MB: Diana, thank you for meeting with us. Can you share how long you’ve been a Home Improvement finance manager and what kind of changes you’ve seen in our industry in the last 10 years?
DB: I’ve been a finance manager for 30 years now. Up until 2008, home improvement companies and lenders were everywhere. Then came 2008-2011 and many of our friends in the home improvement and lending industries went out of business. In 2012, we started seeing a revival of sorts—more lenders are coming into the marketplace and home improvement companies are growing and expanding again.
MB: When you talk to other owners and finance managers, what are the most common struggles and mistakes?
DB: A common issue is the question of what percentage of revenue should be financed. Some owners target a low percentage, but I’m always shooting for 80%+. When I’m asked why, I say that if I can only spend what is in my wallet then I am limited to that amount, but if I have a financing option and the payment works I will always spend more. I challenge any company out there that does not offer financing to track the size of their financed sales (including credit cards or when the customer uses their own bank) vs. those “cash-only” buyers.
I also do not subscribe to the “if the customer is not approved in the home at the time of the sale, they will cancel” philosophy. There are plenty of customers who cancel that were approved in the home, or vice versa. Many of the customers who cancel after approval in the home were not offered the “correct” or appropriate financing for their budget and usually that is the reason for cancellation—not always price. There is MUCH to be said for having experienced finance people talk to customers about financing, rather than sales reps in the field. Think about it— the last time you bought a car, did the sales person take care of the financing? How about when you purchased a home? Another thing on my mind: you do not have to give away promotions to get the sale. Increase your profitability and quit giving away the farm or allowing your reps to give it away for you.
MB: Can you expand on that thought? What are some other benefits to centralized financing?
DB: At the meeting I referenced earlier, they extensively discussed control with financing. That was one of the things that I really honed in on. When finance people actually handle the financing, it allows the contractor to control the cost. Your profitability is not in the hands of your sales reps. [Read Medallion Bank’s thoughts on this] One of the things we did here was make the decision to focus on maximizing the profitability of the business while also growing our business. Not everyone needs a promotion or even wants one. It’s about the monthly cost—is it affordable? I’ve seen fees on deals upward of $3-4-5,000 dollars just in acquisition/discount fees! The customer can get a low, affordable monthly payment without getting 60 months no interest. Keeping all of these interactions with the finance team gives the dealer greater control.