HVAC Full Blast

Welcome to HVAC Full Blast, where you get industry inputs for real results. Today, we're unlocking HVAC financing secrets to supercharge your sales. Mary Carter from Trane and Steven Ross from Sandler are with us, sharing can't miss insights. Let's dive into the conversation.

How you been, Steven?

Hey. In South Carolina, it's pretty hot, which is which is nice. I know some contractors are kinda sitting on the fence going, hey. I'm ready for summertime to get started.

And it was a little late getting here this year, but it started.

So Yeah.

I totally agree. We're finally the the sun turned on. It's been nice. It's been nice to get out of clouds and rain, and now we're seeing some business pickup. So that's always exciting out there seeing customers and doing what we do, just trying to get some inspiration going in the whole world of better ways to do things.

Yeah, yeah. Here's a topic which we've had it on the calendar, Here's one of the things I think makes it really, really relevant is that on the phone this week with a couple of dealers, sometimes what happens is March, April, even February, you're relatively slow as a dealer. Your salespeople or your selling techs have a lot of time to spend with the customer. And so those sales processes are pretty thorough.

We do a good job asking about all the things going on in the house. We talk about financing. We talk about tax credits, all that kind of stuff. And so our average ticket's pretty good.

And even though we don't have a ton of leads, our closing ratio is pretty good. And then June hits and we're running twice as many calls and we're super busy and things are going really fast.

Talked to a dealer this week, sales guy ran thirty calls last week and only closed six of them. So on one hand, volume's up, lots of calls coming in, opportunities, but because thirty calls, that's six a day for five days, so he's rocking and rolling. His sales calls have gone from maybe an hour, hour and fifteen to maybe thirty minutes max. And so in asking questions in terms of, Hey, what's your product mix like?

He's quoting a lot of single stage because he didn't take the time, didn't have the time to really explain what else is available.

How many of those six were financed? Zero. So the sales rep, he's not taking the time to talk finance because he's in a rush. And so now in talking to the dealer, one of the things the dealer says, well, that's not a big deal because almost all of our customers just pay cash or we finance very few, right? That's not our market. I thought maybe we could just start with that and say, Hey, Mary, you've been all over the country. You've talked to large markets, big cities, Los Angeles, New York, Houston, Chicago.

Then also you got the smaller markets like Des Moines, Iowa and Columbia, South Carolina, then you got tiny markets, right? So what do you see? Are there markets, maybe that's a good starting point, are there markets where everybody pays cash?

Yeah. Oh, great question. I feel like we see and talk about this all the time. And I think maybe I even asked you what the difference between finance and finance is at one Well, it's a joke amongst finance professionals and I have a finance degree or a finance degree. But we just say that the difference is the amount of money that you're talking about. Once you get up into that high bracket, you are financing.

Gotcha. Alright. Because now we know.

A little a little break the ice on financing and finance. But but, no, I mean, it's it's so interesting. Right? Because the perception around money and talking about money is a whole psychology thesis in and of itself.

And what we know is that every individual has a money script. There is a script in their mind that has, you know, instilled in them from their first transaction with money, like the first time you ever held cash or coins. Coins, can you imagine? But, you know, to now where, you know, maybe you're mostly digital digitally transacting with money.

There is a script in your mind that says, this is what I should do with it. This is what I shouldn't do with it. This is how I feel about it and one thing that is consistent no matter what your script says is, I don't want to talk about it out loud and I don't wanna tell another person when I don't got it.

So those are pretty consistent scripts. What's interesting about that is regardless of what you have, where you have, what you do with it, where you live, what we see is that when you're put into a emergency replacement situation or a situation where you really need the good or service being offered to you, money becomes the immediate reason not to do something and therefore causes the whole decision tree for the consumer to go down, you know, really just a get it right, get it fixed, get it done situation. So it plays perfectly into this dealer that you're describing's hand who's now he's cut on time, and he's trying to make the sale as fast as possible, but then he misses that beautiful element of offering an affordable way for someone to pay for the jam that they're in.

Right? You know, I'm calling you because I'm uncomfortable. I don't feel good of, you know, the the house isn't working the way I want it to. I got people coming over.

I got, you know, barbecue cabinet in two weeks, right? Like, I gotta have this house cooled, ready to go, and and you didn't give me a way to pay for it. In fact, you know, your stress is just elevated. Right?

So regardless of the market, regardless of where you live, we know that consumers want affordable ways to pay for the things that they want and they need. And when they don't get presented with one, they're not gonna ask you for it because we are not creatures who like to expose the fact that we don't got it.

That's Yeah.

That really is it. Right? I mean, how many times, you know, are you actively going to show your cards and say, I can't afford that when you're talking with someone trying to sell you something? That's that's a pretty big pill for a lot of people to swallow.

Yeah. So I got a question for you. What what was your money script coming into sales? Like, did you have you thought through, like, how did your parents raise you or how did they talk about money?

Oh, I'm so glad you asked me this question. And no, you did not tee this up and we did not talk about this beforehand, but this is where my mom, if she's listening to this, will just hopefully be sitting back like beaming with pride.

My parents instilled very money conscious values on me very early. They wanted me to understand, you know, there's no such thing as a full paycheck. The difference between saving for your future and saving for a goal. And so my mom constructed an allowance system which required me to pay family taxes.

And I contributed to a bank account and we went to the bank and I did my puny little deposits.

It was whole exercise in like this is how money works for you. This is what happens when you save. You get that good feeling of earning interest.

And I don't want to paint it like allowance was a big deal. It was ten dollars and you had to hit all your jobs to get your allowance. And she paid it out to us as one five and that five went right into the bank. You really even see that five. You really got five dollars and then one dollar went to family taxes, so you really had four dollars and then your four dollars something had to go towards a goal and then the rest you got to keep. So all is said and done, I'm taking home like two dollars But it was a really cool lesson to see, this is how you make money work for you.

And family taxes, by the way, they didn't go to just, you know, random things. They went to very intentional things for the family, like Friday pizza night. We would take from taxes. And if we were I don't know.

We had a pool, and so if we were buying, like, new noodles for the pool or something, that would come out of family taxes. Like, taxes were meant to show where fun improvements and where good things could contribute to. Now, obviously, mom and dad are funding family taxes. Right?

My little dollar a week isn't gonna make a huge dent. But but, yeah, that was that was really my money script. It was, you know, I am always trying to find ways to make my money work for me. How am I gonna be doing that in a capacity where I feel good about it, I know I can have fun, but I'm also doing responsible things so that I'm not stressing.

Yeah. Yeah. I remember I mean, it's interesting what you remember about your childhood, right? Yeah.

Didn't have a lot of money growing up. And my dad's super smart. He's got a D, but it's in philosophy. It turns out that doesn't pay that well.

So we were kind of middle income, maybe lower middle income. And our neighbor though been going to law school for a while, gets out of law school, gets a job. He's a lawyer for a couple years, and then he gets a big job. And so he comes home one day in a new car.

And I remember we were out. We were getting ready to go get in the car and go get pizza or something, and he pulls in a new car. We're like, oh, wow. And my dad started talking to him, and so we walk over there.

We're looking at this car. We're like, man, this is kinda nice. And I think I was maybe eight, nine years old. And I remember just going, hey.

How much did that cost?

And my mom was absolutely embarrassed.

And so I got a spanking when I got home because you're not allowed to ask what does the car We're not talking about But that's one of your money scripts is you learn pretty early on, you shouldn't ask about money, it's not polite to ask about money and we don't talk about money.

Was just one of the unspoken things. We certainly don't talk about money with our neighbors. You know?

So Well, and it's and, like, sort of tailing off of that, like, in learning how to make money work for me, the also, like, the secretiveness of it.

Like, you know, so you so I'm very driven to do that, but don't necessarily share our tactics. You know, we don't we don't talk about how we do that. It's it's just sort of like the mystery of, you know, wow. Like, do you have money and you must be good at managing it?

Yeah. Mhmm. Yep. And there's nobody else behind me. Like you know? Right. Yeah. And that's just not true.

It's just it really just isn't the case. And, you know, along the lines of helping money work for me, sometimes that's financing. You know? Sometimes that is taking on a payment plan when especially when I was really starting in my career and wanting to do more fun things and and you know, pay rent and utilities but then also like needed a car, you know, all of a sudden that became a huge expense and I really learned like what a five figure purchase means to me and my budget And Yeah.

And all of a sudden financing becomes really attractive. And there are there are ways to go about it and do it. But I think the the one way to start doing it well is to talk about it. You just gotta get a little comfortable saying, you know, again, the the financing word, the the word that starts with f a little bit more frequently in your sales pitch because it's it's really the key to bridging that gap between oh, What am I gonna do?

Can I afford it? To, oh, what what can I afford in my budget? And here's what I can say yes to.

Yeah. So let me go back to my question a couple minutes ago. I mean, you've seen the data from across the country. I mean, are there pockets where everybody pays cash?

I could not honestly sit here and say, yes.

Los Angeles cash capital of the world, they are crushing it.

Without a doubt and based on approval ratings from all different kinds of service companies that offer financing, you will always find a customer base that is willing to take on monthly payments. Now, what they take on monthly payments for might differ, but no, I mean, there's not necessarily one market or one county out there that is just, you know, cash or nothing. That's just that's a utopia that I haven't found yet.

Alright. So what if what if a contractor says to you, though, hey. All my customers pay cash. Like, what's what's the counterargument there?

When someone says that to me and I hear it often, I usually say, well, how did you offer for them to pay you? Did you only offer cash?

And then you guys start to get exposed of, well, yeah, of course I did. Then you can have the conversation of, well, then of course they paid you cash. You only gave them one way to pay.

How would they guess another way to pay?

And and you you can start to kinda turn the light bulb on on, oh, that's okay. Good point. Maybe, you know, how would you do it? And then I could say something like, you know, a lot of our customers who are offering financing actually see higher tickets and more closes because they're giving their customer an affordable way to take on a monthly payment that fits their budget.

Simple as that. But customers are rarely going to say, wow, that's the cash price.

Gosh, that just feels really uncomfortable to me. Could I sign up for a payment plan instead?

Yeah.

That's a big leap for a lot of customers to make.

It is. It is. I think it's helpful. I mean, you know, you you see maybe swings around the country where you'd say, well, maybe in this part of the country, sixty five percent of the people finance and thirty five percent are coming up with it on their own and maybe somewhere else, eighty five percent of people finance. But I've never seen even less than fifty percent in terms of residential home purchases, which could be roofing, siding, windows, plumbing, heating and air. Any purchase like that, the vast majority of them are financed.

That's even if you said, Well, let's count credit cards as self financing. They're still having to come up with that money somewhere else. And then you see statistics where most people don't have one thousand dollars in their bank account or something like that. So the need, certainly when you look at the demographics, is there for sure.

Yeah.

No. I totally agree. And, you know, it credit cards are financing.

I just we just gotta acknowledge that. And and that's okay. And if you've ever met someone who says, no. I'd rather just put it on a credit card and get my points.

No problem. I love points too. You know? Back to making my money work for me.

Like, there there's there's no shame in using points and cash back rewards and whatever you wanna do to make life happen for you. But it's financing. And again, not saying that's a bad thing, that's totally okay. But a lot of people like to think that that's not financing or I've even heard people say, you know, like, you know, I racked up all this credit card debt and, you know, the the sad part about that is credit card limits are not necessarily money you have.

That's not that's not debt you have to go get. That's just a capability that you have to spend to be able to pay back. But, you know, big misconceptions around really how credit cards function. It it's just a form of financing.

And, yeah, some of them come with some pretty great perks. Use them. Not saying don't do that.

Just just be intentional and be smart about the way you think about it.

So what's you know, you've got territory managers and account managers all over the country, and they sit down with contractors. They say, hey. You should be financing. You're missing out on if if all especially if all of your customers are paying cash, you're missing out on this huge group of people that doesn't pay cash. So you should be offering it just to go get that segment of the marketplace.

So if you're like, how how do you do it? What's the what's the official tagline? Like, what's the game plan?

Yeah. The weighted average cost of financing. Have you heard that one yet?

Yeah. There's a couple different names. Alright. So weighted average. Yeah. Help me understand that one.

Weighted average is definitely what you see is the the most consistent recommendation of building in the cost of financing because again, maybe, you know, we could probably do a whole like myth section on what is financing but the actual off actually offer financing promotions. There is a cost to that and that cost is usually given to the merchant or the business that is offering you that promotion. So, even though I'm a consumer, I'm buying a new heating and air system and I'm getting offered a zero percent APR for sixty equal monthly payments promotion.

Even though that's my financing, the dealer or the the heating and air guy offering that to me is paying a fee to offer that, right? So, so what do we do with that fee? How do we address that fee?

Lots of consumer credit regulation around this that says, you know, I can't show the fee to a homeowner because that's a predatory practice or it's misleading. It it basically, the the cut and dry on that is you can't penalize people for offering or for taking advantage of financing. That's a that's a discriminatory practice.

So you gotta build it in. How do I do that? That gets me to the weighted average. So the weighted average basically says, consider all of your payment methods, whether that be cash, check, credit card, or a financing promotion.

Consider the percentage of your customers that pay with those methods. Create an average, add it up, and that's the fee that you should be putting into every transaction all day every day so that you're just, you know, set no matter how your customers choose to pay. Because on average, just using some ballpark numbers here, thirty percent will pay with cash, thirty percent will run a traditional credit card, and forty percent will use one of your financing promotions that you show them in a proposal.

Yeah. Nice. We argue? Can we fight about this?

I mean, I think I've laid it out pretty nicely there. I I see no flaws. Yeah.

Well, here's you know, when I was a sales guy, I'm like, hey. I want the biggest, baddest finance offer we have available because that's gonna help me close dealers deals. So I'm going back to the guy that owns the heating air company. I'm like, man, give me a better offer.

Like, come on. This you know? And, course, the trade off then is, Well, you wanna better finance offer to help you close more deals. That's more expensive.

So we've gotta build that in.

And so the challenge with the weighted average, and I would agree, corporate America has proven that's the best way to go. If you're a big brand box store and you're offering a promotion on TVs, that's how they're doing it. I think the problem sometimes is if you own a small heating and air company, you don't necessarily have the pockets or the cash flow that maybe big box stores have. And I think that's where the issue comes in.

I'll give you an example. Let's say I own a restaurant and I've got one hundred customers a day, five days a week. And so I say, Hey, I'm going to give free ice cream on Fridays. I've got one hundred customers, and so now I can absorb that cost based on, Hey, I've got five hundred customers a week total, but only one hundred on Fridays, and I want to give free ice cream on Fridays.

Well, what happens is some of your customers that come Monday, Tuesday, Wednesday, Thursday, now they show up on Friday. And so if you only budgeted for a hundred free ice cream cones on Friday, but you have a hundred and fifty people show up, like, oh, we we miscalculated. We didn't we didn't plan correctly. Right?

What we're counting on is we're counting on financing to shift behavior. But if we don't go back and watch the shift, we're not ready for it.

When I first owned a heating and air company, we had twelve employees.

How much time did I spend looking at my finance offer, my finance cost, and at the end of the month how many people took advantage of it?

The right answer there is I spent zero amount of time looking at that.

If if my account manager came in quarterly and said, let's take a take a look at this. I would take a look at it. But I also because I didn't keep my eye on that on a regular basis, I was more comfortable just saying, I'm gonna offer different finance offers on different grades of equipment, but I'm gonna specifically build that finance cost in on that line of equipment. And that way, I don't have to monitor it. That was kinda my checks and balances.

As corporate America would say, Hey, that's not the best way to do it, but it's better than not offering it at all. And if you're a small company, you're covering your rear end assuming that you don't have the ability to monitor on a regular basis. That's the one pushback I give sometimes when I talk to somebody who's saying, Hey, contractors should offer more financing.

I also managed sales for a contractor. We had twelve in home sales guys. I had fifty in store lead generators at big box stores funneling leads in. I had an assistant who had an assistant.

We could say, Hey, every week you've to look and see how much do we finance, what was the average cost and so on. Let's keep track of that. We had cash flow coming in. You've got a big company, that is absolutely the way to do it. You got twelve employees, maybe not. I think that's maybe a little bit of my issue sometimes with how we talk to contractors and say, you should offer financing.

So many things I could say. That is fine. Maybe the most important thing is that my money script absolutely includes free ice cream on Friday, so I'm coming to your restaurant on Friday.

That's good.

But that aside.

So, yes, that's that's like the first the first statement. Everything I think that you're saying here holds value and is true.

And I guess I guess the way to really kind of break it down is there's a lot of levels to this. For a manufacturer or for a financing company to come to you and, you know, underhand pitch the weighted average method and, you know, see if it gets a hit is really their way, I would say, of boiling the ocean on tactics and really choosing the one that we do see with big box retail. Any any major merchant that you're interacting with today is using a weighted average. So so is it the best method?

It certainly is successful, but it might not be the best method for you. And I I can get on board with that. I also don't hate what what I what I like about how you said you were doing it is if that's perfectly fine. If if you know on, you know, on a best, better, good, what the offer is gonna be and you're pricing that offer for those tiers, great.

Because you're covered. Right? You're not taking a gamble. You you're you're still presenting an offer on every kind of system, number one.

You're not just saying, oh, I'm only offering financing on my good stuff, and hopefully, you know, I'll get cash out of my low end stuff. And then your account manager's gonna be coming to you saying like, hey. How come we never get any of these high end deals? Right?

It's like, not equitably showing financing. So showing it on every kind of equipment. Good. Building it into every tier of equipment with the right promotional rate.

Good. And if that's the way that you get a start, I say start. You know, the last thing I would want someone to do is sit through a weighted average presentation, walk away saying like, well, that doesn't work for me. Throw their hands up.

Do nothing and go another season without presenting an affordable way to pay for heating and air systems.

You gotta start somewhere, and that's usually my best advice, you know, when I'm working one on one with someone. If I'm giving a class, we're probably gonna talk about with the weighted average because it is effective and it does work. But I'm I'm sensitive to the fact that it's time. It's definitely time.

Now I would say some of the platforms out there, some of the different FSM platforms and CRM platforms have gotten pretty savvy in being able to show you, you know, hey. This is how much you closed on credit cards, and this is your average credit card fee. Right? Because each of the major credit card companies charge a different rate.

So if you can, it's worth the investment to be able to, I don't know, get that that screen on your accounting system to just show you what those buckets look like and try to make it, you know, a KPI that you can monitor a little bit because it it is very telling. When I've sat with dealers one on one and just reviewed credit card processing slips, it's amazing for people to kind of have that moment to see like, wow, I didn't realize how many sales I'm doing on a credit card and how much of a credit card fee I'm eating. Right?

I think that's that's one thing we, you know, just just like homeowners think a new system cost five thousand dollars We think a credit card fee is three percent. Like that, there's just tried and trues out there that we all subscribe to.

Crack into your credit card processing statement. Is it really three percent? How many Discover cards did you take? How many American Express cards did you take? You know, not to, you know, throw those two companies under the bus by any means, but their fee structures are very different.

And with the advent of rewards promos, you know, all of those rewards cards usually come with an annual fee and a little bit of a change in a processing fee to a merchant. Anyway, going down a big rabbit hole on credit cards.

If you can't tell, I like know a lot about this I think it's worth talking about.

Since we mentioned Amex, let me point that one out. I think I've had a contract before say, Oh my gosh, look at the fee on Amex. I'm not going to accept Amex anymore.

And the downside of that is I have an Amex, and I almost exclusively use it. I mean, from travel to running business expenses through it and so on because then when I travel for fun, I'm just cashing in points like crazy.

If I had two choices between buying a heating and air system from company one and company two and company two doesn't take Amex, that probably sways my decision.

I think that's Amex's pitch is, Hey, if this guy can afford the annual fee and he's going after these rewards, this is the kind of customer you want. It's worth the additional fee. I would probably agree with that. Both as a business owner and as a consumer, I would say, just like any but to your point, you got to build it in. You can't just assume that credit card fees are going to be three percent or two point two five percent or whatever they used to be. But yeah, you got to keep an eye on it.

I like your thinking there too.

Am I the kind of consumer that's just not taking into account what kind of business I'm about to buy from? Probably not. That's why we encourage businesses to up their Google reviews and have strong online presences. And why wouldn't that also carry into the proposal? And, like, you know, what what I'm willing to look at and consider there. I I think that's a I think that's a really good point. I know you wanna fight, but I think we're walking away so far.

Trying to mix it up a little bit. Hey. You know, I Here's something that every now and then you stumble across something and you think, well, that's not going to work, and then it works. And so for me, one of my moments was obviously I am a sales coach now. That's what I do for a living. But at one point in time, I was a sales guy and I hired a sales coach. That's how I got into it.

And my sales coach said, Hey, when do you offer financing? Not do you offer financing, when do you offer financing?

I just said, Well, we get down to the end and I'm like, Hey, this system's ten grand and this one's fifteen, this one's twenty, and by the way, we offer financing. He's like, What industries are great at offering financing? The two that come to mind are cars and real estate. Most homes bought and sold are somebody who got a mortgage on it, right?

Same thing with cars. And my sales coach said, When do they offer financing? I'm like, I don't know. What do mean?

My realtor isn't offered financing, but here's the key. A good realtor won't even show you houses until you've been pre qualified for your mortgage.

So the when in that industry is right at the beginning. And same thing with cars. A lot of times, if you're going to buy a car, they're gonna try to find out, hey, what do want your monthly payment to be? What do you think you can afford?

What do you think you're gonna qualify for? Because that's then gonna determine what you're looking at. So my sales coach, who was not in the heating and air world at all, was like, I think you're waiting too long. You're waiting till the end.

You need to be talking at the beginning. And I thought, that's just crazy talk. I mean, I would never apply for financing if I don't know what the Hegan Air system costs. That doesn't make sense.

He's like, Well, I hear what you're saying, but I think you should try it.

I remember going to this lady's home one time and knocking the door. She's very nice. We had had a technician out there, so pretty high closing ratio type call. My service tech's already been there. He sent the lead to me. I'm now there.

And the lady was just this little ball of stress. You could tell her anxiety was through the roof. She's scared. She's a little panicked.

To the point where I'm like, am I doing something wrong? I don't know what's going on here. And so we sit down at the kitchen table and she says to me, this is an extreme example. But she says to me, she goes, hey, look, I have no idea how I'm gonna afford this.

She goes, my husband and I have had a savings account. We've had a savings account for a long, long time. And we just pulled, like, fifteen grand out of the savings account and put a new roof on the house six months ago because we didn't think this was gonna happen. We thought we had another five years coming out of this heating and air system.

She goes, I am completely unprepared.

In the back of my mind, my sales coach going, Well, you don't have to do the proposal, then offer financing. Offer financing first. I just said to her, Hey, why don't we do a credit application?

It takes five minutes. We'll just make up a number, we'll plug it in, but we can adjust it later. And she was like, Okay. So we did that. You could physically see the change in her where she went from this ball of stress to, Oh, okay.

So was like, hey. If you finance this amount, here's the monthly payment. You finance this amount, here's the monthly payment. Finance this and this.

She goes, okay. So in in that regard, I don't think she would have listened to anything I said about variable speed or indoor air quality or any sort of upsell until she knew she could afford it. So if I hadn't addressed that right at the beginning, that sales call would have gone nowhere in terms of my average ticket. I probably still would have closed it, but it would have been the lowest absolute possible option because she was so stressed.

So it was interesting because after that, then I started building it into my process where five minutes in, would mention financing.

And if the customer said anything at all, it's kind of like throwing a little hook in the water and seeing if you get a nibble.

If I got a nibble at all, if the customer said, Well, what kind of financing offers do you have? Or Are you running a promo? Or let's say anything at all, I would say, That's a great question. Why don't we take five minutes, get you approved, and then we can see what that looks like?

You go, Well, okay, out of one hundred sales calls, how many people are actually going to say, yes, let's get pre approved at the beginning?

And it's not that many. Let's say it's three, four, five people out of one hundred. Well, if you could up your closing ratio five percent over the course of the year, would you do it? Absolutely you would do it, right?

So even if it's only five people out of a hundred that say, yeah, let's get preapproved for financing before the call even starts, you would do it. And so that was one of, had a couple kind of my first year of being coached, my sales went up twenty percent. The next year being coached, my sales went up twenty percent. And then that third year, my sales jumped forty percent on top of the other two years.

And that was one of the keys was if people are stressed about money, talk about it upfront early, often, put them at ease, then talk about two stage or variable speed fans or inverter compressors, whatever you want to talk about. But if they're worried about money, they're not even gonna listen to you until they know how they can afford it. And so that was kind of one of those eye opening moments for me.

Yeah. And what I love about that homeowner story is it's not like she was sitting there saying, I have no money. Right? She had just done a huge cash outlay for a different purchase. This is now an unexpected unplanned event for her. Like you said, she was hoping to get another five this years out of that system. Like, she's not reckless out here, you know, just living her best life on on, you know, a dime that's not hers.

And again, I think there's some misconception with financing in that, you know, that people who finance are just generally bad at money management. That is like, break that. If you're sitting here right now thinking that, break that. That is that's really not what financing allows people to do when they're in this situation that we often see, especially in heating and air or really in in home services, which is I gotta do this now.

I mean, personally, we went through it recently with a foundation repair. You know, totally unplanned, Not at all what we wanted to do with our funds and what we had going on. But and when you start getting those proposals back, it's it's like you said, I'm not hearing anything about all the new technology that there is and the layers that they can do and the graveling, and this why I use this pebble over that. Gone.

I'm looking at five figures in front of me like, okay. Like Yeah. That is not what I wanted to do this week. Now, you know, if you're good homeowner and you're taking care of your property, you do it and you find a way.

Why not make financing just a way for that customer to say, yes, I wanna work with you. If I liked what you were saying to me, it just makes it that much easier.

One of the other things, Mary, that we try to coach contractors on and salespeople is strategy. Not just doing the same thing on every sales call, but what kind of sales call is it and what's your strategy on this call? That strategy varies a little bit, just like I'm a huge football fan.

If one week you're playing a team that has a huge defensive line, you're like, We're probably throwing the ball this week. The next week you think, We can run it down their throats. You're tweaking your game plan a little bit sales call to sales call. I think contractors, again, that's maybe a little bit more advanced selling, but one of the things you said is not everybody is sitting there just poorly managing their money and that's why they need financing. So give me a couple of different types of buyers that might take advantage of financing. Like who do you think, I mean, created three, four, five groups, I mean, I don't know how many there are, but that's my question. How many groups of people or types of people do you think are out there looking for financing?

Yeah, it's probably an infinite number of kinds of people just because we're all so different, right? But in general, I think some of the buckets where we miss is when we roll up to the house and we see the nice car and the nice facade and, you know, maybe a couple of kids are running around. And sometimes we hear about, you know, oh, well, there was a nanny in the house. And so I, you know, I know they got it. Right? Like, oh, okay. You know, big assumption there, but alright.

You know, I I didn't wanna be embarrassing or or make them feel like they couldn't afford it, so I didn't offer financing. Right? So so any of those kinds of customers where you're starting you're walking up to the house with any kind of prejudgment of they've got money. I've been, you know, fill in the blank of what that looks like to you.

Those are great, great examples of customers that consider financing. Sometimes those customers are extremely good at money management and they know how to make the bank's money work for them. Right? So if I'm taking a zero percent offer on a heating and air purchase, but I know I'm earning, you know, a a better percentage in a money market account.

Now my interest is paying for my monthly payment. You know, it kinda it kinda like internally Rob, Peter, Paypal, and all your needs are met. And by the way, you're earning interest. Right?

Brilliant. Great money strategy. Very savvy and a great way to not have to do a huge cash outlay for a a big purchase. You know, one thing we saw a lot in the pandemic that was really interesting with business management was what happens when my business has to rely on my cash outlay and all and the only thing that I have in the bank is my cash.

And that's when we started to see businesses really start to get very conservative on cash outlay because if that's the only working capital that I have to make payroll, I don't have anything else coming in. Now I have to be very judicious with how I spend that cash. And therefore, I don't wanna let all of it go for every expense that comes in. I gotta be strategic, and that's where you start to build in monthly payments.

Anyway, same thing for homeowners. Right? Why would I let all of the cash out of my savings go when I know maybe I can earn a little bit on that and spread it out evenly over affordable monthly payments? So, you know, the bucket of customers that you think, yeah, they they got it.

This is just only gonna be offensive to them. I would never make that assumption. In fact, I would even say at the beginning of my sales pitch, by the way, a lot of our customers are taking advantage of our monthly finance promotion. If you're interested in that, I can talk to you about it at the end.

Chances are that customer is gonna say to you, no, I'm good. I'm not interested in financing. No problem. Just to let you know, you know, you'll see it on the proposal, but let's let's take a look at the unit.

What you got going on in here? Proceed. Right?

Yeah.

How much do you think that they think the unit's gonna cost at that point?

Yeah. Yeah. Good. Good. That's a good question too. Right. To make sure I understand what you're saying, some people would say, because I had a guy phrase it this way, he'd say, Hey, I'm earning twelve percent of my money right now in the stock market.

Therefore, if your offer is less than that, I would rather keep my money there and take your deal. So we offered him, I think four point nine or five point nine or something. He felt like it was a great deal because even though there's a little bit of interest there, he's out earning that elsewhere. And so even though he had the money, so that's kind of maybe one category.

His phrase was OPM, other people's money. Other people's He liked it, he liked it. But then you said the other group of people, maybe they've got cash. And a lot of times I think of this maybe as a retired person, they've got a big nest egg, but they don't necessarily have cash coming in the door.

Could spend the money, but if you're forcing them to pay a check and they could, they're going to shrink their buying power because they're going get a little more conservative. If you said, Hey, we can spread this out over a couple of years, maybe it makes them feel at ease, they'll open up the pocketbook a little bit more. So that would be maybe category number two.

Yeah, and think about it too, that's what happened to your customer in your earlier example, right? She had just done a big cash outlay for another project. So she shrunk that potential, right? And now she's freaking out because, Oh my gosh, I'm a homeowner and something's happening at my house again.

That is I I think we actually we we probably don't ask this of customers a lot, you know, going back to money scripts, right? But I think that's pretty common. I think especially in today's world, you know, you get rear ended on a Monday, HVAC goes out on a Tuesday, and on Wednesday, kids broken a bone, and Thursday, another kid needs braces. Like, that's kind of how it, like, life can feel coming at you. They were, you know, we always say things happen in threes, right? How many times can you lay out a big cash expense three times? That's hard to do.

Yeah.

Got five kids and so I remember going and sitting down with a financial advisor probably fifteen years ago, her name was Joy, and I couldn't afford a whole lot. In terms of college savings accounts, trying to put little bits in there.

And Joy just was kind of congratulating on me on putting anything at all in a college savings account. And the example she gave was she had a client that came to her. It was a husband and wife, both doctors, both made around three hundred thousand dollars a year. Now this is fifteen years ago.

So a lot of money today. Was a lot of money fifteen years ago. Combined household income, dollars six hundred thousand a year, but everything they owned was on a monthly payment. They had their main house, they had a beach house, they had a mountain house.

The beach house had a boat, the mountain house had ATVs, the main house had a pool.

And so when you take out all the monthly payments on all those expenses, their disposable monthly income each month was two fifty dollars Well, I like the way they party, but that's not Yeah.

So that was one. I mean, again, a lot of times I might stereotype them as that first group, which is, oh, he's got the money somewhere.

He just wants a low interest rate and then he could take advantage of other people's money. So that first category of guy, he might be the perfect kind of guy for maybe zero interest for thirty six months, where the term isn't that long, but it gives him zero interest and he could pay it off in three years and he's got the money anyway.

That appeals to him. That would have been a terrible offer for the husband and wife who are both doctors because that zero for thirty six months is going to have a monthly payment of six seven hundred eight hundred dollars a month depending on the cost of the system.

Even though they present as wealthy people, and they are, they're really monthly payment buyers. And so you need a finance offer for them that gives them probably the lowest monthly payment. Now they'll get a bonus at some point down the road or they'll take their tax refund and pay it off. So for them, would say something like one hundred and twenty months, even though it might be nine point nine or a much higher interest rate, but it gives them the lowest possible interest or the lowest possible monthly payment. And then they're never gonna keep it for one hundred and twenty months. They're just using that monthly payment until they get a big check and then they pay it off altogether.

So I think it was interesting for me to sit down and talk to a financial planner about what advice do you give your clients because she has all these different types of clients as well. So I guess my takeaway from that was as a sales guy or as a dealer, I can't just pick one finance plan. I've got to have a strategy to say, Hey, some customers are going be monthly payment buyers, and I need a strategy to go get that customer. Some customers are gonna be interest rate buyers.

They have the money, but they're gonna take advantage of the low interest rate. I want that. And then maybe I've got something in the middle for that person that feels like they need to shop around or they're considering using an Amex card or doing the finance or something like that. You probably need at least two or three different types of offers.

Mary, when you walk in and you say, Hey, here's our finance partner. We have eighty seven different finance plans. Like, how do you help a dealer or a sales guy pick? I mean, what are you what are you looking at?

Yeah. You're gonna have to, like, break out your, like, monopoly monocle to read them all. Right? Like, it's gonna be ridiculous.

This what's interesting about what you're saying here is eventually you do have to whittle it down. Right? You know, we gotta we we don't wanna be the Cheesecake Factory of proposals where we gotta read a menu of a hundred pages to decide how we're gonna buy.

But in general, and this is actually one part of the weighted average that really shines, when you price in the most expensive plan that you're gonna offer. So say that it is that zero percent APR for thirty six months promotion.

That plan is likely to cost more than any plan that tags on interest. So if let's say you have zero for thirty six in your menu, and then maybe you've got a four point nine nine for forty eight months, and then maybe a nine point nine nine for one twenty. Check out your rate sheet. That four nine nine for forty eight and that nine nine for one twenty especially should be much cheaper in terms of a fee than your zero for thirty six.

So you price in the zero for thirty six. You make that your tried and true. And then when the customer, you know, and you're going over the payment option sees that six hundred dollars a month, you know, maybe they do mention to you or maybe you know that it throughout your sales pitch that, you know, wow. This might be a monthly payment customer.

You always have these other promotions on your back pocket that then you can pivot to and still come out ahead because you've priced in the most expensive promotion. That's one thing about the weighted average that I actually really do like because it just takes into it it it kinda creates, like, worst case scenario, you're gonna do zero for thirty six. Best case scenario, you're gonna sell the job with the promotion that works for the customer. You know?

Like, that's not like the most eloquent way to say that, but it is one strategy that you can deploy pretty quickly without having to do one of those, that's what you're interested? Let me run and get you a price. Disappear to the truck. Right.

Oh, that's what you're interested? Totally understand. Let me get you a price. Disappear to the truck.

You know, you don't have to bait and switch when you're building an expensive promotions. However, that kind of can be like a level two to this.

If you're still just trying to get comfortable with offering a monthly payment, just pick one. Just just pick one and try it and stick with it. Make it part of your repertoire. Make it part of your offering.

And then, you know, start to start to maybe that's a actually, you know what? It's probably a great conversation to have with your account manager. What are you seeing out there? What are other people doing?

What's the market responding to? Everyone's got access to reports that can dig into that one a little bit deeper.

Yeah. I think one of the questions I I'm not an engineer. So sometimes if you start asking me engineering questions, I'm like, I don't know. So but I did have a dealer one time.

He's like, look. You got this variable speed eighteen seer system, and you got the variable speed twenty system, why do you have two systems that are so similar? And I was joking around. Response was, so I can have two different finance offers on them.

Because you don't know. Right? And so you may have on pick one and put your low interest rate finance offer, pick the other and put your low monthly payment finance offer and see which one sells the best.

Because they're going to be very similar from an engineering standpoint. They're both communicating.

I don't know. So let's see what does the market respond with? So that was kind of interesting was just to think, okay, you might think, I like what you said, which is if you're not doing any, then it doesn't matter. Just pick one and go with it.

But you do have different buyers and you got different buyers at different price points. So in high school football, my high school football team, we were terrible. We had four audibles, run the ball one way, run the ball the other way, roll out pass play one way, roll out pass play the other way. That was it, four audibles.

But like pro level football, they got some options in terms of what audibles I kind of think of that the same way. If you're pro level sales and again, this is maybe getting back to that conversation. If you're a small shop and you can't manage it well and just pick something to go with it, but pro level sales, you would probably have multiple offers on different lines of equipment that you could shovel the customer one way or the other, depending on what their response was and what sort of financing they're looking for.

So, does give Yeah, you've the Tom Brady, Nintendo gloves.

Yeah. You know, like, a book of plays. Right? Like, you want that that in your arsenal to be able to to know where to go.

That that's a that's a great way to garner trust. That's a great way to create plans that, again, people not only, you know, want to buy, but they can afford to buy. That that's a great way to also, you know, build yourself up within the community of, like, this guy didn't just come in and use car sales me into some system. Like, we really worked on that solution together and we love when that happens.

Nobody likes to feel like they got got by a financing offer. Right.

Yeah.

My account manager pushed me pretty hard to get on the bandwagon with financing and just look at it. To some extent, I wasn't even really looking. Was like, Yeah, yeah, we got it in there. Yeah, yeah, the salespeople are offering it.

We were financing probably thirty percent of our sales, but we probably could have had a higher closing ratio if we did a better job of offering it because we would have landed more customers. But what we finally settled on was we also wanted to have one for the service technician. Somebody's got to do a fairly expensive repair. That person probably is a monthly payment shopper.

We would pick a nine point nine percent rate for them because it gives them the lowest possible monthly payment. But then we would have at least two or three that the sales guys had built into the equipment that they were offering so that they could steer the customer one way or the other, depending on what they felt like that customer needed. So it was interesting.

We saw just in the two year period when we switched our financing strategy, we went from eight million dollars to ten million dollars and then not quite ten million dollars nine point eight million And then the next year we went from nine point eight million to eleven point eight million Those two hundred ks chunks are getting you.

Yeah, yeah, yeah. I round up because I'm a sales guy. In reality, if I was being specific, we went eight point three to nine point eight and nine point eight to eleven point eight.

A lot of that growth was just getting a little bit better.

Back to that guy that he ran thirty calls, he closed six.

And his average ticket was low because he's just selling single stage equipment. And so you go, Okay, what was your average ticket? Let's say his average ticket is ten grand. He would say, Well, I sold sixty thousand in a week.

That's pretty good. And it is. You're on pace to sell two fifty that month. Great month, right?

But you're giving up or you're losing out the success of summer is that you left money on the table and you don't even know it because you go back, you're like, well, I had a pretty good week.

And you're saying, well, what if out of those thirty, you could have closed eight? And what if instead of an average ticket of ten grand, your average ticket was twelve grand?

And so that's ninety six thousand dollars a week. We run that out for four weeks, you're at three eighty dollars or something like that, right? So you want have a two hundred and fifty thousand dollars a month or a three hundred and eighty thousand dollars a month. And so it's just close a few more deals, get your average ticket up a little bit, help people buy something a little bit better.

But man, the numbers get big when you run it out. Close a few more deals at a couple thousand bucks more a pop, run that out for a month. I mean, that's hundreds of thousands of dollars. So that's what we saw.

Let's just get good at Yeah.

I think there's a lot of truth in that.

One thing that we see and we come up against a lot is why do manufacturers put financing offers on their website? And then me, the business owner, I get stuck holding the bag trying to, when I'm making my finance offers, if I didn't pick the one that's on the manufacturer's website and then the customer says, well, I, you know, I saw on the dot com that they're doing zero percent for sixty. What happens if I didn't choose zero for sixty in my, you know, menu of promotions? Did you ever come up against that conversation out in the wild?

Yeah, I think the one thing to remember is you can always go back and add it in. And so it wasn't ever that you couldn't do it. It usually was more of an issue of the customer picked a specific system but then wanted a better finance offer. And as we talked about before, if you're not doing the weighted average, you're going, Oh my gosh, that better finance offer is going to cost me five hundred dollars or eight hundred dollars more and I didn't have that built in.

The one thing I would say to the dealer is you can say, Well, Mr. Smith, Mr. Smith, I quoted you this system with this finance offer. I can get you zero for sixty dollars but it's on this system over here. That allows me to build that in and have it on a system. If they really want zero for sixty dollars they're probably getting the twenty SEER variable.

It doesn't necessarily mean, just because it's listed on the manufacturer's website, it doesn't apply to all systems across the board at every level. You're able to say, Hey, I've got that offering. It's just over here. It gives you something else to talk about and it keeps you legal.

That's right.

The manufacturers, they do say for participating dealers. So, you know, if you're not a participating dealer of that promotion, that is okay. But what my challenge would be is if you're not a participating dealer of that promotion, why are you not a participating dealer of that promotion? Is it because you don't believe in it?

It's not in your core. It's not in your menu, but you have other options. Okay. Fine.

Like, you know, you're you're getting like partial credit from me on that one. But if you look at that and you just say, oh, man, like, you know, evil brand, pouring, you know, promotions down my throat that I don't really want.

I I really think you get a challenge of thinking on why they're putting that offer up there in the first place because chances are it's returning some kind of lead or some kind of interest of somebody who says, oh, I can afford that. Yeah. Let me look up somebody that I can bring into my home and get a quote on that. So, that's always my challenge as well is, you know, why why do you think manufacturers put financing on the website? Because they know it moves boxes.

Absolutely. Absolutely.

I could talk to you about financing until the end of time, but maybe we should wrap it up with our hot take or our final thought on where this all lives.

I think my takeaway final thought is lots of ways to use the F word. Just pick one that you like the most and go with that one.

Oh my gosh. I love that. Yeah. I I it's similarly I I like that a lot.

But just pick one. Do something. Don't don't be a sitting duck. Don't don't be out there not doing it.

Financing is at its core a survival of the fittest tool and the ones that are good at it all have a billboard in your town and are advertising it and crushing it on the daily. So get on board, do it.

Awesome. Always fun talking to Steven.