SEMA News - May 2010

BEST PRACTICES

Don’t Take Credit for Granted

By Steve Campbell

This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.

Money has been tight for more than two years. Small businesses were especially hard hit by the recession that began late in 2007, with some estimates indicating that companies suffered sales losses ranging from 10% to 40% or more. The resulting constriction resulted in layoffs, cutbacks, inventory reductions and consolidations that made a bad situation even worse for businesses that were on the bubble between solvency and bankruptcy. Some did not survive.

There are mixed messages about where the economy now stands—including an increasing Gross Domestic Product and a rising stock market offset by residual high unemployment levels—but most experts feel that a recovery has begun. Now may be the time to set the financial wheels in motion for those businesses that are prepared to invest in growth. However, acquiring capital is not a quick and easy proposition, even for a company that boasts a solid credit history. Advanced Clutch Technology Inc. (ACT) is a case in point.

ACT had been dealing with the same regional bank for eight years when the recession began. The company had renewed its line of credit annually and had also financed other loans through that same institution. The bank—a regional lender—had occasionally expressed reservations about ACT’s inventory levels, not fully understanding the specialty-equipment industry, but had always renewed the credit line. Until the end of 2008.

“The bank didn’t initially say that it was declining to finance,” said Tracie Nuñez, ACT’s chief executive officer. “But four months after we began the renewal process, the bank’s officials came back and said they weren’t comfortable dealing with our type of business—a manufacturer in the automotive market.”

Nuñez began a search for new financing. She and her team went through discussions with five different institutions—each of which took hours, days and weeks before declining financing. But she took lessons from every encounter.

“We learned that it’s very difficult to get a loan after you developed the need,” she said. “You should complete your due diligence well in advance of seeking a loan. It’s hard to compile all of the information you need when you’re suddenly under the gun.”

Michael Valenti, vice president and manager of Manufacturers Bank in Los Angeles, where ACT finally found a receptive lender, said that going into a loan process with all of the proper and up-to-date information at hand not only speeds what can be a lengthy process, but also gives the loan officer a positive initial view of the client.

“Come in prepared so that you can explain where you’ve been and where you want to go,” Valenti said. “Put a package together that includes three years of business tax returns, three years of personal tax returns on all owners of a corporation, a current balance sheet and an income statement that is no older than 90 days. Also include your current receivables and payable aging and one or two pages explaining the reason you need to borrow the money, what sales look like going forward and how the money will be paid back.”

	Six Steps to Prepare for the Loan Process     Three years of business tax returns     Three years of personal tex returns (all owners)     Current balance sheet     Income statement (no older than 90 days)     Current receivables and payable aging     Summary of reason for borrowing

The explanation of need and repayment prospects are particularly important, said Louis Goodwin, senior vice president and regional manager for Wells Fargo’s Inland Empire Commercial Banking office in Southern California. Goodwin, responsible for providing financial services to middle market companies within the Inland Empire, is co-presenting a SEMA webinar entitled “Preparing Your Company to Finance Growth” on May 6.

“Clearly articulate the purpose of the loan request, understanding that lenders are in the business to provide capital for good business reasons,” he counseled. “These reasons often include financing to support sales growth, equipment purchases to expand capacity or improve efficiency, to purchase a building or to buy a business. Most lenders are not going to be interested in financing operating losses, delinquent receivables or other needs caused by negative trends.”

Goodwin also suggested inviting the lender to meet with you at your place of business as a preliminary step, even before the paperwork begins. A face-to-face, on-premises meeting allows you to introduce the banker to your business and provide a tour of your operations. 

“You can effectively interview the banker during this time,” he said. “You can ask questions about the process by which the bank makes decisions and agree on the next steps. The goal is to enable the banker to leave the meeting with a good understanding of what the company is all about and a timeframe for follow-up. Even if you must meet the loan officer at the bank, use that initial time to interview the banker so that you clearly understand what the approval process entails and if the bank provides the services you are seeking to companies within your industry.”

Goodwin said that completion of a loan application may or may not be necessary, depending on the size of the loan request and the financial institution. Although application forms vary from bank to bank, the information that is typically requested is often the same. When you request an application, review with the banker the additional information that will be requested to be submitted so that all the information the bank deems necessary to make a decision can be submitted at one time.

	Now may be the time to set the financial wheels in motion for businesses that are prepared to invest in growth.

“A lot of companies don’t have executive profiles and biographies,” Nuñez said. “You may not have a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis [which lists the objectives of the business and identifies favorable or unfavorable factors to achieving the objective] or projections on inventory and sales, but those are thing we had to update and put together. We had to provide several years of financial statement reviews. You want to make sure those types of documents are prepared consistently every year, you’re ready to answer the bank’s questions and the information is correct and relevant.”

Nuñez also said that several of the banks she dealt with seemed to be dragging their feet or asking for information on a piecemeal basis, leading to frustration and confusion on her part. That scenario may be an indication that the lender and borrower are simply not well matched, Goodwin said.

Additionally, many banks have become conservative lenders in response to a higher level of scrutiny, perceived or real, by bank regulators and audit committees. Companies that cater to economic sectors hard hit during the recession, such as in the housing and auto industries, may be asked to provide extra assurances that their business models are compelling.

“Banks are in the risk-management business and understand how to assess those risks,” he said. “Some lenders are in the business to take very high risks, and for that they demand high returns. Lenders may provide financing despite higher risk profiles based upon strong collateral or guarantor support. If you find that your bank is continuing to ask for additional information that does not appear to be material to the decision or that has been previously submitted, you may conclude that you have the wrong bank or banker. Banks are interested in understanding and assessing the character of the borrower, the capacity of the borrower to repay the debt, and the collateral that will be pledged to support the loan in the event that the cash flow of the business turns out to be insufficient to repay the loan. That’s why you should ask about and understand the decision-making process of the bank and the expected timing of a decision.”

Goodwin also pointed out that financial institutions are not the only sources that a company might consider in the search for capital. Loans from friends and family are common in the early stages of a company’s development or in times of difficulty. Equity from other investors is also a possibility once a company has developed a proven product, made a place for itself in a market and established a track record. Often-overlooked sources of financing can also include customers and vendors, Goodwin said, since such business partners may understand the business well and may even agree to more favorable trade terms or loans.

If you do decide on a lending institution, proper paperwork is vital. Valenti said that Manufacturer’s Bank provides a loan application checklist, as do most financial institutions. In addition, the Small Business Administration’s website offers a full range of forms as well as general and more detailed information about securing an SBA-guaranteed loan. Compiling such information for and about your company can provide additional benefits.

“We’ve used our executive profiles in our marketing pieces and discussions with new clients,” Nuñez said, “and we’ve used them when we’ve had opportunities for coverage by magazines. But time is of the essence. When you decide to seek a loan, you have to put the biggest possible priority on it. The quicker you can get the bank your information, the more they will stay connected with you. If you’re quick and responsive about providing documents, the bank will perceive that as the way the whole business is run.”  

SEMA News - May 2010

BEST PRACTICES

Don’t Take Credit for Granted

By Steve Campbell

This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.

Money has been tight for more than two years. Small businesses were especially hard hit by the recession that began late in 2007, with some estimates indicating that companies suffered sales losses ranging from 10% to 40% or more. The resulting constriction resulted in layoffs, cutbacks, inventory reductions and consolidations that made a bad situation even worse for businesses that were on the bubble between solvency and bankruptcy. Some did not survive.

There are mixed messages about where the economy now stands—including an increasing Gross Domestic Product and a rising stock market offset by residual high unemployment levels—but most experts feel that a recovery has begun. Now may be the time to set the financial wheels in motion for those businesses that are prepared to invest in growth. However, acquiring capital is not a quick and easy proposition, even for a company that boasts a solid credit history. Advanced Clutch Technology Inc. (ACT) is a case in point.

ACT had been dealing with the same regional bank for eight years when the recession began. The company had renewed its line of credit annually and had also financed other loans through that same institution. The bank—a regional lender—had occasionally expressed reservations about ACT’s inventory levels, not fully understanding the specialty-equipment industry, but had always renewed the credit line. Until the end of 2008.

“The bank didn’t initially say that it was declining to finance,” said Tracie Nuñez, ACT’s chief executive officer. “But four months after we began the renewal process, the bank’s officials came back and said they weren’t comfortable dealing with our type of business—a manufacturer in the automotive market.”

Nuñez began a search for new financing. She and her team went through discussions with five different institutions—each of which took hours, days and weeks before declining financing. But she took lessons from every encounter.

“We learned that it’s very difficult to get a loan after you developed the need,” she said. “You should complete your due diligence well in advance of seeking a loan. It’s hard to compile all of the information you need when you’re suddenly under the gun.”

Michael Valenti, vice president and manager of Manufacturers Bank in Los Angeles, where ACT finally found a receptive lender, said that going into a loan process with all of the proper and up-to-date information at hand not only speeds what can be a lengthy process, but also gives the loan officer a positive initial view of the client.

“Come in prepared so that you can explain where you’ve been and where you want to go,” Valenti said. “Put a package together that includes three years of business tax returns, three years of personal tax returns on all owners of a corporation, a current balance sheet and an income statement that is no older than 90 days. Also include your current receivables and payable aging and one or two pages explaining the reason you need to borrow the money, what sales look like going forward and how the money will be paid back.”

	Six Steps to Prepare for the Loan Process     Three years of business tax returns     Three years of personal tex returns (all owners)     Current balance sheet     Income statement (no older than 90 days)     Current receivables and payable aging     Summary of reason for borrowing

The explanation of need and repayment prospects are particularly important, said Louis Goodwin, senior vice president and regional manager for Wells Fargo’s Inland Empire Commercial Banking office in Southern California. Goodwin, responsible for providing financial services to middle market companies within the Inland Empire, is co-presenting a SEMA webinar entitled “Preparing Your Company to Finance Growth” on May 6.

“Clearly articulate the purpose of the loan request, understanding that lenders are in the business to provide capital for good business reasons,” he counseled. “These reasons often include financing to support sales growth, equipment purchases to expand capacity or improve efficiency, to purchase a building or to buy a business. Most lenders are not going to be interested in financing operating losses, delinquent receivables or other needs caused by negative trends.”

Goodwin also suggested inviting the lender to meet with you at your place of business as a preliminary step, even before the paperwork begins. A face-to-face, on-premises meeting allows you to introduce the banker to your business and provide a tour of your operations. 

“You can effectively interview the banker during this time,” he said. “You can ask questions about the process by which the bank makes decisions and agree on the next steps. The goal is to enable the banker to leave the meeting with a good understanding of what the company is all about and a timeframe for follow-up. Even if you must meet the loan officer at the bank, use that initial time to interview the banker so that you clearly understand what the approval process entails and if the bank provides the services you are seeking to companies within your industry.”

Goodwin said that completion of a loan application may or may not be necessary, depending on the size of the loan request and the financial institution. Although application forms vary from bank to bank, the information that is typically requested is often the same. When you request an application, review with the banker the additional information that will be requested to be submitted so that all the information the bank deems necessary to make a decision can be submitted at one time.

	Now may be the time to set the financial wheels in motion for businesses that are prepared to invest in growth.

“A lot of companies don’t have executive profiles and biographies,” Nuñez said. “You may not have a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis [which lists the objectives of the business and identifies favorable or unfavorable factors to achieving the objective] or projections on inventory and sales, but those are thing we had to update and put together. We had to provide several years of financial statement reviews. You want to make sure those types of documents are prepared consistently every year, you’re ready to answer the bank’s questions and the information is correct and relevant.”

Nuñez also said that several of the banks she dealt with seemed to be dragging their feet or asking for information on a piecemeal basis, leading to frustration and confusion on her part. That scenario may be an indication that the lender and borrower are simply not well matched, Goodwin said.

Additionally, many banks have become conservative lenders in response to a higher level of scrutiny, perceived or real, by bank regulators and audit committees. Companies that cater to economic sectors hard hit during the recession, such as in the housing and auto industries, may be asked to provide extra assurances that their business models are compelling.

“Banks are in the risk-management business and understand how to assess those risks,” he said. “Some lenders are in the business to take very high risks, and for that they demand high returns. Lenders may provide financing despite higher risk profiles based upon strong collateral or guarantor support. If you find that your bank is continuing to ask for additional information that does not appear to be material to the decision or that has been previously submitted, you may conclude that you have the wrong bank or banker. Banks are interested in understanding and assessing the character of the borrower, the capacity of the borrower to repay the debt, and the collateral that will be pledged to support the loan in the event that the cash flow of the business turns out to be insufficient to repay the loan. That’s why you should ask about and understand the decision-making process of the bank and the expected timing of a decision.”

Goodwin also pointed out that financial institutions are not the only sources that a company might consider in the search for capital. Loans from friends and family are common in the early stages of a company’s development or in times of difficulty. Equity from other investors is also a possibility once a company has developed a proven product, made a place for itself in a market and established a track record. Often-overlooked sources of financing can also include customers and vendors, Goodwin said, since such business partners may understand the business well and may even agree to more favorable trade terms or loans.

If you do decide on a lending institution, proper paperwork is vital. Valenti said that Manufacturer’s Bank provides a loan application checklist, as do most financial institutions. In addition, the Small Business Administration’s website offers a full range of forms as well as general and more detailed information about securing an SBA-guaranteed loan. Compiling such information for and about your company can provide additional benefits.

“We’ve used our executive profiles in our marketing pieces and discussions with new clients,” Nuñez said, “and we’ve used them when we’ve had opportunities for coverage by magazines. But time is of the essence. When you decide to seek a loan, you have to put the biggest possible priority on it. The quicker you can get the bank your information, the more they will stay connected with you. If you’re quick and responsive about providing documents, the bank will perceive that as the way the whole business is run.”  

SEMA News - May 2010

BEST PRACTICES

Don’t Take Credit for Granted

By Steve Campbell

This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.

Money has been tight for more than two years. Small businesses were especially hard hit by the recession that began late in 2007, with some estimates indicating that companies suffered sales losses ranging from 10% to 40% or more. The resulting constriction resulted in layoffs, cutbacks, inventory reductions and consolidations that made a bad situation even worse for businesses that were on the bubble between solvency and bankruptcy. Some did not survive.

There are mixed messages about where the economy now stands—including an increasing Gross Domestic Product and a rising stock market offset by residual high unemployment levels—but most experts feel that a recovery has begun. Now may be the time to set the financial wheels in motion for those businesses that are prepared to invest in growth. However, acquiring capital is not a quick and easy proposition, even for a company that boasts a solid credit history. Advanced Clutch Technology Inc. (ACT) is a case in point.

ACT had been dealing with the same regional bank for eight years when the recession began. The company had renewed its line of credit annually and had also financed other loans through that same institution. The bank—a regional lender—had occasionally expressed reservations about ACT’s inventory levels, not fully understanding the specialty-equipment industry, but had always renewed the credit line. Until the end of 2008.

“The bank didn’t initially say that it was declining to finance,” said Tracie Nuñez, ACT’s chief executive officer. “But four months after we began the renewal process, the bank’s officials came back and said they weren’t comfortable dealing with our type of business—a manufacturer in the automotive market.”

Nuñez began a search for new financing. She and her team went through discussions with five different institutions—each of which took hours, days and weeks before declining financing. But she took lessons from every encounter.

“We learned that it’s very difficult to get a loan after you developed the need,” she said. “You should complete your due diligence well in advance of seeking a loan. It’s hard to compile all of the information you need when you’re suddenly under the gun.”

Michael Valenti, vice president and manager of Manufacturers Bank in Los Angeles, where ACT finally found a receptive lender, said that going into a loan process with all of the proper and up-to-date information at hand not only speeds what can be a lengthy process, but also gives the loan officer a positive initial view of the client.

“Come in prepared so that you can explain where you’ve been and where you want to go,” Valenti said. “Put a package together that includes three years of business tax returns, three years of personal tax returns on all owners of a corporation, a current balance sheet and an income statement that is no older than 90 days. Also include your current receivables and payable aging and one or two pages explaining the reason you need to borrow the money, what sales look like going forward and how the money will be paid back.”

	Six Steps to Prepare for the Loan Process     Three years of business tax returns     Three years of personal tex returns (all owners)     Current balance sheet     Income statement (no older than 90 days)     Current receivables and payable aging     Summary of reason for borrowing

The explanation of need and repayment prospects are particularly important, said Louis Goodwin, senior vice president and regional manager for Wells Fargo’s Inland Empire Commercial Banking office in Southern California. Goodwin, responsible for providing financial services to middle market companies within the Inland Empire, is co-presenting a SEMA webinar entitled “Preparing Your Company to Finance Growth” on May 6.

“Clearly articulate the purpose of the loan request, understanding that lenders are in the business to provide capital for good business reasons,” he counseled. “These reasons often include financing to support sales growth, equipment purchases to expand capacity or improve efficiency, to purchase a building or to buy a business. Most lenders are not going to be interested in financing operating losses, delinquent receivables or other needs caused by negative trends.”

Goodwin also suggested inviting the lender to meet with you at your place of business as a preliminary step, even before the paperwork begins. A face-to-face, on-premises meeting allows you to introduce the banker to your business and provide a tour of your operations. 

“You can effectively interview the banker during this time,” he said. “You can ask questions about the process by which the bank makes decisions and agree on the next steps. The goal is to enable the banker to leave the meeting with a good understanding of what the company is all about and a timeframe for follow-up. Even if you must meet the loan officer at the bank, use that initial time to interview the banker so that you clearly understand what the approval process entails and if the bank provides the services you are seeking to companies within your industry.”

Goodwin said that completion of a loan application may or may not be necessary, depending on the size of the loan request and the financial institution. Although application forms vary from bank to bank, the information that is typically requested is often the same. When you request an application, review with the banker the additional information that will be requested to be submitted so that all the information the bank deems necessary to make a decision can be submitted at one time.

	Now may be the time to set the financial wheels in motion for businesses that are prepared to invest in growth.

“A lot of companies don’t have executive profiles and biographies,” Nuñez said. “You may not have a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis [which lists the objectives of the business and identifies favorable or unfavorable factors to achieving the objective] or projections on inventory and sales, but those are thing we had to update and put together. We had to provide several years of financial statement reviews. You want to make sure those types of documents are prepared consistently every year, you’re ready to answer the bank’s questions and the information is correct and relevant.”

Nuñez also said that several of the banks she dealt with seemed to be dragging their feet or asking for information on a piecemeal basis, leading to frustration and confusion on her part. That scenario may be an indication that the lender and borrower are simply not well matched, Goodwin said.

Additionally, many banks have become conservative lenders in response to a higher level of scrutiny, perceived or real, by bank regulators and audit committees. Companies that cater to economic sectors hard hit during the recession, such as in the housing and auto industries, may be asked to provide extra assurances that their business models are compelling.

“Banks are in the risk-management business and understand how to assess those risks,” he said. “Some lenders are in the business to take very high risks, and for that they demand high returns. Lenders may provide financing despite higher risk profiles based upon strong collateral or guarantor support. If you find that your bank is continuing to ask for additional information that does not appear to be material to the decision or that has been previously submitted, you may conclude that you have the wrong bank or banker. Banks are interested in understanding and assessing the character of the borrower, the capacity of the borrower to repay the debt, and the collateral that will be pledged to support the loan in the event that the cash flow of the business turns out to be insufficient to repay the loan. That’s why you should ask about and understand the decision-making process of the bank and the expected timing of a decision.”

Goodwin also pointed out that financial institutions are not the only sources that a company might consider in the search for capital. Loans from friends and family are common in the early stages of a company’s development or in times of difficulty. Equity from other investors is also a possibility once a company has developed a proven product, made a place for itself in a market and established a track record. Often-overlooked sources of financing can also include customers and vendors, Goodwin said, since such business partners may understand the business well and may even agree to more favorable trade terms or loans.

If you do decide on a lending institution, proper paperwork is vital. Valenti said that Manufacturer’s Bank provides a loan application checklist, as do most financial institutions. In addition, the Small Business Administration’s website offers a full range of forms as well as general and more detailed information about securing an SBA-guaranteed loan. Compiling such information for and about your company can provide additional benefits.

“We’ve used our executive profiles in our marketing pieces and discussions with new clients,” Nuñez said, “and we’ve used them when we’ve had opportunities for coverage by magazines. But time is of the essence. When you decide to seek a loan, you have to put the biggest possible priority on it. The quicker you can get the bank your information, the more they will stay connected with you. If you’re quick and responsive about providing documents, the bank will perceive that as the way the whole business is run.”  

SEMA News - May 2010

BEST PRACTICES

Don’t Take Credit for Granted

By Steve Campbell

This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.

Money has been tight for more than two years. Small businesses were especially hard hit by the recession that began late in 2007, with some estimates indicating that companies suffered sales losses ranging from 10% to 40% or more. The resulting constriction resulted in layoffs, cutbacks, inventory reductions and consolidations that made a bad situation even worse for businesses that were on the bubble between solvency and bankruptcy. Some did not survive.

There are mixed messages about where the economy now stands—including an increasing Gross Domestic Product and a rising stock market offset by residual high unemployment levels—but most experts feel that a recovery has begun. Now may be the time to set the financial wheels in motion for those businesses that are prepared to invest in growth. However, acquiring capital is not a quick and easy proposition, even for a company that boasts a solid credit history. Advanced Clutch Technology Inc. (ACT) is a case in point.

ACT had been dealing with the same regional bank for eight years when the recession began. The company had renewed its line of credit annually and had also financed other loans through that same institution. The bank—a regional lender—had occasionally expressed reservations about ACT’s inventory levels, not fully understanding the specialty-equipment industry, but had always renewed the credit line. Until the end of 2008.

“The bank didn’t initially say that it was declining to finance,” said Tracie Nuñez, ACT’s chief executive officer. “But four months after we began the renewal process, the bank’s officials came back and said they weren’t comfortable dealing with our type of business—a manufacturer in the automotive market.”

Nuñez began a search for new financing. She and her team went through discussions with five different institutions—each of which took hours, days and weeks before declining financing. But she took lessons from every encounter.

“We learned that it’s very difficult to get a loan after you developed the need,” she said. “You should complete your due diligence well in advance of seeking a loan. It’s hard to compile all of the information you need when you’re suddenly under the gun.”

Michael Valenti, vice president and manager of Manufacturers Bank in Los Angeles, where ACT finally found a receptive lender, said that going into a loan process with all of the proper and up-to-date information at hand not only speeds what can be a lengthy process, but also gives the loan officer a positive initial view of the client.

“Come in prepared so that you can explain where you’ve been and where you want to go,” Valenti said. “Put a package together that includes three years of business tax returns, three years of personal tax returns on all owners of a corporation, a current balance sheet and an income statement that is no older than 90 days. Also include your current receivables and payable aging and one or two pages explaining the reason you need to borrow the money, what sales look like going forward and how the money will be paid back.”

	Six Steps to Prepare for the Loan Process     Three years of business tax returns     Three years of personal tex returns (all owners)     Current balance sheet     Income statement (no older than 90 days)     Current receivables and payable aging     Summary of reason for borrowing

The explanation of need and repayment prospects are particularly important, said Louis Goodwin, senior vice president and regional manager for Wells Fargo’s Inland Empire Commercial Banking office in Southern California. Goodwin, responsible for providing financial services to middle market companies within the Inland Empire, is co-presenting a SEMA webinar entitled “Preparing Your Company to Finance Growth” on May 6.

“Clearly articulate the purpose of the loan request, understanding that lenders are in the business to provide capital for good business reasons,” he counseled. “These reasons often include financing to support sales growth, equipment purchases to expand capacity or improve efficiency, to purchase a building or to buy a business. Most lenders are not going to be interested in financing operating losses, delinquent receivables or other needs caused by negative trends.”

Goodwin also suggested inviting the lender to meet with you at your place of business as a preliminary step, even before the paperwork begins. A face-to-face, on-premises meeting allows you to introduce the banker to your business and provide a tour of your operations. 

“You can effectively interview the banker during this time,” he said. “You can ask questions about the process by which the bank makes decisions and agree on the next steps. The goal is to enable the banker to leave the meeting with a good understanding of what the company is all about and a timeframe for follow-up. Even if you must meet the loan officer at the bank, use that initial time to interview the banker so that you clearly understand what the approval process entails and if the bank provides the services you are seeking to companies within your industry.”

Goodwin said that completion of a loan application may or may not be necessary, depending on the size of the loan request and the financial institution. Although application forms vary from bank to bank, the information that is typically requested is often the same. When you request an application, review with the banker the additional information that will be requested to be submitted so that all the information the bank deems necessary to make a decision can be submitted at one time.

	Now may be the time to set the financial wheels in motion for businesses that are prepared to invest in growth.

“A lot of companies don’t have executive profiles and biographies,” Nuñez said. “You may not have a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis [which lists the objectives of the business and identifies favorable or unfavorable factors to achieving the objective] or projections on inventory and sales, but those are thing we had to update and put together. We had to provide several years of financial statement reviews. You want to make sure those types of documents are prepared consistently every year, you’re ready to answer the bank’s questions and the information is correct and relevant.”

Nuñez also said that several of the banks she dealt with seemed to be dragging their feet or asking for information on a piecemeal basis, leading to frustration and confusion on her part. That scenario may be an indication that the lender and borrower are simply not well matched, Goodwin said.

Additionally, many banks have become conservative lenders in response to a higher level of scrutiny, perceived or real, by bank regulators and audit committees. Companies that cater to economic sectors hard hit during the recession, such as in the housing and auto industries, may be asked to provide extra assurances that their business models are compelling.

“Banks are in the risk-management business and understand how to assess those risks,” he said. “Some lenders are in the business to take very high risks, and for that they demand high returns. Lenders may provide financing despite higher risk profiles based upon strong collateral or guarantor support. If you find that your bank is continuing to ask for additional information that does not appear to be material to the decision or that has been previously submitted, you may conclude that you have the wrong bank or banker. Banks are interested in understanding and assessing the character of the borrower, the capacity of the borrower to repay the debt, and the collateral that will be pledged to support the loan in the event that the cash flow of the business turns out to be insufficient to repay the loan. That’s why you should ask about and understand the decision-making process of the bank and the expected timing of a decision.”

Goodwin also pointed out that financial institutions are not the only sources that a company might consider in the search for capital. Loans from friends and family are common in the early stages of a company’s development or in times of difficulty. Equity from other investors is also a possibility once a company has developed a proven product, made a place for itself in a market and established a track record. Often-overlooked sources of financing can also include customers and vendors, Goodwin said, since such business partners may understand the business well and may even agree to more favorable trade terms or loans.

If you do decide on a lending institution, proper paperwork is vital. Valenti said that Manufacturer’s Bank provides a loan application checklist, as do most financial institutions. In addition, the Small Business Administration’s website offers a full range of forms as well as general and more detailed information about securing an SBA-guaranteed loan. Compiling such information for and about your company can provide additional benefits.

“We’ve used our executive profiles in our marketing pieces and discussions with new clients,” Nuñez said, “and we’ve used them when we’ve had opportunities for coverage by magazines. But time is of the essence. When you decide to seek a loan, you have to put the biggest possible priority on it. The quicker you can get the bank your information, the more they will stay connected with you. If you’re quick and responsive about providing documents, the bank will perceive that as the way the whole business is run.”  

SEMA News - May 2010

BEST PRACTICES

Don’t Take Credit for Granted

By Steve Campbell

This series of SEMA News stories is based on the idea of using reliable and repeatable methods to ensure business success. In coming issues, we will delve into a range of topics aimed at developing Best Practices through knowledge, motivation and skills.

Money has been tight for more than two years. Small businesses were especially hard hit by the recession that began late in 2007, with some estimates indicating that companies suffered sales losses ranging from 10% to 40% or more. The resulting constriction resulted in layoffs, cutbacks, inventory reductions and consolidations that made a bad situation even worse for businesses that were on the bubble between solvency and bankruptcy. Some did not survive.

There are mixed messages about where the economy now stands—including an increasing Gross Domestic Product and a rising stock market offset by residual high unemployment levels—but most experts feel that a recovery has begun. Now may be the time to set the financial wheels in motion for those businesses that are prepared to invest in growth. However, acquiring capital is not a quick and easy proposition, even for a company that boasts a solid credit history. Advanced Clutch Technology Inc. (ACT) is a case in point.

ACT had been dealing with the same regional bank for eight years when the recession began. The company had renewed its line of credit annually and had also financed other loans through that same institution. The bank—a regional lender—had occasionally expressed reservations about ACT’s inventory levels, not fully understanding the specialty-equipment industry, but had always renewed the credit line. Until the end of 2008.

“The bank didn’t initially say that it was declining to finance,” said Tracie Nuñez, ACT’s chief executive officer. “But four months after we began the renewal process, the bank’s officials came back and said they weren’t comfortable dealing with our type of business—a manufacturer in the automotive market.”

Nuñez began a search for new financing. She and her team went through discussions with five different institutions—each of which took hours, days and weeks before declining financing. But she took lessons from every encounter.

“We learned that it’s very difficult to get a loan after you developed the need,” she said. “You should complete your due diligence well in advance of seeking a loan. It’s hard to compile all of the information you need when you’re suddenly under the gun.”

Michael Valenti, vice president and manager of Manufacturers Bank in Los Angeles, where ACT finally found a receptive lender, said that going into a loan process with all of the proper and up-to-date information at hand not only speeds what can be a lengthy process, but also gives the loan officer a positive initial view of the client.

“Come in prepared so that you can explain where you’ve been and where you want to go,” Valenti said. “Put a package together that includes three years of business tax returns, three years of personal tax returns on all owners of a corporation, a current balance sheet and an income statement that is no older than 90 days. Also include your current receivables and payable aging and one or two pages explaining the reason you need to borrow the money, what sales look like going forward and how the money will be paid back.”

	Six Steps to Prepare for the Loan Process     Three years of business tax returns     Three years of personal tex returns (all owners)     Current balance sheet     Income statement (no older than 90 days)     Current receivables and payable aging     Summary of reason for borrowing

The explanation of need and repayment prospects are particularly important, said Louis Goodwin, senior vice president and regional manager for Wells Fargo’s Inland Empire Commercial Banking office in Southern California. Goodwin, responsible for providing financial services to middle market companies within the Inland Empire, is co-presenting a SEMA webinar entitled “Preparing Your Company to Finance Growth” on May 6.

“Clearly articulate the purpose of the loan request, understanding that lenders are in the business to provide capital for good business reasons,” he counseled. “These reasons often include financing to support sales growth, equipment purchases to expand capacity or improve efficiency, to purchase a building or to buy a business. Most lenders are not going to be interested in financing operating losses, delinquent receivables or other needs caused by negative trends.”

Goodwin also suggested inviting the lender to meet with you at your place of business as a preliminary step, even before the paperwork begins. A face-to-face, on-premises meeting allows you to introduce the banker to your business and provide a tour of your operations. 

“You can effectively interview the banker during this time,” he said. “You can ask questions about the process by which the bank makes decisions and agree on the next steps. The goal is to enable the banker to leave the meeting with a good understanding of what the company is all about and a timeframe for follow-up. Even if you must meet the loan officer at the bank, use that initial time to interview the banker so that you clearly understand what the approval process entails and if the bank provides the services you are seeking to companies within your industry.”

Goodwin said that completion of a loan application may or may not be necessary, depending on the size of the loan request and the financial institution. Although application forms vary from bank to bank, the information that is typically requested is often the same. When you request an application, review with the banker the additional information that will be requested to be submitted so that all the information the bank deems necessary to make a decision can be submitted at one time.

	Now may be the time to set the financial wheels in motion for businesses that are prepared to invest in growth.

“A lot of companies don’t have executive profiles and biographies,” Nuñez said. “You may not have a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis [which lists the objectives of the business and identifies favorable or unfavorable factors to achieving the objective] or projections on inventory and sales, but those are thing we had to update and put together. We had to provide several years of financial statement reviews. You want to make sure those types of documents are prepared consistently every year, you’re ready to answer the bank’s questions and the information is correct and relevant.”

Nuñez also said that several of the banks she dealt with seemed to be dragging their feet or asking for information on a piecemeal basis, leading to frustration and confusion on her part. That scenario may be an indication that the lender and borrower are simply not well matched, Goodwin said.

Additionally, many banks have become conservative lenders in response to a higher level of scrutiny, perceived or real, by bank regulators and audit committees. Companies that cater to economic sectors hard hit during the recession, such as in the housing and auto industries, may be asked to provide extra assurances that their business models are compelling.

“Banks are in the risk-management business and understand how to assess those risks,” he said. “Some lenders are in the business to take very high risks, and for that they demand high returns. Lenders may provide financing despite higher risk profiles based upon strong collateral or guarantor support. If you find that your bank is continuing to ask for additional information that does not appear to be material to the decision or that has been previously submitted, you may conclude that you have the wrong bank or banker. Banks are interested in understanding and assessing the character of the borrower, the capacity of the borrower to repay the debt, and the collateral that will be pledged to support the loan in the event that the cash flow of the business turns out to be insufficient to repay the loan. That’s why you should ask about and understand the decision-making process of the bank and the expected timing of a decision.”

Goodwin also pointed out that financial institutions are not the only sources that a company might consider in the search for capital. Loans from friends and family are common in the early stages of a company’s development or in times of difficulty. Equity from other investors is also a possibility once a company has developed a proven product, made a place for itself in a market and established a track record. Often-overlooked sources of financing can also include customers and vendors, Goodwin said, since such business partners may understand the business well and may even agree to more favorable trade terms or loans.

If you do decide on a lending institution, proper paperwork is vital. Valenti said that Manufacturer’s Bank provides a loan application checklist, as do most financial institutions. In addition, the Small Business Administration’s website offers a full range of forms as well as general and more detailed information about securing an SBA-guaranteed loan. Compiling such information for and about your company can provide additional benefits.

“We’ve used our executive profiles in our marketing pieces and discussions with new clients,” Nuñez said, “and we’ve used them when we’ve had opportunities for coverage by magazines. But time is of the essence. When you decide to seek a loan, you have to put the biggest possible priority on it. The quicker you can get the bank your information, the more they will stay connected with you. If you’re quick and responsive about providing documents, the bank will perceive that as the way the whole business is run.”  

SEMA News - May 2010

More Than 500 Enthusiasts Spread Top Trends From 2009 SEMA Show

By Dan Frio

In an effort to better analyze the tastes and preferences of today’s auto enthusiasts, SEMA, in coordination with Ford, launched the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show.

The program invited 527 enthusiasts, selected through a rigorous application process, to the second day of the Show and tasked them with using social media, including Twitter and Facebook, to broadcast their personal product and trend highlights of the Show.

Beginning at the New Products Showcase, these opinion leaders were asked to post 10 product highlights to personal Twitter accounts. Their activity actually led to the SEMA Show entering Twitter’s top 10 global trends for that day (November 4, 2009).

Nearly half of the enthusiasts selected (49%) were between the ages of 25 and 44 and were active users of social media; 44% said that they updated their personal sites daily. Not only were they hands-on with their computers and smartphones, but they also turned wrenches; 42% said that they worked on their cars and trucks themselves, and 55% did their own work but also used professional installation services.

Nearly nine in 10 (89%) had done performance upgrades to their vehicle, 86% had added wheels and/or tires and 81% had done an engine swap or upgrade. Truck/SUV modifiers (62%) slightly outweighed street-performance/musclecar modifiers (57%). Almost half of the enthusiasts owned a GM vehicle (48%), edging out Ford owners (36%).

Three in Four Enthusiasts Primarily Use Internet for Buying Decisions

If you needed further motivation to revamp, enhance or (deep breath) finally develop your business’ website, consider this data gathered from car and truck enthusiasts at the 2009 SEMA Show: An average of 75% of enthusiasts in eight different categories use the Internet to research and inform their parts and accessories purchases. That number jumps to 80% when social media sites, such as Facebook and Twitter, are factored in.

Fellow enthusiast sites are the most popular venues for gathering information, followed by queries made through traditional search engines, such as Google and Yahoo. Magazines, catalogs, car shows and manufacturer websites also still contribute to enthusiast research. Depending on market segment, between 52% and 78% of enthusiasts still rely on magazines, for example, to inform their buying decisions. Street-rod enthusiasts in particular prefer ink and paper (78%) almost as much as they do enthusiast website research (80%). Compact-performance fans are the most receptive to doing their homework on the Internet, with 85% saying that they turn to enthusiast sites for answers. Off-roaders and street-performance enthusiasts (81%) follow closely behind.

Does all of that time in front of the screen convert to action? Absolutely. An average of 72% of parts hunters in all eight categories said that they’d purchased from Internet retailers. Not surprisingly, compact-performance enthusiasts were most likely to buy from an Internet retailer, while those in the restoration scene—just 66%—were among the least likely.

Where does that leave the independent retailer? Generally, about 54% of enthusiasts in all segments—compact performance, off-road, passenger car, racing, restoration, street performance, street rod/custom and truck/SUV—said that they’d purchased from an independent retailer.  Street-performance fans are most likely to buy from an independent (55%), while truck and SUV owners are the least loyal at just 46%.

Participants in the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show were mostly male (96%), with 52% between 25 and 44 years old. Most were married (96%), with 67% having household incomes between $50,000 to in excess of $75,000.

Pain at the Pump Won’t Deter Truck and SUV Enthusiasts

	The Enthusiast Opinion Leader Research Program offered 527 auto enthusiasts admission to the 2009 SEMA Show in exchange for their reportage on top products and trends to social media sites, such as Facebook and Twitter.

Truck and SUV enthusiasts remain unfazed by gas prices, according to a survey of truck, off-road and SUV enthusiasts at the 2009 SEMA Show. Most surveyed said that they were “not at all likely” to get rid of their big vehicle even if gas prices rise. In nearly all cases, the members of this passionate audience said that they would (if they hadn’t already) buy a fuel-efficient car for daily driving and commuting, but the truck would stay. For many, trucks and SUVs are a necessity either for business or recreation. “I have to have a truck, so gas prices don’t matter,” one participant explained. Another summed up with equal brevity: “I’ll never give up my truck. I’ll give up other things, but not my truck.”

But even if truck enthusiasts sound cavalier about gas prices, they are anything but in their research and purchasing patterns. This astute audience buys based on personal style, function and utility, and availability. They’re also sensitive to private-labeling practices and shoddy customer service.

“Individuality” was the top reason participants gave when asked why they customize. A need to “put your own brand on it” and “make it your own so it doesn’t look like all the others on the road” were two common themes among respondents.

Replacing worn stock parts with specialty equipment prompted many purchasing decisions, with truck/SUV owners perceiving that aftermarket products offer better performance, function and safety. Enthusiasts also noted that factory replacement parts are often more expensive than aftermarket.

Off-roaders were most adamant about the benefits of specialty products. “Stock gets stuck” was one notable response. Utility and function hold high value for this group, and they’re generally not impressed with cosmetic accessories (although, one enthusiast noted that his taillights looked good and merited the cost even though they didn’t improve his truck’s performance).

These enthusiasts are also keen on part quality. Several enthusiasts noted that cutting corners and buying inferior parts usually costs more in the end. Brand name alone is not enough to get the sale, however. More were aware of private-labeling practices in the industry and had strong objections to paying more for a legacy brand if they knew the manufacturer was also building for others. “I’m not spending twice the money for something that’s going to wear out the same,” said one participant.

Retailers and manufacturers take note: If you want this group’s business, make sure you have the parts. Many said that they would first try to buy from a local brick-and-mortar store but often couldn’t find the parts in their area. Not surprisingly, most turned to the Internet. Those surveyed said that they bought an average of 75% of their parts online.

Reduced or free shipping caught most enthusiasts’ attention and often tipped he balance in favor of a particular retailer. But online buying isn’t without its frustrations, enthusiasts said. Several survey participants related stories of placing orders only to learn that the product was back-ordered or simply out of stock.

And, not surprising for an Internet-savvy audience, they do the bulk of their product research online, typically looking first to online forums to learn about the experiences of others with the same or similar products. Fellow-enthusiast endorsements and criticisms are valuable currency with those weighing a purchasing decision.

Many also check a manufacturer’s website for product information and often e-mail or call for details. How a manufacturer responds to these inquiries has a significant influence on the consumer’s decision. Failure to respond promptly or replies with short, uninformative answers typically lose the sale.

Enthusiasts perceive that the effort a manufacturer puts into both follow-ups and the product information on its website reflects its design, manufacturing and customer-service values. Buyers want detailed product specs, photos and application specifics.

“Companies are just not thorough in putting the information on their websites,” one respondent explained. “Many sites will just say one useless thing about the product.”  

For more information on the Enthusiast Opinion Leader Research Program, click here

 

 

SEMA News - May 2010

More Than 500 Enthusiasts Spread Top Trends From 2009 SEMA Show

By Dan Frio

In an effort to better analyze the tastes and preferences of today’s auto enthusiasts, SEMA, in coordination with Ford, launched the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show.

The program invited 527 enthusiasts, selected through a rigorous application process, to the second day of the Show and tasked them with using social media, including Twitter and Facebook, to broadcast their personal product and trend highlights of the Show.

Beginning at the New Products Showcase, these opinion leaders were asked to post 10 product highlights to personal Twitter accounts. Their activity actually led to the SEMA Show entering Twitter’s top 10 global trends for that day (November 4, 2009).

Nearly half of the enthusiasts selected (49%) were between the ages of 25 and 44 and were active users of social media; 44% said that they updated their personal sites daily. Not only were they hands-on with their computers and smartphones, but they also turned wrenches; 42% said that they worked on their cars and trucks themselves, and 55% did their own work but also used professional installation services.

Nearly nine in 10 (89%) had done performance upgrades to their vehicle, 86% had added wheels and/or tires and 81% had done an engine swap or upgrade. Truck/SUV modifiers (62%) slightly outweighed street-performance/musclecar modifiers (57%). Almost half of the enthusiasts owned a GM vehicle (48%), edging out Ford owners (36%).

Three in Four Enthusiasts Primarily Use Internet for Buying Decisions

If you needed further motivation to revamp, enhance or (deep breath) finally develop your business’ website, consider this data gathered from car and truck enthusiasts at the 2009 SEMA Show: An average of 75% of enthusiasts in eight different categories use the Internet to research and inform their parts and accessories purchases. That number jumps to 80% when social media sites, such as Facebook and Twitter, are factored in.

Fellow enthusiast sites are the most popular venues for gathering information, followed by queries made through traditional search engines, such as Google and Yahoo. Magazines, catalogs, car shows and manufacturer websites also still contribute to enthusiast research. Depending on market segment, between 52% and 78% of enthusiasts still rely on magazines, for example, to inform their buying decisions. Street-rod enthusiasts in particular prefer ink and paper (78%) almost as much as they do enthusiast website research (80%). Compact-performance fans are the most receptive to doing their homework on the Internet, with 85% saying that they turn to enthusiast sites for answers. Off-roaders and street-performance enthusiasts (81%) follow closely behind.

Does all of that time in front of the screen convert to action? Absolutely. An average of 72% of parts hunters in all eight categories said that they’d purchased from Internet retailers. Not surprisingly, compact-performance enthusiasts were most likely to buy from an Internet retailer, while those in the restoration scene—just 66%—were among the least likely.

Where does that leave the independent retailer? Generally, about 54% of enthusiasts in all segments—compact performance, off-road, passenger car, racing, restoration, street performance, street rod/custom and truck/SUV—said that they’d purchased from an independent retailer.  Street-performance fans are most likely to buy from an independent (55%), while truck and SUV owners are the least loyal at just 46%.

Participants in the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show were mostly male (96%), with 52% between 25 and 44 years old. Most were married (96%), with 67% having household incomes between $50,000 to in excess of $75,000.

Pain at the Pump Won’t Deter Truck and SUV Enthusiasts

	The Enthusiast Opinion Leader Research Program offered 527 auto enthusiasts admission to the 2009 SEMA Show in exchange for their reportage on top products and trends to social media sites, such as Facebook and Twitter.

Truck and SUV enthusiasts remain unfazed by gas prices, according to a survey of truck, off-road and SUV enthusiasts at the 2009 SEMA Show. Most surveyed said that they were “not at all likely” to get rid of their big vehicle even if gas prices rise. In nearly all cases, the members of this passionate audience said that they would (if they hadn’t already) buy a fuel-efficient car for daily driving and commuting, but the truck would stay. For many, trucks and SUVs are a necessity either for business or recreation. “I have to have a truck, so gas prices don’t matter,” one participant explained. Another summed up with equal brevity: “I’ll never give up my truck. I’ll give up other things, but not my truck.”

But even if truck enthusiasts sound cavalier about gas prices, they are anything but in their research and purchasing patterns. This astute audience buys based on personal style, function and utility, and availability. They’re also sensitive to private-labeling practices and shoddy customer service.

“Individuality” was the top reason participants gave when asked why they customize. A need to “put your own brand on it” and “make it your own so it doesn’t look like all the others on the road” were two common themes among respondents.

Replacing worn stock parts with specialty equipment prompted many purchasing decisions, with truck/SUV owners perceiving that aftermarket products offer better performance, function and safety. Enthusiasts also noted that factory replacement parts are often more expensive than aftermarket.

Off-roaders were most adamant about the benefits of specialty products. “Stock gets stuck” was one notable response. Utility and function hold high value for this group, and they’re generally not impressed with cosmetic accessories (although, one enthusiast noted that his taillights looked good and merited the cost even though they didn’t improve his truck’s performance).

These enthusiasts are also keen on part quality. Several enthusiasts noted that cutting corners and buying inferior parts usually costs more in the end. Brand name alone is not enough to get the sale, however. More were aware of private-labeling practices in the industry and had strong objections to paying more for a legacy brand if they knew the manufacturer was also building for others. “I’m not spending twice the money for something that’s going to wear out the same,” said one participant.

Retailers and manufacturers take note: If you want this group’s business, make sure you have the parts. Many said that they would first try to buy from a local brick-and-mortar store but often couldn’t find the parts in their area. Not surprisingly, most turned to the Internet. Those surveyed said that they bought an average of 75% of their parts online.

Reduced or free shipping caught most enthusiasts’ attention and often tipped he balance in favor of a particular retailer. But online buying isn’t without its frustrations, enthusiasts said. Several survey participants related stories of placing orders only to learn that the product was back-ordered or simply out of stock.

And, not surprising for an Internet-savvy audience, they do the bulk of their product research online, typically looking first to online forums to learn about the experiences of others with the same or similar products. Fellow-enthusiast endorsements and criticisms are valuable currency with those weighing a purchasing decision.

Many also check a manufacturer’s website for product information and often e-mail or call for details. How a manufacturer responds to these inquiries has a significant influence on the consumer’s decision. Failure to respond promptly or replies with short, uninformative answers typically lose the sale.

Enthusiasts perceive that the effort a manufacturer puts into both follow-ups and the product information on its website reflects its design, manufacturing and customer-service values. Buyers want detailed product specs, photos and application specifics.

“Companies are just not thorough in putting the information on their websites,” one respondent explained. “Many sites will just say one useless thing about the product.”  

For more information on the Enthusiast Opinion Leader Research Program, click here

 

 

SEMA News - May 2010

More Than 500 Enthusiasts Spread Top Trends From 2009 SEMA Show

By Dan Frio

In an effort to better analyze the tastes and preferences of today’s auto enthusiasts, SEMA, in coordination with Ford, launched the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show.

The program invited 527 enthusiasts, selected through a rigorous application process, to the second day of the Show and tasked them with using social media, including Twitter and Facebook, to broadcast their personal product and trend highlights of the Show.

Beginning at the New Products Showcase, these opinion leaders were asked to post 10 product highlights to personal Twitter accounts. Their activity actually led to the SEMA Show entering Twitter’s top 10 global trends for that day (November 4, 2009).

Nearly half of the enthusiasts selected (49%) were between the ages of 25 and 44 and were active users of social media; 44% said that they updated their personal sites daily. Not only were they hands-on with their computers and smartphones, but they also turned wrenches; 42% said that they worked on their cars and trucks themselves, and 55% did their own work but also used professional installation services.

Nearly nine in 10 (89%) had done performance upgrades to their vehicle, 86% had added wheels and/or tires and 81% had done an engine swap or upgrade. Truck/SUV modifiers (62%) slightly outweighed street-performance/musclecar modifiers (57%). Almost half of the enthusiasts owned a GM vehicle (48%), edging out Ford owners (36%).

Three in Four Enthusiasts Primarily Use Internet for Buying Decisions

If you needed further motivation to revamp, enhance or (deep breath) finally develop your business’ website, consider this data gathered from car and truck enthusiasts at the 2009 SEMA Show: An average of 75% of enthusiasts in eight different categories use the Internet to research and inform their parts and accessories purchases. That number jumps to 80% when social media sites, such as Facebook and Twitter, are factored in.

Fellow enthusiast sites are the most popular venues for gathering information, followed by queries made through traditional search engines, such as Google and Yahoo. Magazines, catalogs, car shows and manufacturer websites also still contribute to enthusiast research. Depending on market segment, between 52% and 78% of enthusiasts still rely on magazines, for example, to inform their buying decisions. Street-rod enthusiasts in particular prefer ink and paper (78%) almost as much as they do enthusiast website research (80%). Compact-performance fans are the most receptive to doing their homework on the Internet, with 85% saying that they turn to enthusiast sites for answers. Off-roaders and street-performance enthusiasts (81%) follow closely behind.

Does all of that time in front of the screen convert to action? Absolutely. An average of 72% of parts hunters in all eight categories said that they’d purchased from Internet retailers. Not surprisingly, compact-performance enthusiasts were most likely to buy from an Internet retailer, while those in the restoration scene—just 66%—were among the least likely.

Where does that leave the independent retailer? Generally, about 54% of enthusiasts in all segments—compact performance, off-road, passenger car, racing, restoration, street performance, street rod/custom and truck/SUV—said that they’d purchased from an independent retailer.  Street-performance fans are most likely to buy from an independent (55%), while truck and SUV owners are the least loyal at just 46%.

Participants in the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show were mostly male (96%), with 52% between 25 and 44 years old. Most were married (96%), with 67% having household incomes between $50,000 to in excess of $75,000.

Pain at the Pump Won’t Deter Truck and SUV Enthusiasts

	The Enthusiast Opinion Leader Research Program offered 527 auto enthusiasts admission to the 2009 SEMA Show in exchange for their reportage on top products and trends to social media sites, such as Facebook and Twitter.

Truck and SUV enthusiasts remain unfazed by gas prices, according to a survey of truck, off-road and SUV enthusiasts at the 2009 SEMA Show. Most surveyed said that they were “not at all likely” to get rid of their big vehicle even if gas prices rise. In nearly all cases, the members of this passionate audience said that they would (if they hadn’t already) buy a fuel-efficient car for daily driving and commuting, but the truck would stay. For many, trucks and SUVs are a necessity either for business or recreation. “I have to have a truck, so gas prices don’t matter,” one participant explained. Another summed up with equal brevity: “I’ll never give up my truck. I’ll give up other things, but not my truck.”

But even if truck enthusiasts sound cavalier about gas prices, they are anything but in their research and purchasing patterns. This astute audience buys based on personal style, function and utility, and availability. They’re also sensitive to private-labeling practices and shoddy customer service.

“Individuality” was the top reason participants gave when asked why they customize. A need to “put your own brand on it” and “make it your own so it doesn’t look like all the others on the road” were two common themes among respondents.

Replacing worn stock parts with specialty equipment prompted many purchasing decisions, with truck/SUV owners perceiving that aftermarket products offer better performance, function and safety. Enthusiasts also noted that factory replacement parts are often more expensive than aftermarket.

Off-roaders were most adamant about the benefits of specialty products. “Stock gets stuck” was one notable response. Utility and function hold high value for this group, and they’re generally not impressed with cosmetic accessories (although, one enthusiast noted that his taillights looked good and merited the cost even though they didn’t improve his truck’s performance).

These enthusiasts are also keen on part quality. Several enthusiasts noted that cutting corners and buying inferior parts usually costs more in the end. Brand name alone is not enough to get the sale, however. More were aware of private-labeling practices in the industry and had strong objections to paying more for a legacy brand if they knew the manufacturer was also building for others. “I’m not spending twice the money for something that’s going to wear out the same,” said one participant.

Retailers and manufacturers take note: If you want this group’s business, make sure you have the parts. Many said that they would first try to buy from a local brick-and-mortar store but often couldn’t find the parts in their area. Not surprisingly, most turned to the Internet. Those surveyed said that they bought an average of 75% of their parts online.

Reduced or free shipping caught most enthusiasts’ attention and often tipped he balance in favor of a particular retailer. But online buying isn’t without its frustrations, enthusiasts said. Several survey participants related stories of placing orders only to learn that the product was back-ordered or simply out of stock.

And, not surprising for an Internet-savvy audience, they do the bulk of their product research online, typically looking first to online forums to learn about the experiences of others with the same or similar products. Fellow-enthusiast endorsements and criticisms are valuable currency with those weighing a purchasing decision.

Many also check a manufacturer’s website for product information and often e-mail or call for details. How a manufacturer responds to these inquiries has a significant influence on the consumer’s decision. Failure to respond promptly or replies with short, uninformative answers typically lose the sale.

Enthusiasts perceive that the effort a manufacturer puts into both follow-ups and the product information on its website reflects its design, manufacturing and customer-service values. Buyers want detailed product specs, photos and application specifics.

“Companies are just not thorough in putting the information on their websites,” one respondent explained. “Many sites will just say one useless thing about the product.”  

For more information on the Enthusiast Opinion Leader Research Program, click here

 

 

SEMA News - May 2010

More Than 500 Enthusiasts Spread Top Trends From 2009 SEMA Show

By Dan Frio

In an effort to better analyze the tastes and preferences of today’s auto enthusiasts, SEMA, in coordination with Ford, launched the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show.

The program invited 527 enthusiasts, selected through a rigorous application process, to the second day of the Show and tasked them with using social media, including Twitter and Facebook, to broadcast their personal product and trend highlights of the Show.

Beginning at the New Products Showcase, these opinion leaders were asked to post 10 product highlights to personal Twitter accounts. Their activity actually led to the SEMA Show entering Twitter’s top 10 global trends for that day (November 4, 2009).

Nearly half of the enthusiasts selected (49%) were between the ages of 25 and 44 and were active users of social media; 44% said that they updated their personal sites daily. Not only were they hands-on with their computers and smartphones, but they also turned wrenches; 42% said that they worked on their cars and trucks themselves, and 55% did their own work but also used professional installation services.

Nearly nine in 10 (89%) had done performance upgrades to their vehicle, 86% had added wheels and/or tires and 81% had done an engine swap or upgrade. Truck/SUV modifiers (62%) slightly outweighed street-performance/musclecar modifiers (57%). Almost half of the enthusiasts owned a GM vehicle (48%), edging out Ford owners (36%).

Three in Four Enthusiasts Primarily Use Internet for Buying Decisions

If you needed further motivation to revamp, enhance or (deep breath) finally develop your business’ website, consider this data gathered from car and truck enthusiasts at the 2009 SEMA Show: An average of 75% of enthusiasts in eight different categories use the Internet to research and inform their parts and accessories purchases. That number jumps to 80% when social media sites, such as Facebook and Twitter, are factored in.

Fellow enthusiast sites are the most popular venues for gathering information, followed by queries made through traditional search engines, such as Google and Yahoo. Magazines, catalogs, car shows and manufacturer websites also still contribute to enthusiast research. Depending on market segment, between 52% and 78% of enthusiasts still rely on magazines, for example, to inform their buying decisions. Street-rod enthusiasts in particular prefer ink and paper (78%) almost as much as they do enthusiast website research (80%). Compact-performance fans are the most receptive to doing their homework on the Internet, with 85% saying that they turn to enthusiast sites for answers. Off-roaders and street-performance enthusiasts (81%) follow closely behind.

Does all of that time in front of the screen convert to action? Absolutely. An average of 72% of parts hunters in all eight categories said that they’d purchased from Internet retailers. Not surprisingly, compact-performance enthusiasts were most likely to buy from an Internet retailer, while those in the restoration scene—just 66%—were among the least likely.

Where does that leave the independent retailer? Generally, about 54% of enthusiasts in all segments—compact performance, off-road, passenger car, racing, restoration, street performance, street rod/custom and truck/SUV—said that they’d purchased from an independent retailer.  Street-performance fans are most likely to buy from an independent (55%), while truck and SUV owners are the least loyal at just 46%.

Participants in the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show were mostly male (96%), with 52% between 25 and 44 years old. Most were married (96%), with 67% having household incomes between $50,000 to in excess of $75,000.

Pain at the Pump Won’t Deter Truck and SUV Enthusiasts

	The Enthusiast Opinion Leader Research Program offered 527 auto enthusiasts admission to the 2009 SEMA Show in exchange for their reportage on top products and trends to social media sites, such as Facebook and Twitter.

Truck and SUV enthusiasts remain unfazed by gas prices, according to a survey of truck, off-road and SUV enthusiasts at the 2009 SEMA Show. Most surveyed said that they were “not at all likely” to get rid of their big vehicle even if gas prices rise. In nearly all cases, the members of this passionate audience said that they would (if they hadn’t already) buy a fuel-efficient car for daily driving and commuting, but the truck would stay. For many, trucks and SUVs are a necessity either for business or recreation. “I have to have a truck, so gas prices don’t matter,” one participant explained. Another summed up with equal brevity: “I’ll never give up my truck. I’ll give up other things, but not my truck.”

But even if truck enthusiasts sound cavalier about gas prices, they are anything but in their research and purchasing patterns. This astute audience buys based on personal style, function and utility, and availability. They’re also sensitive to private-labeling practices and shoddy customer service.

“Individuality” was the top reason participants gave when asked why they customize. A need to “put your own brand on it” and “make it your own so it doesn’t look like all the others on the road” were two common themes among respondents.

Replacing worn stock parts with specialty equipment prompted many purchasing decisions, with truck/SUV owners perceiving that aftermarket products offer better performance, function and safety. Enthusiasts also noted that factory replacement parts are often more expensive than aftermarket.

Off-roaders were most adamant about the benefits of specialty products. “Stock gets stuck” was one notable response. Utility and function hold high value for this group, and they’re generally not impressed with cosmetic accessories (although, one enthusiast noted that his taillights looked good and merited the cost even though they didn’t improve his truck’s performance).

These enthusiasts are also keen on part quality. Several enthusiasts noted that cutting corners and buying inferior parts usually costs more in the end. Brand name alone is not enough to get the sale, however. More were aware of private-labeling practices in the industry and had strong objections to paying more for a legacy brand if they knew the manufacturer was also building for others. “I’m not spending twice the money for something that’s going to wear out the same,” said one participant.

Retailers and manufacturers take note: If you want this group’s business, make sure you have the parts. Many said that they would first try to buy from a local brick-and-mortar store but often couldn’t find the parts in their area. Not surprisingly, most turned to the Internet. Those surveyed said that they bought an average of 75% of their parts online.

Reduced or free shipping caught most enthusiasts’ attention and often tipped he balance in favor of a particular retailer. But online buying isn’t without its frustrations, enthusiasts said. Several survey participants related stories of placing orders only to learn that the product was back-ordered or simply out of stock.

And, not surprising for an Internet-savvy audience, they do the bulk of their product research online, typically looking first to online forums to learn about the experiences of others with the same or similar products. Fellow-enthusiast endorsements and criticisms are valuable currency with those weighing a purchasing decision.

Many also check a manufacturer’s website for product information and often e-mail or call for details. How a manufacturer responds to these inquiries has a significant influence on the consumer’s decision. Failure to respond promptly or replies with short, uninformative answers typically lose the sale.

Enthusiasts perceive that the effort a manufacturer puts into both follow-ups and the product information on its website reflects its design, manufacturing and customer-service values. Buyers want detailed product specs, photos and application specifics.

“Companies are just not thorough in putting the information on their websites,” one respondent explained. “Many sites will just say one useless thing about the product.”  

For more information on the Enthusiast Opinion Leader Research Program, click here

 

 

SEMA News - May 2010

More Than 500 Enthusiasts Spread Top Trends From 2009 SEMA Show

By Dan Frio

In an effort to better analyze the tastes and preferences of today’s auto enthusiasts, SEMA, in coordination with Ford, launched the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show.

The program invited 527 enthusiasts, selected through a rigorous application process, to the second day of the Show and tasked them with using social media, including Twitter and Facebook, to broadcast their personal product and trend highlights of the Show.

Beginning at the New Products Showcase, these opinion leaders were asked to post 10 product highlights to personal Twitter accounts. Their activity actually led to the SEMA Show entering Twitter’s top 10 global trends for that day (November 4, 2009).

Nearly half of the enthusiasts selected (49%) were between the ages of 25 and 44 and were active users of social media; 44% said that they updated their personal sites daily. Not only were they hands-on with their computers and smartphones, but they also turned wrenches; 42% said that they worked on their cars and trucks themselves, and 55% did their own work but also used professional installation services.

Nearly nine in 10 (89%) had done performance upgrades to their vehicle, 86% had added wheels and/or tires and 81% had done an engine swap or upgrade. Truck/SUV modifiers (62%) slightly outweighed street-performance/musclecar modifiers (57%). Almost half of the enthusiasts owned a GM vehicle (48%), edging out Ford owners (36%).

Three in Four Enthusiasts Primarily Use Internet for Buying Decisions

If you needed further motivation to revamp, enhance or (deep breath) finally develop your business’ website, consider this data gathered from car and truck enthusiasts at the 2009 SEMA Show: An average of 75% of enthusiasts in eight different categories use the Internet to research and inform their parts and accessories purchases. That number jumps to 80% when social media sites, such as Facebook and Twitter, are factored in.

Fellow enthusiast sites are the most popular venues for gathering information, followed by queries made through traditional search engines, such as Google and Yahoo. Magazines, catalogs, car shows and manufacturer websites also still contribute to enthusiast research. Depending on market segment, between 52% and 78% of enthusiasts still rely on magazines, for example, to inform their buying decisions. Street-rod enthusiasts in particular prefer ink and paper (78%) almost as much as they do enthusiast website research (80%). Compact-performance fans are the most receptive to doing their homework on the Internet, with 85% saying that they turn to enthusiast sites for answers. Off-roaders and street-performance enthusiasts (81%) follow closely behind.

Does all of that time in front of the screen convert to action? Absolutely. An average of 72% of parts hunters in all eight categories said that they’d purchased from Internet retailers. Not surprisingly, compact-performance enthusiasts were most likely to buy from an Internet retailer, while those in the restoration scene—just 66%—were among the least likely.

Where does that leave the independent retailer? Generally, about 54% of enthusiasts in all segments—compact performance, off-road, passenger car, racing, restoration, street performance, street rod/custom and truck/SUV—said that they’d purchased from an independent retailer.  Street-performance fans are most likely to buy from an independent (55%), while truck and SUV owners are the least loyal at just 46%.

Participants in the Enthusiast Opinion Leader Research Program at the 2009 SEMA Show were mostly male (96%), with 52% between 25 and 44 years old. Most were married (96%), with 67% having household incomes between $50,000 to in excess of $75,000.

Pain at the Pump Won’t Deter Truck and SUV Enthusiasts

	The Enthusiast Opinion Leader Research Program offered 527 auto enthusiasts admission to the 2009 SEMA Show in exchange for their reportage on top products and trends to social media sites, such as Facebook and Twitter.

Truck and SUV enthusiasts remain unfazed by gas prices, according to a survey of truck, off-road and SUV enthusiasts at the 2009 SEMA Show. Most surveyed said that they were “not at all likely” to get rid of their big vehicle even if gas prices rise. In nearly all cases, the members of this passionate audience said that they would (if they hadn’t already) buy a fuel-efficient car for daily driving and commuting, but the truck would stay. For many, trucks and SUVs are a necessity either for business or recreation. “I have to have a truck, so gas prices don’t matter,” one participant explained. Another summed up with equal brevity: “I’ll never give up my truck. I’ll give up other things, but not my truck.”

But even if truck enthusiasts sound cavalier about gas prices, they are anything but in their research and purchasing patterns. This astute audience buys based on personal style, function and utility, and availability. They’re also sensitive to private-labeling practices and shoddy customer service.

“Individuality” was the top reason participants gave when asked why they customize. A need to “put your own brand on it” and “make it your own so it doesn’t look like all the others on the road” were two common themes among respondents.

Replacing worn stock parts with specialty equipment prompted many purchasing decisions, with truck/SUV owners perceiving that aftermarket products offer better performance, function and safety. Enthusiasts also noted that factory replacement parts are often more expensive than aftermarket.

Off-roaders were most adamant about the benefits of specialty products. “Stock gets stuck” was one notable response. Utility and function hold high value for this group, and they’re generally not impressed with cosmetic accessories (although, one enthusiast noted that his taillights looked good and merited the cost even though they didn’t improve his truck’s performance).

These enthusiasts are also keen on part quality. Several enthusiasts noted that cutting corners and buying inferior parts usually costs more in the end. Brand name alone is not enough to get the sale, however. More were aware of private-labeling practices in the industry and had strong objections to paying more for a legacy brand if they knew the manufacturer was also building for others. “I’m not spending twice the money for something that’s going to wear out the same,” said one participant.

Retailers and manufacturers take note: If you want this group’s business, make sure you have the parts. Many said that they would first try to buy from a local brick-and-mortar store but often couldn’t find the parts in their area. Not surprisingly, most turned to the Internet. Those surveyed said that they bought an average of 75% of their parts online.

Reduced or free shipping caught most enthusiasts’ attention and often tipped he balance in favor of a particular retailer. But online buying isn’t without its frustrations, enthusiasts said. Several survey participants related stories of placing orders only to learn that the product was back-ordered or simply out of stock.

And, not surprising for an Internet-savvy audience, they do the bulk of their product research online, typically looking first to online forums to learn about the experiences of others with the same or similar products. Fellow-enthusiast endorsements and criticisms are valuable currency with those weighing a purchasing decision.

Many also check a manufacturer’s website for product information and often e-mail or call for details. How a manufacturer responds to these inquiries has a significant influence on the consumer’s decision. Failure to respond promptly or replies with short, uninformative answers typically lose the sale.

Enthusiasts perceive that the effort a manufacturer puts into both follow-ups and the product information on its website reflects its design, manufacturing and customer-service values. Buyers want detailed product specs, photos and application specifics.

“Companies are just not thorough in putting the information on their websites,” one respondent explained. “Many sites will just say one useless thing about the product.”  

For more information on the Enthusiast Opinion Leader Research Program, click here