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Leasing to customers: the pros and cons for MSPs

When it comes to the best financial setup for providing your customers with technology, there’s no one-size-fits-all approach. But one option available to MSPs and their customers is leasing.

In this article, we’re going to take a deep dive into the leasing landscape, discussing the benefits, and the potential downsides, for both MSPs and end customers.

What is leasing?

Leasing is a financial model that allows businesses to have up to date technology without the need to inject large sums of money or a big investment up front. Customers are able to get the technology they want whilst having the ability to spread out the cost over time.

Depending on the leasing contract T&Cs, at the end of the agreed term, customers are often given the choice to renew their lease, purchase the product, or start a fresh lease.

The structure of leasing for MSPs and resellers

When it comes to leasing in the telecoms or IT sector, the role of the MSP or reseller is to be the middleman between the leasing company and the customer.

Leasing as an MSP vs. a telecoms company. Unlike traditional telecoms companies, MSPs have some unique advantages, and obstacles. MSPs have established relationships with their customers, and they can leverage these relationships to offer tailored packages paired with trusted, dedicated support.

The technology included in the lease agreement is usually: phones/handsets, SIP trunks (but not call charges), hardware, headsets.

Leasing: a look at the finances

MSPs stand to benefit financially from leasing arrangements, typically retaining 80-85% of the lease value, with the remainder going to the leasing company. Offering customers flexibility means increased sales opportunities.

The payment models: a breakdown

Customers purchase hardware upfront

Pros: this model provides a lump sum cash flow for MSPs, which gives them the financial flexibility to reinvest the funds into their business. This could look like growing the team or offering better service for customers.
Cons: it lacks the advantages that come with recurring revenue.

MSPs lease to the customer via a leasing company

Pros: MSPs don’t need to upfront the hardware cost, and top-of-the-line hardware is accessible to customers over a longer term. You’ll be able to provide options at the end of the lease to help boost customer retention.
Cons: MSPs have to navigate leasing fees with the leasing company and competitive pricing challenges for the customers.

MSP-funded upfront cost

Pros: customers can also benefit from accessing premium hardware over time with this approach and this helps with customer retention.
Cons: it’s important for MSPs to have a strong cash flow to cover the upfront costs for potentially expensive hardware. There will still be some interest accrued that the MSP will need to factor in.

A hybrid model

Pros: offering choice and flexibility for the customer, this model combines upfront cash injections with monthly payments, catering to both customer preferences and MSP operational needs.
Cons: it requires careful management to balance upfront investments with ongoing revenue streams.

Should MSPs offer leasing to customers?

Choosing between self-financing and leasing depends on your financial circumstances and business objectives. But in the current market, it’s important for MSPs to offer both leasing and non-leasing options to be competitive, provide top-tier customer service and offer financial flexibility for both parties. Leasing telephone systems is a common practice within the telecoms sector, MSPs can bridge the gap between telecom and IT services in the merging landscape.

Opting for leasing or a hybrid model is a strategic approach. MSPs can offer more services and develop long-term relationships with their customers, which supports customer retention. Leasing also offers a predictable financial revenue stream.

Telecoms for MSPs with Telco To Go

Our experts at Telco To Go help MSPs break into telecoms, providing expert guidance and support to help resellers navigate this new, unknown territory. We put any lease referrals to our preferred lease partner, Grenke, who offer support to MSPs navigating the telecom landscape. Speak to us today about your journey into telecoms.