There’s the old joke about the two buzzards sitting in a
tree overlooking a highway. One responds to the other, “Be
patient? I’m hungry. Let’s kill something.” Just like that
buzzard, it is not in the nature of most marketers to be
patient for business to grow. They want to go out and “kill
something,” too.

The trouble is that most marketers go after new business the
wrong way. They want to “take down” the new piece of
business using all the tools of the trade from advertising
and direct mail to cold calling and event marketing. This is
an expensive way to drum up business. Your existing clients
are just waiting to tell you about people they know who
could use your services, and then help sell you in to these
people they refer. Not only is this more cost effective, it
practically guarantees the prospects will share the same
characteristics of your best customers.

“OK, Harry,” you’re asking, “but how do I do it?”

The first rule of getting referrals: ask. When should you
ask? Let’s review.

- After your customer has purchased something from you is a
great time to ask. The new customer is pumped up about your
offering and you can harness that energy by asking for names
of others who could beneft from doing business with you.

- Upon delivery of your product or service is the next time
to ask. The benefits of your offering should be readily
apparent now, so you can remind the customer of the
importance of their referrals.

- Anytime you have personal contact with your customer is a
good time to ask. You are continuing to build a relationship
with them and can use the opportunity to ask for referrals.
Don’t ask more than three times per year.

Many people hesitate to ask for referrals because they are
not sure how to do it. Just be honest. Tell your customers
that referrals are very important to the growth of your
business, and that you want to grow it with people just like
them. Remind them that the people they know will benefit
from your service the way that they have. Then, ask.

Tell your prospect that you’d like for them to give you the
names of three or four people who might benefit from your
services. Pull out a sheet of paper and pen and look
expectantly at them. If they can’t immediately give you
names, ask some prompting questions. Such as:

Who are your three best friends?
Who are the most successful business people you know?
Can you think of anyone who would benefit from my services?

Write the names down and keep writing until the customer
runs out of names. Then, go back and ask for contact
information for each one.

Thank the customer in the way you feel most comfortable.
Some people like to send a gift, others will just drop a
note of thanks. Some wait to see if the referral becomes a
customer and then send a higher end gift. Do whatever works
for you, but do thank them and keep them in the loop,
letting them know about your follow up and the outcome of
your prospecting.

So, don’t just sit there in your tree. Get out there and
kill something.

Harry Hoover is managing principal of Hoover ink PR, http://www.hoover-ink.com. He has 26 years of experience in crafting and delivering bottom line messages that ensure success for serious businesses like Brent Dees Financial Planning, Duke Energy, Levolor, New World Mortgage, North Carolina Tourism, VELUX and Verbatim.

According to the Equipment Leasing Association (“ELA”), U.S. businesses lease every thing from laptop computers to commercial airplanes, racking up more than $ 200 billion in equipment leased each year. Although four out of five U.S. companies use leasing to acquire equipment, many don’t know the ins and outs of leasing well enough to negotiate a good deal. By focusing on a few key aspects of the lease transaction, you can save a bundle on your next lease and eliminate potential aggravation.

1. Choose the Right Leasing Partner

The starting point for saving money on your lease is to select the right leasing company. The biggest savings in this area come from saving time and dodging substandard lease transactions. The wrong lessor choice can result in a slow approval, inability of the lessor to deliver, hidden fees, a poorly designed lease transaction or worst. Give this aspect of obtaining a lease your highest priority. To save a bundle on your next lease, you must do your homework in pre-qualifying bidding leasing companies. Look for lessors with: 1) experience and knowledge; 2) good reputations; 3) the ability to perform; 4) helpful business contacts; and 6) a relationship approach. Ask for and get lessor financial information, background information on the key managers, a listing of recently completed leases, and contacts at key funding sources for each leasing company being considered. Review this information and follow up with all contacts provided.

2. Choose the Right Lease

You can rake in big savings by obtaining the right lease for the equipment you are acquiring. When planning your lease financing, determine the top three or four attributes your lease should have. During this process, carefully evaluate the importance of: lease pricing, lease flexibility, balance sheet considerations, equipment obsolescence, the anticipated period of equipment usage, and your firm’s credit status. The wrong lease choice can be costly.

Lease pricing is market driven, so get at least three lease bids. Carefully evaluate bids by doing a comparative analysis of discounted cash flows incorporating all anticipated costs and fees. Make sure your lease has favorable end-of-lease options, a reasonable end-of-lease notice period, the ability to relocate equipment by notifying the lessor, the right to terminate the lease early without an onerous charge, and the right to assign the lease to another user under agreed upon conditions. Look for an arrangement that will cover equipment needs for at least the next six to twelve months.

Big savings can be realized by knowing when to select a lease with a bargain purchase option versus a fair market value option. If you know you will be keeping the equipment beyond the initial lease term, a bargain purchase option is usually the most cost-effective alternative. If the equipment is prone to obsolescence or if it is unlikely you will retain the equipment at the end of the lease, consider a lease with fair market value, end-of-lease options.

Know your firm’s credit standing. If your firm has been in business for a number of years, is profitable, has a good track record and has a strong balance sheet, it deserves great lease pricing and terms. If your firm has a spotty credit record or weak balance sheet, the challenge is to get the best deal possible. Identify and offer credit enhancements that will make your transaction more attractive. Allow plenty of time to get through the credit review and due diligence process.

3. Ask for Fair Market Value ‘Caps’

If you decide that a fair market value lease is the way to go, you can realize big savings by limiting that value. Fair market value rental and purchase options at the end of the lease allow the lessee to either continue leasing the equipment or to buy the equipment at the then fair market value. These values are generally quoted by the lessor at lease end based on aftermarket data, but most leases allow the lessee to obtain an appraisal from a qualified equipment appraiser. To realize significant savings and to eliminate unpleasant surprises, request fair market value options that are “capped” (have upper limits). Beware, however. Lessors may insist on fair market value ‘floors’ (lower limits) when they agree to ‘caps’. The availability of a fair market value cap will depend on the size of the transaction (may not be available on small transactions), competition among lessors, and the credit status of your firm.

4. Keep the End-of-lease Notice and Renewal Periods Short

To avoid hefty unintended lease charges, seek notice and automatic renewal periods that are short. The primary purpose of the end-of-lease notice period is to allow the leasing company sufficient time to redeploy the equipment if you elect to return the equipment. The secondary purpose is to notify the lessor of your plan to either continue leasing the equipment or to purchase it. The notice period generally ranges from one to six months, with three months being typical. If you violate the notice period, the lease kicks into an often unfavorable automatic renewal period, usually one to six months. If the lessor is unwilling to negotiate this provision, you can save money by making sure the notice requirement is fulfilled within the allowed time.

5. Slash Interim Rent

You can slash lease costs significantly by limiting interim rent. Interim rent is the rent you pay for daily use of equipment between the equipment acceptance and lease start dates. The rationale for interim rent is that you have use of the equipment and the lessor is obligated to pay the equipment vendor during this period. While the rationale is not unreasonable, interim rent can balloon lease pricing by arbitrarily extending the term of the lease (albeit by only days). The best approach is to schedule equipment delivery and acceptance toward the end of the month. Most lease terms officially start the first day of the month following equipment acceptance. Another strategy is to negotiate a truncated period at the end of the lease such that the interim period and truncated period total one month of the quoted lease term. A last strategy is to request a limit on interim rent (perhaps ten or fifteen days) regardless of equipment acceptance.

6. Manage Equipment Returns

Save a bundle on your lease by managing the equipment’s return. Although you may not anticipate returning the equipment to the leasing company at lease end, it can be costly if you do. When equipment is returned, most lessors care about and will hold your firm accountable for the equipment’s condition. Equipment should be properly maintained and returned in good condition. Make sure that you understand the return provision of the lease and that you have good internal controls to adhere to these requirements. If the lease contains an ‘all or none’ return provision, one strategy is to subdivide the lease into several smaller lease schedules on the front end. Place equipment you are most likely to keep on the same schedules. Try to negotiate the right to return up to 20% of the equipment (based on original value) at the end of the lease, as long as you agree to renew the lease or purchase the balance of the equipment. Track and save all equipment accessories and documentation.

7. Match Lease Term with Projected Equipment Use

The term of the lease should match the expected use of the equipment as closely as possible to save money. If the term is too short, cash outlays for the equipment might exceed the expected equipment benefits over the term. If the lease term is too long, you might lose the flexibility of upgrading to newer more desirable equipment. Notwithstanding your preferences, the term allowed by the leasing company may depend on their perception of credit risk and the expected economic life of the equipment. Any mismatch between your preference and lessor’s can be managed by obtaining favorable end-of-lease options.

8. Identify and Understand All Potential Fees

Leasing proposals vary in the types and amounts of fees and penalty charges. Common fees and charges include: commitment fees; non-use fees or facility fees; per schedule documentation charges; attorney fees; UCC financing statements; penalty charges for late rental payments; and early lease termination charges. These are only a few of the possible fees and charges. You can save a bundle by carefully going through each lease proposal and lease agreement to identify and compare likely charges. If fees or charges are significant and likely, they should be incorporated into your pricing analysis. Where possible, especially where one proposal contains fees/charges excluded from the other proposals, try to negotiate these fees/charges.

9. Offer Credit Enhancement to Reduce Lease Rates

In some cases, you can trim lease pricing substantially by offering credit enhancements to improve your firm’s credit profile. Enhancements can include: shortening the lease term, cash or other assets as additional collateral, personal or corporate guarantees, advance rentals payments, and security deposits. Since most credit enhancements involve giving up something of value, do a cost/benefit analysis to determine whether the net benefit is in your favor. If your firm has assets that are not working for it why not put them to work in the leasing arrangement. The value of credit enhancements can differ from lessor to lessor, so identify and discuss possible enhancements upfront. Try to assess whether your firm’s credit will improve significantly by credit enhancements and get lessors’ pricing with and without the credit enhancements.

10. Request Several End-of-lease Options

If the lease contains a nominal purchase option, there is little need for additional end-of-lease flexibility. Otherwise, flexible end-of-lease options can save you a bundle by preventing you from incurring extra expense. One of the most cost-effective options is the ability to return the equipment at the end of the lease. If you no longer need the equipment, why incur additional charges? Additionally you should have the ability to purchase the equipment at a fair or reduced price and the right to continue leasing the equipment at a fair or reduced rent. As discussed, use of caps in fair market value purchase or rental options can greatly reduce potential costs at lease end.

Conclusion

Saving a bundle on your next lease is a cinch if you know where to look. By focusing on a few key areas, you can wring huge savings out of your lease. Remember to set your priorities in evaluating lease proposals and to choose the right leasing partner. Also, while front-end lease pricing is usually a high priority, evaluate each lease carefully to sniff out hidden fees and expenses. Don’t be bashful about negotiating points in the lease that have the potential to save you a bundle.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. (“LTI”), responsible for LTI’s marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: http://www.ltileasing.com.