these leasing arrangements? Which banks? Is there still a demand from a client's perspective?

Why does your company not implement it's own rental agreements directly with the client instead? I understand that it is a cash flow issue for them in these circumstances and they retain ownership of a depreciating asset with little resale value though but I guess that's one of the reasons the client will want to rent the equipment instead of purchasing it; so there is a demand. However the price can be upped to make the outright CAPEX purchase more cost effective for the client. You could also enter into some detailed SLA's (including financing terms) with the client to tie them in for an extended duration and at the same time make it worth their while. Sounds to me like your Sales Director needs to be looking into a more service based sales model than a product pushing one.

Sales in SA needs to evolve. We still have a sales mentality when we should have more of an account management one imo. It makes more sense to increase residual revenue streams than to hard-sell a once-off product and then bitch when times get tough. Contracts can be linked to the interest rate to negate the economy turning against you during the course of a lengthy contract. You don't need FSB approval to provide rental agreements. You can inflate the price if necessary. Income is guaranteed for a specific duration which then becomes easily forecastable. Sales teams can build up their own residual income instead of fluctuating commissions. Service agreements can be tied into rental arrangements as your company retains ownership of the equipment and thereore have to ensure it is operating effectively and is correctly maintained - this opens up another revenue stream. Plus plus plus.

Keep it in-house imo. There are a lot of benefits to doing this...

 

[HyperBudgie]

Why are the banks pulling out of these leasing arrangements? Which banks? Is there still a demand from a client's perspective?

Why does your company not implement it's own rental agreements directly with the client instead? I understand that it is a cash flow issue for them in these circumstances and they retain ownership of a depreciating asset with little resale value though but I guess that's one of the reasons the client will want to rent the equipment instead of purchasing it; so there is a demand. However the price can be upped to make the outright CAPEX purchase more cost effective for the client. You could also enter into some detailed SLA's (including financing terms) with the client to tie them in for an extended duration and at the same time make it worth their while. Sounds to me like your Sales Director needs to be looking into a more service based sales model than a product pushing one.

Sales in SA needs to evolve. We still have a sales mentality when we should have more of an account management one imo. It makes more sense to increase residual revenue streams than to hard-sell a once-off product and then bitch when times get tough. Contracts can be linked to the interest rate to negate the economy turning against you during the course of a lengthy contract. You don't need FSB approval to provide rental agreements. You can inflate the price if necessary. Income is guaranteed for a specific duration which then becomes easily forecastable. Sales teams can build up their own residual income instead of fluctuating commissions. Service agreements can be tied into rental arrangements as your company retains ownership of the equipment and thereore have to ensure it is operating effectively and is correctly maintained - this opens up another revenue stream. Plus plus plus.

Keep it in-house imo. There are a lot of benefits to doing this...

Nedbank has pulled out, Stannic and Wesbank..The only bank still doing rental financing is ABSA.


Many deals are done in-house (mainly the smaller deals or deals on second hand machines).

Its the equipment with the large capital outlay that companies need banks for.
Specialised equipment that costs in excess of R300 000.00 can't really be carried in-house.When the bank approves a deal we get a cash payout from the bank and they collect the interest over the period.

A company doing R1.5mil in sales (discounted rentals paid out to the company by banks) can hardly afford to internally finance that sort of money on a monthly basis.
There are, however, a few OA companies that are doing this, but the smaller franchises would never be able to finance their own deals.