When to Hire a Finance Manager (FwM, part 3)

Our home improvement finance program is most effective when paired with a finance manager, and for good reason.  The finance manager role is a time-tested way to optimize a financing operation.  What started as a position created to comply with lending regulations in the late 60s has evolved into a major strength in a big-ticket retail sales operation.

Occasionally, we are asked when a company should hire a finance manager.  There are a number of ways to look at this.  If you are just getting into financing, the question is whether a finance manager will facilitate enough earnings growth to cover more than his or her cost.   For sake of argument, let’s say you have a profit margin of 10%.  If you hire a finance manager with a fully loaded annual cost of $50,000 including all benefits, it requires $500,000 in additional financed jobs to break even.  Pretty simple math.

But we are most often asked the question by folks using one of our competitors.  Most of these competitors have programs that are not more effective with a finance manager (which is a good fit for some contractors).  These programs are salesperson driven and a finance manager may just get in the way.  The competitor programs also come with fees/charges on all loan options, so they aren’t panaceas.  In this case, the answer for when to hire a finance manager isn’t quite so simple.  Finance managers can bring a lot to the table, making some of the components of the answer subjective.  However, to keep this from becoming a 400 paragraph opus, let’s focus first on exchanging one cost for another.

Assume a contractor is set up with one of our competitors and pays an average of 2% to a financing provider, which includes all fees and charges like interchange fees for credit cards.  The simplest way to justify the existence of a finance manager is to calculate the dollar value of these fees and charges and compare it to the expected cost of the finance manager.  If the contractor finances $2.5 million of their revenues annually, this means a total cost of $50,000 is currently going out the door.  Hiring the finance manager we discussed previously would be a cost wash if you also switched to a financing program like ours with an option for no fees or charges.

So, if you were simply exchanging one cost for another, why else would you hire a finance manager?  Because of all the additional benefits you have by hiring one!  For example:

  • A finance manager allows you to take burden off your sales team.  This makes your salespeople more focused on selling the job instead of selling money.
  • It eliminates the potential for the salesperson to kill the sale if the financing is initially declined in the home.  A finance manager can shop the deal to a non-prime lender if handling the credit application.
  • Consumers can be sensitive about money issues, so putting the details in the hands of a trained finance manager may increase the odds of closing the sale.
  • The in-home sales process can leave the consumer with questions and concerns the next day.  A strong finance manager is a perfect foil for a salesperson, helping to close the deal with a softer hand.

Of course, each of these is difficult to quantify, but they all add up to a meaningful role in any contractor’s office.  If you have additional questions about hiring or operating with a finance manager, please leave a comment or contact us directly.

2 comments

  1. […] for constructive tension is between the sales manager (team) and the finance manager (team).  We discussed some benefits of this constructive tension in a previous post.  There are two obvious opportunities here.  First, the sales team has the incentive to get the […]

  2. […] Next week, we will discuss other concerns around the Home Improvement industry and financing with Diana. In the meantime, read our own thoughts on centralized financing. […]

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