Inform

UK Budget

Authored by George Tonks

The UK Budget statement presented by the Chancellor, Alistair Darling on 24 March was primarily a pre-election signal for the Labour party, with general statements of intent rather than any substance. Given the impending general election there is no chance of any substantive legislative changes being passed by the current Parliament and many tax rates for the next fiscal year had already been announced. We are therefore left knowing that soon after May, the Chancellor (even if it is still Mr Darling) will need to start giving more detail on how the UK’s excessive borrowings will be tackled, through tax rises and public sector spending cuts.

There are always two issues for the asset finance industry from a Budget statement, the economy and tax. On the general economic position, the overview remains of concern, but with an indication of a continuing slow improvement. This should mean (a) that new business will pick up and (b) a reduction in default and bad debts. In terms of tax changes, new announcements of particular significance to the industry were very limited. The annual investment allowance is being increased to £100k and, despite lobbying by the leasing industry, there is no change to the basis on which this is available. Hence this remains available only to the owner of equipment, providing a discrimination against leasing. However the absence of any announcement on the temporary 40% first year allowance means that this will disappear from the start of April, so at least putting leasing on a level playing field in that regard. Meanwhile car finance will be affected by the complex interactions of various tax changes announced previously particularly on VED, the ending of the scrappage scheme and the pent up demand from the lack of new business car registrations last year. Leasing specific tax changes announced were restricted to some minor changes to the mechanics of the election in respect of sales of leasing companies introduced by the PBR in December, which are likely to have very limited impact.

For more detail on the Budget statement and how this could affect your business or for information on tax issues affecting leasing and asset finance business contact George Tonks on +44 (0)845 003 1000 or e-mail george.tonks@invigors.com.

Taking Advantage of the Economic Downturn – 6 key insights

In October we ran the first in a series of Asset Finance Executive Briefings, featuring a series of high profile guest speakers. As you would expect, the seminar generated lively engagement and key insights to help asset finance executives shape their future business strategies. 6 of these insights were:-

1. The good news is that although investment levels are down, the attraction to customers of some fundamental benefits of asset finance (extra line of credit, liquidity and cashflow protection, transfer of disposition risk) has never been stronger. Funding margins can be attractive even for strong credits, and a number of traditional non-finance customers are now switching. New business is available for sales teams that are suitably trained, focused and motivated.
2. Competitor weaknesses will appear rapidly. There will be opportunities to target their best customers and staff but this will require the combination of articulate market intelligence processes and the ability to shift sales focus and marketing activity at speed. It’s no good having a direct mail and telesales campaign landing 3 months later - the opportunity will be long gone!
3. Bad debt has grown rapidly, and notably within the SME and broker sectors. Liquidity and capital shortages are likely to drive a) higher margin expectations from these areas b) tighter scrutiny of the profitability of broker accounts, including funder withdrawals from some or all the market c) lower broker commissions d) broker consolidation.
4. In some sectors, bad debts have gone from all-time lows to all-time highs within a 12 month period. Bad debts over the next 12 months will be driven by lending decisions made during a previously benign period of economic growth. Many credit and collections staff, at least up to middle management level, will have no experience of operating in current conditions and need up-skilling fast. It’s likely processes and procedures will need to change.
5. Finance companies will be pressured into re-gearing, typically from 9:1 to 6-7:1. As ROE requirements won’t change or may even increase, there is likely to be a) a drive towards increased operating efficiencies, including through increased scale, b) market withdrawal from sub-scale players, or those with aggressive profitability targets c) M&A activity to drive scale and consolidation.
6. M&A deals (large and small) are available for those with funding capacity. Deals are more likely to be done bilaterally than by public auction, and at considerable speed. In this environment you need at least a pre-researched, target list of companies you’d like to acquire to reduce the risk of a rushing a bad decision. And be bold in your target choices - previously unbuyable businesses may now be within your grasp.

This drives two key insights of my own:-

• Invigors exists to help finance providers with exactly these sorts of issues – if you don’t have the skills or capacity to move as fast as you need to in the current market, please call us on +44 (0)845 003 1000 or e-mail peter.hunt@invigors.com (even just to bounce around some ideas).
• The next Asset Finance Executive Briefing is on 20^th November and will focus on ways of increasing profitability for finance providers, an essential requirement for many businesses. For more information and to register please call +44 (0)845 003 1000, at our website, or by downloading the brochure here.

Are you listening to your Salesforce?

Having an effective sales force and sales processes make sense.  The rewards for improvement are quick - increasing sales, improving efficiency, increasing customer and sales force retention and acting as a positive incentive for high quality recruits.   The payback of making changes (whether training or process driven) can often occur in the same financial year, the ROI benefits substantial.

Some time ago we carried out a major “Voice of Sales” survey for a client.  The logic was twofold.  Firstly as a diagnostic to identify and qualify areas for business improvement; secondly to determine the impact of a recent business reorganisation.

Not surprisingly, response rates were very high and the results drove positive change within the business.  These included:-

• Identifying and removing barriers to business within sales and middle office functions
• Identifying areas of training where significant value could be added to the sales people’s performance and career development
• Determining how communications and best practice sharing could be improved

An important bi-product from the survey was highlighting the different expectations of recent recruits and where existing process and service levels were lower than competitors.  By capturing this knowledge, our client was better able to win new business in competitive accounts and improve the induction and retention of new recruits.  New insights were also generated for resolving problem areas, such as commission calculation and payment structures. 

Acting on the survey results gave ownership of business solutions to the sales force and improved morale.

A Voice of Sales survey is a modest investment that creates the opportunity for a raft of commercial benefits, competitive advantage and fast payback.  It amazes me that more businesses don’t use them.

Find out how a Voice of Sales survey could improve your salesforce morale and effectiveness by calling Peter Hunt on +44 845 003 1000 or e-mailing peter.hunt@invigors.com.

Office Furniture Disposal - with a green twist

Any company which has relocated will no doubt recall having rooms full of odd furniture that does not match the corporate standard, is not adequate or is even in a state of disrepair. When leasing office furniture, lessors are often concerned about the possibility that it will be returned or may have to be collected from lessees during a lease’s lifecycle.

No doubt facilities and asset managers alike will recall the despair felt when trying to store, plan the sale or dispose of this furniture. Often the answer is to pay a company to take old furniture away and dispose of it. Determined owners may even hunt hard to find an organisation that will pay them a small amount of cash for old items. But have you ever considered the hidden costs in these actions?

The most obvious costs are in the time spent in various ways, such as phoning, meeting and vetting, potential buyers. Then negotiating, managing removals and invoicing - time that could be spent more productively on the day job. Sometimes there are storage costs incurred to warehouse the mountain of desks and chairs until buyers arrive and gradually take them away.

But have you ever considered the environment in this process? Often buyers of used furniture will dispose of anything other than the best items, which means furniture ends up in a land fill site.

Now there is a green option which has a great ethical and charitable twist, Green-Works. Green-Works is a registered charity dedicated to diverting office furniture away from landfill.  Through its partner franchises and carriers Green-Works provide a national service on an industrial scale, stopping many thousands of tonnes of furniture from ending up in landfill. 

To minimise the quantity of furniture being recycled Green-Works has established a unique joinery remanufacturing capability in collaboration with the DTI to explore best practice options, divert materials that can not be immediately used away from simple recycling and supply office furniture for sale to commercial organisations and the third sector (charities, voluntary organisations and social enterprises).

Green-Works is a social enterprise, providing job opportunities for a wide range of socially disadvantaged people. An independent assessment recently demonstrated the massive social benefit flowing from Green-Works’ endeavours.

Following the principles of the “waste hierarchy” Green-Works seeks to reuse before recycling. The practical outcome of this strategy is that Green-Works has a constant supply of office furniture for sale to commercial organisations and the third sector.

Now lessors can confidently finance or even lease office furniture knowing that they can access a secondary market and collection services. As Green-Works are a charity all this makes ethical and environmental sense, you never know, this could also be a business opportunity – with a green twist!

You can find out more about Green-Works by visiting www.green-works.co.uk, calling 0845 230 2231 or e-mailing info@green-works.co.uk. David Bloomfield, Sales and Marketing Director will be pleased to help you.

Leasing in Eastern Europe and Central Asia

One of the most striking things about visiting some of the CIS countries[1] for the first time is the intriguing mix of old and new – architecture, vehicles, clothing – in fact a transition is underway that seems to be affecting every aspect of society. Even the CIS itself appears to be in transition as members question its role and benefits and seem to be drifting apart.[2]

Of course, this sense of change is mirrored in the business environment. As I and my colleagues have met with leasing companies in a number of CEE/CIS countries, it has been interesting to compare differences in business culture. In the 3 CIS countries visited most recently some common threads emerge from the way the leasing industry is developing, each of which indicates the importance which leasing may have in the economic development of those countries.

Firstly, sponsored development of leasing activity has been going on for some time with agencies such as the European Bank for Reconstruction and Development using donor money from a wide range of richer countries to support their “Early Transition Countries Initiative… …aimed at mobilising more investment, and encouraging economic reform”.[3] The initiative includes investment and a range of activities designed to help transfer know-how and build up local expertise.

Secondly, the regulatory framework is embracing the latest international developments in legal, tax and accounting and there have been a large number legal reform projects over the last 10 years, sponsored by both the EBRD and the International Finance Corporation (the private sector arm of the World Bank). The Republic of Moldova, for instance, enacted a specific Leasing Law in April 2005, while Georgia’s 2005 Tax Code contains articles specific to leasing which refer to International Accounting Standards. These 2 countries are well on the way to adoption of leasing IAS, with some minor local variations.

Thirdly, there is a hunger to learn from the experiences (good and bad) of Western Europe and a determination to build well-run, successful business that can compete in-country with the western European lessors that will eventually arrive. It’s perhaps surprising at first glance that Uzbekistan boasts 28 leasing companies and that one of those has a website[4] that sets out (in English) details of the advantages and benefits of leasing, the history of leasing, the development of leasing in Uzbekistan and the company’s terms of doing business.

The leasing industry in these countries may be lacking in experience, but it is already well on the way to building a solid foundation for future development. Western lessors may find it difficult to compete when they decide they have the appetite to enter these markets.

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[1] Commonwealth of Independent States - free association of sovereign states formed in 1991, comprising Russia and 11 other republics that were formerly part of the Soviet Union. Members are Russia, Ukraine, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Armenia, Azerbaijan, Georgia, and Moldova

[2] See for example – “CIS Crisis” http://en.wikipedia.org/wiki/Commonwealth_of_Independent_States

[3] EBRD Press Release 23 November 2006

[4] http://www.uzbek-leasing.com

6 ways to accelerate sales in 2006

For many asset finance companies, the New Year represents a stretching new set of annual targets.  Unfortunately, many sales acceleration tactics are started then simply fizzle out, relegated to nothing more than occasionally used tools or ideas.  Organisational focus and support disappears with little improvement in sales results, yet sales departments are still required to deliver the revenue growth forecast to drive expansion of the whole organisation.

If an organisation wants to halt this trend, improve the sales culture or just see more sales it should consider formulating a sales strategy which is implemented throughout the company.  All approved ideas should be promoted from a tactic to a strategic initiative, requiring a company wide commitment at all levels.  Here are some logical ideas that are regularly debated, but rarely used effectively to increase sales.  Of course, this is not an exhaustive list as every company if different.

1. IDENTIFY at a senior level, a manageable number of must win deals or accounts.  Often sales people cannot move the organisation to a successful offer on their own.  Organisational buy in needs to happen including senior management involvement in order to raise the bar from a tactical review, and switch the emphasis to a strategy of “must wins” transactions.
   
2. LOOK at the organisation’s unique selling points (USPs) and/or products.  Is there one that stands out as being unique?  Identify the types of customer to whom this will appeal, then create marketing and sales initiatives to aggressively target that customer segment.  If you can’t point to any USPs, then maybe it’s time to undertake some customer research to develop one.  When the task is done a company should embrace the messaging and create a culture out of it utilising their marketing skills to the full.
   
3. FOCUS on sales skills.  Pick out the areas where improvements can be made such as better targeting, improved selling of higher margin products or selling fee income products. Then develop tailored training supported by on-the-job coaching to generate a rapid payback through focused performance improvement.
   
4. EDUCATE the whole organisation.  Explain what it does, why customers buy, what the vendor/dealers or customer market place is, how finance fulfils a requirement and maybe even “what sales people have to do to get a deal”.  Make sure that all customer facing departments empathise and get involved with the customer and sales process - beyond start and finish, to re-solicitation and retention.  This can give you more sales leads from across the organisation.
   
5. LISTEN to customers, vendors and dealers.  Often they have some great ideas, delivering both short and longer term sales benefits, or simply creating a feel good factor that strengthens your relationship. Once identified and agreed, ideas need to be promoted heavily both internally and externally, rather than simply paying lip service to it.
   
6. CREATE MOTIVATIONAL pay plans, incentives and targets.  Do all of the areas that affect the speed of sales through to bookings and retention share in the success?  If they do, the culture will change

By picking off one item at a time, an organisation will see gradual improvements.  In many cases, real improvements can be generated in the same financial year.

Some or all of the skills and resources may be held within an organisation to do this, but maybe time cannot be invested to create and see a sales strategy through.  Maybe the title of this article should be changed to “7 ways” as I suggest - CALL INVIGORS or e-mail simon.corbett@invigors.com to accelerate your sales in the New Year and kick start your business.

Happy New Year!

When training doesn't work

I often hear from organisations how a training course they’ve sent staff on didn’t cover all the right topics or give the correct amount of detail.  At an organisational level, that seems like a waste when you realise the biggest costs of training are usually not the course fees, but the opportunity cost of taking someone away from their day job. 

Equally, I’ve heard it said that the most relevant technical training is performed “on-the-job”, but takes a long time.  It also relies heavily on the availability and accessibility of suitable mentors, and can on occasion put customer relations at risk when new situations are encountered.

If we put training into categories it might look like this;

• Delivered on-the-job
• Standard content or off the shelf courses designed for a general audience
• A variation on the standard courses above, with some tweaks
• Completely tailored by trainers, sometimes from outside of the industry

The truth is that a balance of all four approaches is sensible.  The greatest business benefit but also the level of investment is likely to increase down the scale.  While still having to balance the books, in each case it’s worth making a value calculation based not just on course costs, but also the opportunity cost.  At Invigors we’re also looking at ways to develop higher value-add training for organisations at lower costs, such as the development of a company curriculum that encourages high quality, structured development. 

For a fresh approach supported by deep practical and theoretical content, contact Simon Corbett at simon.corbett@invigors.com

Do what you're doing - but BETTER

Many leasing companies are drawn to the vendor, dealer or indirect sector, often believing that it’s a relatively easy way to increase business volumes and improve front office efficiency.

This may have been true in the past. Nowadays, with more finance suppliers to choose from, vendors can be choosy. High operational standard are a pre-requisite, including:

• Good territory coverage and route to market
• Efficient point of sale quotes, faster credit processes, automation and reporting
• Pricing competitiveness and maybe residual values

Competitive advantage in securing relationships and then in delivering high levels of finance penetration requires rather more, with greater focus on the “human element” of your offering:

• Good knowledgeable people
• Strong relationship building-skills
• Well briefed internal departments that understand and respond to requests quickly
• Relevant, “tailor-made” products

In the first place, building the model and finding the programme or dealers requires hard work and commitment by groups of individuals. Weeks and months pass by in pursuit of hard targets.

To contain costs, businesses often place a massive focus on the core operational elements that deliver a quality service. Items like credit, speed and customer service are rightly being dealt with by huge IT investments to overcome the overwhelming consumption of time and effort on otherwise manual processes.

As a result, for all the process efficiencies, sometimes the real value-adding parts of the proposition - knowledge, people, communications, education/coaching and products – get left behind. From the vendor’s perspective, this results in a very efficient programme, but one that’s not always effective. As a vendor once said to me during an account review, “If you just keep doing what you’re doing, but better”.

I’ve certainly heard many vendors state that they believe the finance industry to offer only three or four base products, largely undifferentiated from one supplier to the next.

So ask yourself is your product, or your total vendor offering, truly and sustainably better than your competitors?

Then ask where that advantage benefit comes from. In general, it will be your people.

People investment is a key driver of that differentiation. It changes customer retention, service, knowledge and even morale. Is the correct attention paid to this, how does it compare to your competitors, could it be done better?

It’s sad to see budgets for training, marketing or other value-adding areas being either under funded or worse still, not fully spent. It is even more sad to see budgets spent unwisely - which is maybe why the budget is sometimes under funded or not spent! An organisation should plan how to use this investment better than the previous year. For sure the staff probably worked harder!

To develop a highly motivated, effective and value-adding workforce requires organisations to review not just how much they spend on training, or how frequently they train, but also how they train. Too often clear development objectives aren’t established and no tracking mechanism is in place, either to confirm that the individual’s development objectives were achieved or to assure the quality and value of the training provider. Like other items such as staff communication plans or induction programmes, you have to ask, could they be done better?

The good news is that staff “investments” and products can be fixed. All require discipline and sometimes a little extra resources, which are available affordably if you look around. For sure, embarking on such programmes will gain better value for your business, staff and vendors. Customers will enjoy better products, services and relationships, which in turn has to mean better customer retention.

So before you do anything else, first consider doing what you do - but better…..

Invigors welcomes Simon Corbett

We’ve strengthened our international vendor and captive finance capabilities with the appointment of Simon Corbett as the fifth partner in Invigors. Simon’s experience includes responsibility for a number of European vendor relationships, and his experience in building sales teams, opening new country markets, developing sales support functions and programme restructuring fits closely with client demand. If you’d like a discussion with Simon, send him an e-mail here

Picking a Winner

Another Epsom Derby has just been completed, won in style by “Motivator”, a horse that seems to make a habit of winning races. Some five lengths behind, the rather aptly named “Walk in the Park” strolled in second. It struck me that the process of recruitment often feels as risky as putting a large bet on someone who seems to be a winner and then watching to see whether they win or simply perform adequately.

The major criticism I have had of the recruiters over the years is their tendency to adopt an approach reminiscent of a bad experience with an estate agent. “Here’s a great one – 6 bedrooms, 3 bathrooms, 4 reception rooms and 2 acres of garden.” The printed details confirm that it is indeed a beautiful property. But what I actually wanted was a 2 bedroom apartment near the city centre. This is an exaggeration, but I suspect many people have suffered from this type of mismatch between expectations and delivery.

The leasing industry is full of talented, experienced, energetic men and women trying to make a significant contribution to their employers’ businesses. So why is the process of recruitment occasionally so tortuous and why are some of the people we spend valuable time interviewing plainly also-rans?

Perhaps it doesn’t need saying, but the recruiters can only be as good as the brief they are given, and the likelihood of their being able to match skills and experience into a role that is poorly specified, defined or communicated is low. For example, one organisation’s definition of “strong technical knowledge” may be completely different to another’s and the combined effect of the hiring manager’s drive to find someone before the next headcount freeze and the recruiter’s keenness to be seen to understand their client needs can lead to another “estate agent experience”.

Even if the job specification and the required skills and experience are clearly set out, the process can founder on the rocks of cultural mismatch. Those recruiters who are willing genuinely to understand the organisational culture of their clients (and the teams they are hiring into), are worth far more than many of their clients give them credit for. Maybe that is because this is one of those woolly areas where measurement and objective description are difficult, but it should be no surprise that candidates who are stimulated by an honest description of the organisation’s culture (and who can explain their own cultural preference) are more likely to succeed.

That is not to say that recruitment should attempt to clone the best people already in a team, although some organisations do give the impression they want to achieve this. On the contrary, personnel experts are now advocating the hiring of opposites in order to maximise team potential:

“It is part of received wisdom that groups of executives or managers should learn to operate as effective teams. Getting everyone to think the same way is a tempting strategy, but our new research reveals that real teamwork comes when opposites are integrated to work with each other.”

(Fons Trompenaars and Peter Woolliams in the World Federation of Personnel Management Associations’ Newsletter)

A great theory, but more research is needed not only on great teams that include opposites, but on how one avoids the pitfalls of throwing opposites together. Indeed the authors cited above conclude that “Given the importance of reconciling opposites, we are surprised no instrument that measures this has been devised – not in published form, at any rate.” Perhaps that is because no-one is yet ready to bet on this particular race!

The conventional wisdom is that if you want a winner, you need to specify the role fully, define the skills and experience clearly and communicate both effectively to the recruiter. But more than that, you need to aim for a good cultural fit while steering clear of cloning. Try looking at the winners you have picked in the past and figure out why they were…

Further information from the WPFMA can be found at www.wfpma.com.