On Sept. 10, Monitor hosted part one of its new Live+ series, “Charting the Course Through the Pandemic & Beyond.” The livestream served as a platform to answer critical questions on the changes happening presently and what the industry should anticipate for the future.
Ray Witzbowski, CMO at IDS, served as moderator for the event and was joined by panelists Diane Croessmann, director at The Alta Group; Vince Belcastro, group head of syndications at Element Fleet Management; and William Perry, president at Regions Equipment Finance.
Here are eight valuable takeaways from the event:
Remote work presents challenges despite technology
For Element Fleet Management, adjusting to remote work required enhancing necessary technologies for connectivity, such as implementing Microsoft Teams and looking at a potential move toward cloud-based solutions vs. server-based alternatives. However, the biggest challenge presented itself on the closing side. Closing deals required the legal team to do extra work in order to notarize documents. While Element Fleet Management and other big-ticket companies have not made the full migration to e-documents, Belcastro hopes that the pandemic will accelerate its adoption.
Overall, there has been a drastic shift in equipment demands. According to Belcastro there is currently great demand for technology-based equipment, while the real estate sector has dropped drastically.
“I definitely think there is a long-term shift here. Those companies that serve the delivery and logistics side of the equation are going to be long-term winners because that is where the economy is headed,” Belcastro said.
The behavior around asset acquisition is changing
In response to the fallout of the pandemic, Croessman expects to see companies reexamine their operational and capital spending.
“One of the consequences we had out of the shutdown was the abrupt impact it had on cash flow. Then when businesses needed it the most, they found that all those sources of working capital were starting to dry up,” Croessman said.
Fortunately, there are many alternatives in the equipment finance industry. One of the solutions Croessman has seen is converting recent transactions back into cash for clients with sale leasebacks. However, this is not necessarily the case for everyone, as some may be intimidated by any kind of cash flow commitments.
Croessman further explained how companies may take a look at areas such as vacation, or interest only payments, while also advising companies to begin planning how to deal with future mandatory shutdowns into employee contracts.
In summary, Croessman knows one thing for sure — capital spending is crucial for growth, which the equipment finance industry can support in the economic recovery.
This is a time to learn about your customers and their businesses
While Perry acknowledges that the market was destined to have a tough year due to it being an election year, he still sees a win for the industry happening through capital conversion.
“In my opinion there has never been a more opportune time to truly understand our customers, their businesses, how are they affected, furloughs, challenges they face both personally and professionally. If we are able to successfully accomplish that, I think we can bring value by knowing, and with the current interest rate environment, it can be a win-win for both parties,” Perry said.
Perry encouraged industry peers to engage in dialogue that will create transactions and unlock hidden equity so clients are able to meet their objectives. Although every client is faced with a different situation, finding the similarities and providing value will go a long way in moving forward.
There is a current shift to a use-consumption model
Recently, Croessman has seen the migration of users toward a usage and consumption business model. Croessman believes this model can be used in the factory environment as well and become a practice that provides opportunity and flexibility. In particular, she has seen this done in recent months with manufacturers supporting the supply chain of PPE and medical equipment.
With robotics becoming more affordable, “flex factory” has become the new buzzword as factories look more seriously at implementing robotics. However, how this technology is used will be crucial to who gets the farthest with it.
“I think more forward-thinking manufacturers will now look for ways to leverage some of the rapid changes in automated assembly and production to get to those shorter run productions that might open the doors to other opportunities,” Croessman said.
Businesses are learning how to navigate the new work environment
Croessman and Perry addressed the pros and cons of the remote working environment. As Croessman stated, in this new age, conducting business through a monitor has become socially acceptable. It also has cut down on travel time and created opportunities for employee and employer growth.
“We can now open it up and have more of your staff involved in decision-making meetings and being exposed to executive thinking if they’re not always exposed to that. More importantly, having executives exposed to new, younger thinking is a definite benefit,” Croessman said.
On the other hand, there has been dramatic lifestyle change for many. In the remote environment, employees can be connected at all times. Croessman emphasizes that if we are not careful, work can become very abusive. Additionally, Perry echoed Croessman by saying that it is necessary to remember the mental health of everyone in the company and ensure people are getting the personal time and social interactions they would get if they were in an office.
Retaining communication with customers
Interactions with customers are another adjustment of the pandemic. Belcastro has handled this by expanding his investor base and accelerating volume where he can.
Forming a genuine connection with customers by keeping in touch and not keeping things strictly business is how Perry and his team have maintained customer retention.
In regard to customer acquisition in a tough market, Belcastro uses a consultative approach that delivers above market quality service. As Croessman highlights, value-added services go a long way in equipment offerings.
Spending and lending in a corporate buy vs. individual buy
Recently, the panelists have seen companies give employees money in order to buy technology associated with switching to remote work. While Belcastro tries not to get challenged on equipment usage patterns of small ticket purchases, he advised that having individualized purchases is not an efficient use of capital compared with a centralized purchase.
Moving beyond that, more time is needed to determine whether capital expenditure dollars are gone completely or if there has just been a shift in assets and dollars. Belcastro used the example of a company using money that is not being used in the airline space on logistics and technology, even if it is not necessarily a dollar for dollar comparison.
Croessman predicted a rise in new markets, including diagnostics research, logistics, network security and industrial robots.
In terms of capital conservation, Perry believes banks, captives and independents will all benefit. He further predicted a shift from urban buildings and more activity within IT departments.
“Where there is change like this there is tremendous opportunity. You either affect the world or you allow the world to affect you,” Perry said.
Croessman believes the best way to make it through this period of historic change is to be adaptive. She believes the leasing industry is going to play a significant role in economic recovery with solutions that have not been thought of yet.
Belcastro highlighted the importance of the industry and the core services it provides to every company. He encouraged attendees to be aware of the paradigm shift and how it will affect companies in order to create a plan to deal with it and mitigate risk.
Perry advised attendees to be disciplined and understand what their objectives are in changing times. He explained the benefit of being excited about where the world is headed will enable companies to see the opportunity in change.
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