Published March 22, 2022

How to use creative financing to create recurring revenue

Have you ever considered how CFOs and CIOs differ in the way they think about technology projects? There is a difference — a big one: surveys show that 70% of CFOs see these projects as a one-time capital allocation. On the other hand, 83% of CIOs see the same projects as an ongoing, long-term relationship. Who’s right? It depends on how you position your solution.

Over the past 18 months, spending on digital transformation and work-at-home solutions has exploded. The market for these is huge. But there’s a wide gap between how finance and IT departments view budgeting the necessary technology.

CIOs realize it’s easier to ask for what they need year by year, rather than engage in a budget battle that spans over several years. But because of the rapid and fluid evolution of technology, this approach, which might have worked in the past, doesn’t work any longer.

Staying up to date requires long-range thinking and recurring investment. Companies that attempt a one-and-done approach to technological solutions will be unable to compete in a very short time.

As a technology vendor, your job is to help business technology buyers see investing in technology as a continual process rather than a series of events isolated in time. And one of the keys to doing that with a C-suite audience reluctant to adopt this mindset is using creative financing to spread out the financial impact of discrete technology investments with affordable payments.

CFOs like things to be predictable. CIOs understand that technology platforms require ongoing investment. By offering a finance program with consistent payments, the technology vendor can appeal to both audiences, streamline the sales process, and in many cases build larger deals with the increased flexibility and buying power offered by payments.

This approach makes sense in several ways. Research shows that customers who finance technology — typically a bundle that includes all hard and soft costs — are 314% more likely to be returning customers. There’s also a loyalty factor involved. Once the solution is in place and the payments start, the customer is more than twice as likely to continue doing business with the technology vendor that implemented the solution, instead of shopping for a new vendor whenever another need arises.

The takeaway is this: many customers will never tell you that budget is the key issue, when in fact that’s exactly what it is. Successful technology vendors get in front of budget objections, even if they are not verbally expressed, by offering a bundled, affordable payment. They understand how to integrate the payment into the sales discussion so that it addresses the long-term affordability question in the form of a consistent recurring cost.

Using this approach, the CIO gets the required solution with the ability to scale and upgrade over time. The CFO gets a manageable, predictable payment that can be easily incorporated into the technology budget. It’s a win-win for both the customer and the technology vendor.

The experts at LEAF are here to help you to leverage creative financing to solve customer problems and grow your business.