Operations, Sales & Marketing, V8I1

Choosing an RTO Company

(Photo courtesy of krakenimages on Unsplash)

Today’s wooden sheds and portable buildings are quality crafted structures that last for years.

That means customers pay more, but the sheds are worth the price.

However, not every customer has the means to pay full price for a wooden shed. That’s where the Rent-to-Own (RTO) option comes into play.

RTO makes it possible for customers to purchase quality, durable sheds and portable buildings when they can’t pay full price all at once by making a monthly payment over a certain amount of time.

For a shed business considering offering an RTO option, it’s important to find the right company. To find the right RTO partner, shed companies need to understand RTO and understand how to choose a company that will serve them and their customers well.

UNDERSTANDING RTO

Tanner Leibee, who oversees multiple RTO companies in North Carolina, during an educational session at Shed Builder Expo 2021 defined RTO as “an opportunity for a customer to use a product they selected at a financial commitment they can fulfill.”

“Shed rent-to-own includes a path to ownership and the flexibility to return the shed if the consumer does not need it or can no longer afford the unit,” says Philip Rudolph, vice president and COO of Watson Barn Rentals in Morrison, Tennessee, and chairman of the National Barn & Storage Rental Association (NBSRA). 

“The terms of  shed rent-to-own are specified in the rental-purchase agreement.”

Shed rent-to-own is not a cash purchase nor is it an installment purchase, Rudolph points out. Also, shed rent-to-own is not a kind of customer ownership with the freedom to modify the shed as they choose until the shed is purchased. 

So, why should a shed/portable building business consider offering an RTO option for its customers?

“A shed rent-to-own business increases their market in the areas they already serve,” Rudolph says. “They can increase sales without necessarily starting new lots and without having to expand the market area. 

“There are customers in the area already being served by the shed company that will use rent-to-own. These customers do not have the means of a cash purchase. These customers may need a shed for now but are not sure of their future needs. So, the RTO company buys the shed, assumes the risk, and serves the customer.”

Leibee adds that RTO provides options for their customers—the option to obtain ownership of the structure or to opt-out of the purchase. 

SELECTING AN RTO PARTNER

Once a shed business understands what RTO is (and isn’t) and the benefits of offering such a program, it’s time to pick a company to partner with.

When choosing between potential RTO partners, some shed businesses might be tempted to look at the amount of initial payment, the amount of the monthly payments, commission for salespeople, and promotion options like 90 days same as cash. However, Leibee says those are not the top issues to consider.

So, how does a shed business owner make a choice? First, Rudolph identifies key elements a business needs to know:

  • The shed business and the RTO company must work together (over years of time) with attitudes of respect on both sides.
  • Communication must be possible and readily available at all times. This includes good communication with both the shed company and the shed customer.
  • The RTO company must be able to meet long-term financial obligations.
  • They must have a realistic plan for who handles shed pickups and remarketing. 
  • The RTO company’s vision and goals must be compatible. 

Once these elements are known about potential RTO company partners, Rudolph recommends taking the following steps before making a choice:

  1. The shed business should interview several different companies before the choice is made. All RTO companies are not the same. Comparison and contrast will bring the various strengths and weaknesses to the forefront so the best fit can be found.
  2. The shed company should carefully consider the contract terms and RTO policies from the customer’s viewpoint. What is the RTO rate? How is the Early Purchase calculated? Will the customer be able to easily communicate with the RTO company when a need arises? Is the customer helped to understand the savings and cost of various length contracts?
  3. Is the RTO company able to educate and help train sales staff and drivers?  

“Look for compatibility with your own goals,” Rudolph says. “Make sure you examine the RTO contract from the consumer’s viewpoint. Is it clear enough to be understood? Is the early purchase option good for the customer and able to be understood? 

“The attitude of the RTO company will reflect back on the shed manufacturers values.”

According to Leibee, the “real issues” that a shed business should evaluate when choosing an RTO provider include:

  1. Your brand; do they align with your company’s mission.
  2. Reviews.
  3. Ease of use for the customer and then your team.
  4. Driver/customer relationship.
  5. Legal/compliant.

Leibee stresses that all RTO contracts need to be legal. Also, the terminology on a shed business’ RTO paperwork needs to be scrutinized—the words used in a shed business’ RTO paperwork matter.

“Does your paperwork say, ‘Congratulations on the purchase of your building?’” he says. “Is it a sale? Other problem words include principle, equity, and down payment.”

What words are good to use on RTO paperwork? Leibee says words like “rent,” “initial payment,” and “monthly” are all better aligned with RTO purchases.

“You need to know the statutes regarding what your price tags have on them for RTO,” he shares. “There are lawyers who can help.”

FINAL THOUGHTS

When a shed business gets into RTO, they need to find the right partner. 

It’s not so much about finding an RTO company that provides the numbers the business is looking for. Rather, the decision needs to be based on finding an RTO that reflects the business’ values and provides a first-class experience for the customer.

“Find an RTO company that has clear and easy-to-understand goals and policies that match your values,” repeats Rudolph. “They must have superior communication with both you and your customer—nothing left in the dark, full disclosure. 

“Finally, get to know several RTO companies before you choose.”

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