Referring to GreatAmerica Financial Services as a leasing company is similar to calling Disney World a theme park: technically, it’s correct, but there’s quite a bit more at play that helps define both.
Yes, GreatAmerica is a leading finance arm to the office technology end-user set, but many of its more popular and exciting attractions are aimed at the dealer community, from its Collabrance managed IT business to its PathShare HR services. The Cedar Rapids, Iowa-based firm—like any credible organization—may go into battle with its primary big guns (the leasing vehicles), but it’s the value-added offerings that enable it to serve the wider needs of its business partners. That is the mark of a true partner.
We sat down with Mitch Leahy, vice president and managing director of sales, to learn how GreatAmerica balanced the needs of its dealers and lessees in the face of escalating interest rates and rising product costs while continuing to unfurl solutions that provide dealers with more holistic solutions. From the company’s 1nVOICE single-billing platform to its partnership with Keypoint Intelligence and its UVERCE ecommerce platform, GreatAmerica is seeking ways to ensure dealers can identify portals to growth and accomplish more with less.
Walk us through the highlights of GreatAmerica’s 2022 financial performance. How did the company perform in relation to the goals and expectations it set?
Leahy: We had a strong year in terms of originations within both our office equipment group and Great America overall. We got back to exceeding the growth numbers we had in place before the pandemic. It was a big goal to get back on track to year-over-year, uninterrupted growth. I have to credit all our customers and partners for being so resilient during the past three to four years and being able to come back strong once inventory levels returned. We enjoyed a successful onboarding of our acquisition that we made and closed out during 2022 in our franchise unit. We’ve had solid organic growth over the last year and a half and eclipsed the 700-employee mark across all our offices. To see us continue to grow and do it in a thoughtful way and manage through all these challenges since 2020 without having to reduce our team is worth celebrating. Profitability wise, I think anybody in financial services will commiserate around the challenges with last year’s broader market rate increases. Still, we felt really good when the dust settled on our fiscal year (March 2023) and 2022 calendar year. Our team did a nice job managing expectations, balancing our originations and meeting our customers’ needs and expectations, along with trying to increase pricing throughout the year. From a profitability perspective, we were a little below target, but given how things escalated well beyond where we could have budgeted, we felt overall it was a strong year.
What stands out as some of the watershed moments for GreatAmerica in 2022? What resonated the most with you?
Leahy: We had a substantial year of growth, and with that growth we naturally experienced challenges with our processes. We asked team members to do a lot more without a lot of added resources. Our team stepped up and worked through challenges while maintaining a can-do attitude. I’m proud of everybody across the board, from our front-line team members working directly with our customers (and their end-users) all the way to our treasury group that was managing our cost of funds throughout the year with many uncertainties in the broader interest rate market. We made significant process improvements internally in various areas and are better for it. As inventory levels rebounded, our dealers were able to fulfill orders that had been standing for as long as nine months. During the inventory rebound, we saw a pickup in market share with existing and new customers, and we saw the benefit of it. That truly showed all we had done in the prior two years to educate the channel and become a better partner to our customers in the office equipment space. Lastly, we’ve started to make some adjustments in terms of how our customers can work with us in a digital fashion. We made incremental improvements and added features with all our front- and back-end integrations. We just kept plugging along and focused on ways to help our customers work more efficiently and not feel like they’ve got to jump out of their system to work with GreatAmerica.
What do you feel are the biggest trends in leasing for 2023?
Leahy: Based on what we’ve learned from daily customer conversations, dealer peer group meetings and manufacturer shows as of late, people are trying to figure out the new norm—where we’re leveling out with the customer sales funnel and the balance of net-new versus existing customer opportunities. Some of the economic uncertainty is going to be a focus for the next six to 18 months. There’s a lot of variability in the broader markets around interest rates and where things are going to go. Fortunately, the rates haven’t really slowed the decision-making or buying behavior of end-users. So we feel pretty good overall about the economic situation going forward. In combination with conversations we’ve had with various customers and others in the industry, we need to find ways to create systems and help our customers with their own workflows. Post-pandemic, customers are back to full capacity and focusing on growth. Dealers are finding net-new opportunities have stretched their own processes internally for both people and systems. So I think we’re going to have to continue to focus on how we can accelerate their sales process, help them improve accuracy, and leverage data and analytics to be predictive rather than reactive.
It’s interesting that while Inflationary pressures haven’t abated in 2023, it hasn’t really impacted leasing volumes.
Leahy: We really haven’t seen an impact. In our business unit, we’re working through dealers and aren’t really interacting with end-users. In other business units where we’re working more directly with end-users, we really haven’t seen that slow down. Obviously there’s price sensitivity. Certainly payments are increasing because manufacturer pricing is also increasing, and our customers are managing compressed margins as best they can. But we’re still seeing it level out from that pent-up demand from 2020 through 2022. Everything we hear from our customers is they’re still signing up customers for new opportunities, both net-new and upgrades. We see that trending in the right direction.
There’s a lot of variability in the broader markets around interest rates and where things are going to go. Fortunately, the rates haven’t really slowed the decision-making or buying behavior of end-users.
Mitch Leahy, GreatAmerica Financial Services
How do you adjust your leasing rate in this in this kind of environment?
Leahy: Everybody out there has a different cost of borrowing, whether it’s a bank or an independent such as GreatAmerica. As broader market rates increased to the tune of 400 basis points on average across the board, those are costs we’re seeing impact our profitability every day. We’re trying to balance the fact that we’ve got increased costs of borrowing while our customers have commitments to their end-user customers. We’ve taken a little bit of a stepped approach, and we’ll continue to see where we need to make adjustments. We feel like we’ve made the majority of increases necessary for now, and we’ll just continue to adjust where needed as we see how the market shifts going forward. We’ve tried to be thoughtful and not pull the rug out from any of our customers by increasing prices overnight. We’re in it with them, and we’re constantly balancing the originations and the relationship with that profitability piece. We’re still trying to get back to where we want to be on the profitability side, but it’s going to be a longer journey to get there because we’ve never seen interest rates increase as fast and as dramatically as they did in 2022.
Talk a little about your collaboration with Keypoint Intelligence and its UVERCE ecommerce platform. How vital is this component to dealers for future business?
Leahy: Keypoint has been a longstanding partner of ours in different contexts over the years. When they reached out to see if there was an interest in helping them build an end-to-end financing solution within their ecommerce platform, we jumped at that opportunity. End-users can search for pricing, enter an application, apply for credit, go through our application and credit approval process—all the way through a digital signature for the contract. Our goal is to provide that end-user the complete financing transaction while staying within that storefront. It’s a complex decision for the dealer; there are questions around how to do pricing, the visibility to that, how to compensate if there isn’t a normal sales structure. What if customers want to flip over to buying online rather than in person? How do I handle things outside of my service area, and how do I include my service contract? Those questions are being worked through, and folks are finding ways to make sure they have that full end-to-end solution. I believe all dealers agree there’s a percentage of the customer base that wants to deal online, whether it’s a net-new customer or an enterprise-type account. We’re definitely seeing more dealers have an interest in figuring out how to implement this as part of their business strategy going forward. I think it’s going to continue to grow.
In early 2022, GreatAmerica acquired the assets of IRH Capital, which specializes in franchise financing. What have been the early results stemming from this acquisition? Is GreatAmerica pondering other opportunities to expand?
Leahy: IRH had been a longtime GreatAmerica customer through our direct programs group and franchise business, so we knew those folks very well. It was a seamless transaction. We knew they were going to be a fantastic cultural fit based on our experience in working with them. This will give us some opportunity to expand in the franchise world, given that IRH is so well known. Keith [Rabin, IRH principal] and his team are highly respected in that world. As far as other opportunities, we’re always looking for ways to potentially expand, provide customers with new offerings or serve in new markets. We’ll continue to be selective in finding the right opportunities.
Provide some insight into the opportunities and challenges you’re seeing with the managed IT (Collabrance) and human resources (PathShare) divisions.
Leahy: In terms of Collabrance, it’s clear there’s a strong movement toward IT services. Managed IT is hard and requires a lot of investment, so not everyone is jumping into it. It’s a risky business decision if folks don’t go into it with eyes wide open. It requires added resources and subject-matter expertise, and we know this because for over a decade now, we’ve been supporting customers in the channel who are making that move. Our customer experience is focused on making it easier for them. We feel if we can help customers and prospects accelerate their growth in the IT services segment and reduce some of the risks that accompany it, then we’ve done our jobs.
One of the challenges a provider faces in this space is increasing revenues with a higher level of operational maturity. We know what good looks like when somebody gets into the space, whether they’re new to IT services or are looking to partner in a different way on the back end and outsource some of that work. Collabrance can really help shorten the ramp-up time. If a dealer thinks managed IT services isn’t exactly the right fit, the good news is there’s not a huge investment with Collabrance. It exists to make it easy for them without having to acquire a specialized company. We feel like we’re still meeting those needs right in the middle. One opportunity that’s come up particularly in the last year is co-managed solutions, in which dealers can partner with an on-site IT department and help them outsource part of their solution as opposed to taking over the entire managed services relationship. Collabrance has been actively helping providers do that, particularly over the last year, with great success.
Additionally, our help desk is assisting dealers with our new printer-as-a-service option [PaaS]. It’s a flat-rate type of program to supplement or take on the heavy lifting for dealers from a dispatch perspective—the first-level or tier-one support on printer-related calls. Over the last year, we asked our partners and prospects what we could do to take work off their plate and allow them to focus on revenue-generating opportunities. We beta tested PaaS with one dealer who’s fully on board now, and we’ve rolled it out to others in the channel as well just within the last month.
Hiring continues to be the top challenge for our partners, and every survey we see bears this out. PathShare has always been able to help make sure a dealership understands who they’re going after, why employees would want to join their company and how they can leverage the understanding of the market to help them create job profiles and job postings. PathShare can help dealers source new talent for their team and then help them vet the personality testing process, the interview process and onboarding. That continues to be a strong need going forward.
A separate piece is strategy and business planning. A lot of companies in general came through 2020 and 2021 feeling like they needed to have a different or more-specific plan for the next three to five years, and that’s where PathShare can be of assistance. We can help create a vision and ensure dealers have the right people on the team to help execute on it. There are a lot of good things happening with our shared service business units.
What do you foresee as the biggest challenges confronting dealers and leasing as we head into the second half of the year?
Leahy: Uncertainty with inflation and the potential for impact on buying behavior is top of mind for everyone. Given the inflation we’ve seen in the broader market for the last 12 months, end-users are likely expecting things to be relatively more expensive, and dealers have been able to increase prices where needed thus far. Diversification is a big movement, whether it’s managed IT, VoIP, document management or physical security. It’s a great opportunity, but dealers will need to balance that with ensuring the print side is still strong. Hiring, developing and retaining talent continues to be a top concern. There’s also a real challenge around workflow; everybody has a number of different systems. Are they maximizing the full benefit from the use of those systems today? And are they able to make those systems work together so the processes for the team members in their company are more efficient?
Is there anything else on the horizon from a program or partnership standpoint?
Leahy: We’ve been having lots of conversations, and I’m hopeful that within the next 12 months, we’ll have a couple of very cool new opportunities to announce. We do have a couple of things dovetailing off what we rolled out in 2022. We continue to expand integration capabilities. We’ve actually got some new ones that we’re looking to get done before the end of the calendar year and hope to have some announcements out before 2024. We’re also currently going through the process of updating our customer portal, which will have a new look with some expanded functionality and capabilities that incorporate customer input.
Diversification is a big movement, whether it’s managed IT, VoIP, document management or physical security. It’s a great opportunity, but dealers will need to balance that with ensuring the print side is still strong.
Mitch Leahy, GreatAmerica Financial Services
We’ve been able to add capabilities with our 1nVOICE systematic process. It’s a great solution to take all of the billing, collections, remittance work and even some of the accounting work off the plate of our customers. It’s a huge opportunity for users to refocus resources and energy on revenue-generating business. We’ve expanded it in partnership with e-automate to take some non-standard charges and include them on invoices to bill and collect the same as we can today in a traditional maintenance or meter-read type of contract. As dealers add additional services through third-party service offerings, we’ll continue to find ways to provide their end-user with that one invoice and make it a seamless for them to interact with their customer.
Talk about the goals you have for the balance of 2023 and beyond, and what are the measuring sticks for success?
Leahy: We’ve always felt that if we stick to our mission statement of helping our customers achieve greater success, we’ll achieve the targets that we’ve set forward. Part of that is a strong focus on the ease of doing business. We had a phenomenal growth year in 2022 that put some stress on our team members and our service levels because we weren’t staffed for the growth we saw. We’re slowly getting back to where we want to be and focusing on what more we can do to be that partner of choice who’s easiest to do business with. We’ve made some internal improvements and technology enhancements we collaborated on with our partners. Ultimately, we want to continue to support the diversification of the channel. If we’re able to support dealers and the things that they’re trying to do and help them maintain margins and get into some of these new market opportunities, we’ll feel like it will be a successful year in the office equipment group.
