Interview with C Michael Exteriors, Part Two

C Michael Exteriors is a family-owned home improvement contracting business run by Bill and Cyndy Bergmann in Missouri. They have a long history in the industry and are dedicated to running their business the right way. Sarah (Marketing) and Tim (Sales) from Medallion Bank sat down with them to discuss their business history, their experience with financing (in good times and bad), and what sets them apart from their competitors. You can read the first part of this interview here.

Sarah: We see a very stark difference in businesses that we work with that have an owner & finance manager that are more hands-on with more control over the sales process, versus an owner that is much more hands-off, letting the sales manager run the show with no centralized finance presence. It sounds like you’re leaning more towards the former. Do you have anything to add or clarify based on that statement?

Bill: We probably learned the hard way that nobody does it like you do. When it’s your livelihood and your income that’s on the line, you’re never going to get the same results from somebody else that you would if you had managed it yourself.

Sarah: So how does that relate when you’re talking about selling financing? How does your sales team sell financing in general? Is it all driven by you both, or are they off doing their own thing?

Bill: We train them well on financing. I think the word “education” would be more appropriate. The folks that we have selling are pretty seasoned, experienced people. They need to know what plans are available and how to present them, but once you launch them they can pretty well sell on their own.

Tim: When it comes to the financing plans & individual programs, do you guys take control of that or do you say, “look, here’s five different banks and each has five different programs—choose whatever you want.” Or do you say “we’re going to go A, then B, then C” – a little more controlled.

Bill: We very much push them to sell, frankly, Medallion. And the reason that we do that is financially it’s a better deal, in terms of ease of operation, it’s a simple process. In the case of Medallion, sometimes our salespeople do have to get proof of income and docs signed. Our point to them is, and I think we have finally made the point to them, is that when you add up the 5% or 5.5% that we pay [to other lenders] per deal, regardless of credit quality, at the end of the year that’s a lot of money. It’s a lot of money to the company and it’s a lot of commissions to the salesmen. So I think we finally have them on the right track.

Tim: So you have driven your sales team to the best of your ability to selling monthly payment versus APR versus promotions?

Bill: When you look at a typical deal of $7k and $350 cost with the salesperson losing half of that, it might not seem so bad to them. But if you take that and say you had $57k worth of deals, then losing $175/deal becomes a lot of money.

Sarah: Do your salespeople pay the lender fees directly?

Bill: No, the company pays the fees. But our reps are on a par system, so they get a commission unless the sale goes below a certain margin. It comes off the top of the deal.

Sarah: So you’ve worked it out so that your sales team has an incentive to not charge the company a high fee for a certain financing promotion. I’d like to shift back to selling payment. It seems like the concept of selling rate or promotion over payment can be very difficult to understand for some contractors. How do you train your salespeople to sell that low monthly payment instead of that low interest rate?

Bill: The awareness of interest rate seems to be related to how good a customer is – the customer with an 800 credit score is probably going to be more concerned with what rate they’re paying. The customer with a 660 score is probably less likely to care what the rate is and more interested in the payment. During the course of a sales presentation to a customer, the questions they ask tell us if they are a payment buyer. If we give the customer the estimated monthly payment and they don’t ask about the interest rate or term, then clearly they’re focused on what the payment is. On the other hand, if they have 12 questions as a result of that, then we know we have more of a rate-sensitive customer.

Sarah: If you have a rate-sensitive customer, is that an objection that you try to overcome? You know that you’re probably going to be paying a higher financing cost to get the customer a lower rate deal.

Bill: This is a very sensitive thing, in terms of federal law, if we’re permitted to offer certain rates or programs based on the customer. Certainly we need to sell what the customer wants, so we go out of our way to accommodate that request and still maintain a certain margin.

Tim: We live in a very consumer-sensitive society today. The concern would be that X Customer gets 14.99% and Y Customer gets 5.99%. It’s a valid concern.

Bill: It has come up at times in conversations with other banks. In the end, we don’t penalize any customers – a customer is offered our program, and it’s not based on where they live or any other discriminating factors. It’s strictly based on a customer’s needs in order to close the sales and give them terms they are comfortable with. So really it’s customer-driven, whether it’s us pushing them one way or the other.

Sarah: I think that’s an important way to sell, and something that we see all of the time. You’re offering a promotion or a discounted rate only defensively, maintaining the margin that you need to make the sale. You’re not leading with the higher cost program – you’re leading with the program across the board that doesn’t cost your company or customer anything.

Bill: That’s correct.

Tim: If your son or friend were to get in the business and asked you for some advice, would you tell them that sales finance is strictly for the big huge outfits, or that it’s for anybody that wants to grow their business?

Bill: This day and age especially, but for a long time, I don’t know how you can grow your business without having financing. There are just too many customers out there that don’t have the money in their pocket or under the mattress that you can actually help by providing them with some good financing. And they’re open to the idea.

Tim: Is every customer aware that they can get their home improvement financed?

Cyndy: When we set the sales appointment, we let them know at that earliest stage that we offer financing.

Sarah: Cyndy, you mentioned that you bring up financing when you set the sales appointment. Do you do that just to inform, or is it also a tool that you use to upsell a job?

Cyndy: It’s a tool that we use. A lot of people will say that they really need the product, but they just don’t have the money. We tell them that we have amazing financing options to make it work within their budget. It’s a tool that we use to get the lead and the appointment.

Tim: When you have a consumer that’s approved, who communicates that to them?

Cyndy: Me, the finance manager. I let them know I have their financing all arranged, and they’ve got a low payment that’s usually less than the initial quote. With that, it’s a done deal.

Tim: You guys do it old school, like an auto dealership. Cyndy is the F&I Manager. That model is tried, tested and true. The customer may have a better comfort level when they’re dealing with that experienced third party versus the sales rep.

Cyndy: When we’re filling an appointment from any source, we make sure people know we’re a family-owned business, and they will never talk to an answering machine. Our customers love that, because if they have a problem they are going to take to Bill and he’s going to fix it. That’s worth a lot right there.

Did you miss Part One of this interview? Read it here!

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