Cisco Quick Hit Briefing Financial Selling for Dummies

Cisco Confidential© 2012 Cisco and/or its affiliates. All rights reserved. 1

Cisco Quick Hit BriefingFinancial Selling for DummiesBrian AveryPartner Development Manager – Cisco Systems

December 19, 2013

Connect using the audio conference box or by calling into the meeting:

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Cisco ConfidentialCisco Confidential© 2012 Cisco and/or its affiliates. All rights reserved. 2

Brian J AveryPartner Development [email protected] Sales and Channels (8 yrs)Priors:

President and CEO (6 yrs)Cisco Premier Partner

Director of Sales (2 yrs)Cisco Silver Partner

Financial Analyst (7 yrs)Sprint Corporation

Agenda Introduction Quick Hit Overview Why Learn, Objectives The Cost of Capital Financial Selling Tutorial and

Case Study The Power of Cisco Capital IRS Section 179 Tools and Calculators Call To Action, Next Steps


What Is a Quick Hit Briefing?

• A weekly partner briefing series designed for Cisco Commercial Territory partners

• Concise, relevant updates on:Cisco products and solutionsPartner programs and promotions

Partner Enablement – Demand Generation, Selling Skills, Closing Tools, etc.

Next Quick Hit BriefingCloud Opportunities for Cisco PartnersThursday January 9th, 2013 at 9:30 ET

Check http://cs.co/quickhit for registration links and replays

http://cs.co/quickhit


Financial Selling for Dummies(No offense intended!)

© 2012 Cisco and/or its affiliates. All rights reserved. Cisco Confidential 5

Why Learn Financial Selling?

1. To impress your friends at parties

2. To improve your love life

3. To close more deals and make more money


The Cost of Capital• Every business deals with the

“cost of capital” whether they pay cash, lease or use credit.

• Cost of Capital (n) a) the opportunity cost of funds employed as the result of an investment

decision;b) the rate of return that a business could earn if it chose another investment

with equivalent risk

• The value and cost of CapitalCash in the bank – earns interest $$Cash deployed in the business – generates revenue $$Debt (bank loan, line of credit) – costs interest $$Lease – costs interest $$ (but generally less than debt)


Cost of Capital• Popeye’s Friend – J. Wellington Wimpy

“I’ll gladly pay you Tuesday for a hamburger today!”

• Is it better to pay now or pay later?

• Is it better to receive a dollar today or a dollar in a year?

• What is a dollar that you will receive a year from now worth to you if you could get it TODAY?


Evaluating Capital Choices• Which choice (cash purchase, debt purchase, lease purchase)

will offer the maximum benefit?

• How much can you earn if you keep your cash and invest it in the bank or the financial markets?

• How much revenue can you generate if you invest the cash in your business?

• How much will borrowing money cost you?• Is leasing or financing a better choice?

• All of these questions should be considered when making a capital purchase


Today’s Objectives• Help you to understand the importance of Financial Selling in

today’s economic environment

• Share with you techniques on how to apply Financial selling techniques

• Share with you ways you can improve their Financial selling skills

• Enable you to have CFO / Procurement team engagements

• Help you to position both the business and financial benefits of a Cisco solution in order to prove the value of a potential Cisco premium


Where it was once “nice” to understand the business (financial) justification for

what the customer is buying…

You now need to know in order to:

• Be relevant or remain relevant• Address what is top of mind for

your customers daily• Continue to successfully sell

The Old Days Are Over


HP IBM EMC CiscoEst. Product Pen Rates:

~15% ( *overall, estimated 30% in DC)

~31% 30%+ ~11% (*overall)

1. Whether you’re aware or not, all proposals will at some point land on the desk of a CFO

2. CFO’s / Finance / Purchasing will assess and appraise any proposal and ultimately approve or reject the solution or suggest alternatives that offer better value to the company

3. Whether you’re involved or not, many companies & government departments apply some form of financing to most of their solutions and projects

4. You need to be a part of the financial discussion to move up the value chain/secure sales

WHY FINANCIAL SELLING IS IMPORTANT… THE FACTS


Why does a Customer buy a Cisco solution?

Why does a Customer buy a Cisco solution?a) Performanceb) Securityc) Quality / Industry Standardd) Featurese) Other Reasons


Why does a Customer buy a Cisco solution?

Why does a Customer buy a Cisco Borderless Networks solution?a) Performanceb) Securityc) Quality / Industry Standardd) Featurese) Other Reasons

1. Cost savings and / or 2. Revenue generation

The motivation to purchase is, first and foremost, a financial decision


Getting This Right Means $$• Getting access to more Influencers within your accounts

• Positioning solutions that meet the company’s business objectives AND their financial metrics

• Assessing if proposals will pass the CFO / Financing / Purchasing test to save you time and increase credibility

• Anticipating customer objections by building the business / financial case before the proposal

• Financing can equal upgrades every 3 years

• Expanding the overall deal size and/or creating deals out of budget that doesn’t currently exist

• Overcoming the “Cisco is too expensive” challenge and competitive threats


What financial tools do finance DMs use to assess an investment?

What financial tools do CFO \ Financing \ Purchasing staff usually use to assess an investment?a) ROIb) IRRc) TCOd) NPV


What financial tools do finance DMs use to assess an investment?

What financial tools do CFO \ Financing \ Purchasing staff usually use to assess an investment?a) ROIb) IRRc) TCOd) NPV


What is Net Present Value?a) The net present worth of a time series of incoming cash flowsb) The cost of buying a net as a present for the angler in your family.c) The net present worth of a time series of outgoing cash flowsd) A standard method for using the time value of money to appraise a

series of incoming and outgoing cash flows

What is Net Present Value?


What is Net Present Value?

What is Net Present Value?a) The net present worth of a time series of incoming cash flowsb) The cost of buying a net as a present for the angler in your family.c) The net present worth of a time series of outgoing cash flowsd) A standard method for using the time value of money to appraise a

series of incoming and outgoing cash flows


What is Return on Investment?

What is Return on Investment?a) The internal rate of return on any given investmentb) When you make a withdrawal from the bankc) The ratio of money gained or lost (whether realized or unrealized) on

an investment relative to the amount of money investedd) The ratio of money gained and realized on an investment relative to

the amount of money invested


What is Return on Investment?

What is Return on Investment?a) The internal rate of return on any given investmentb) When you make a withdrawal from the bankc) The ratio of money gained or lost (whether realized or unrealized) on

an investment relative to the amount of money investedd) The ratio of money gained and realized on an investment relative to

the amount of money invested


What is Payback?

What is Payback?a) A cheesy 1990’s movie with Mel Gibsonb) The period of time required for the return on an investment to "repay"

the sum of the original investmentc) The positive return from an investment after the original investment

has paid itself offd) The period of time required for the positive return from an investment

after the original investment has paid itself off


What is Payback?

What is Payback?a) A cheesy 1990’s movie with Mel Gibsonb) The period of time required for the return on an investment to "repay"

the sum of the original investmentc) The positive return from an investment after the original investment

has paid itself offd) The period of time required for the positive return from an investment

after the original investment has paid itself off


ROI, PAYBACK, NPV, IRRHOW A CFO / FINANCE OR PURCHASE OFFICER APPRAISES AN INVESTMENT


4 SIDES TO THE EQUATION

NET INVESTMENT• Incremental

net investments

NET BENEFITS• Incremental profits• Incremental

savings• Incremental costs

TIMING• When do the

above occur

ALTERNATIVES• How do they

compare against alternatives


Percentage of CFOs Who Always Use–or Almost Always Use–a Given Technique*

Investment Appraisal Technique

% Always or Almost Always

Internal Rate of Return (IRR)Net Present Value (NPV)

Payback periodReturn On Investment (ROI)

* Source: “The Theory and Practice of Corporate Finance: Evidence from the Field”, Journal of Financial Economics 60, Figure 2

The New Normal – Some Stats

76755730


RETURN ON INVESTMENT (“ROI”)The simplistic view used by many accountants

Example:A company invests $75,000 in a machine that will save $18,000 per year over the 5-year life of the machine.

Total savings = $90,000 ($18,000 x 5)

Net return = $15,000 ($90,000 - $75,000)

ROI = 20% ($15,000 / $75,000)

Is this a good return?

Net return from an investment

Net investment

Total benefits received from an investment – net investment

Net investment=


PAYBACK

Annual savings x P = Net Investment

How long it will take a particular investment to pay for itself

Example:A company invests $75,000 in a machine that will save $18,000 per year over the 5-year life of the machine.

Net investment = $75,000

Annual savings = $18,000

Payback = 4.2 years

Is this a good payback?


Total Cost of Ownership• Useful for comparing competing offerings

• Factors in the total costs over the life of ownershipPurchase CostFinancing CostMaintenance costs, Upgrade costsServices, Warranty costsMove/Add/Change costsCosts of required ancillary itemsSavings or costs avoidedProductivity GainsRevenues Generated

• Simpler, easier to understand

• Lowest TCO Wins!


TCO Ideas and Calculators• Productivity and the Business Case for SMB - Sage Research

2005 study of 65 mid-sized organizations focused on measured productivity gains from the deployment of Unified Communications

• Soft Cost and BenefitsIncreased # of calls handled or orders placedFaster response timesReduced processing timesIncreased productivity

• Telecommunications Savings – SIP trunking, branch connectivity

• Energywise Cost Savings Calculator


Time Value of Money

ANSWER: Compound Interest

20 year old Britney makes a one-time $5,000 contribution to a retirement fund that grows at 8% per

annum.If she never touches it until she retires at 65, how much

will she have?

$159,000

If she waited until she was 39 to make her one-time $5,000 contribution, how much would it grow to?

$37,000

‘A Dollar today is worth more than a Dollar tomorrow’Compound interest is an example of growth that we all understand

Discounted Cash Flow is it’s opposite…

Albert Einstein was once asked what is the most powerful force on Earth… What was his answer?

E=MC2?Atomic Bomb?A Woman Scorned?


Net present value is the monetary value today of all future cash flows discounted at some compound interest rate (the ‘discount rate’) plus any immediate cash flows

Investment Savings Net Benefits Discount Factor @ 10% NPV

Year 0 75,000 (75,000) 1.00 (75,000)

Year 1 - 18,000 18,000 0.91 16,364

Year 2 - 18,000 18,000 0.83 14,876

Year 3 - 18,000 18,000 0.75 13,524

Year 4 - 18,000 18,000 0.68 12,294

Year 5 - 18,000 18,000 0.62 11,177

Net Present Value (6,765)

Present Value accounts for the time value of money. ‘A dollar tomorrow is worth less than a dollar today’

QUESTION: Would a CFO or Financing Officer approve this?

Net Present Value



Present Value accounts for the time value of money. ‘A dollar tomorrow is worth less than a dollar today’

ANSWER: No


Year 0 75,000 (75,000) 1.00 (75,000)

Year 1 - 18,000 18,000 0.91 16,364

Year 2 - 18,000 18,000 0.83 14,876

Year 3 - 18,000 18,000 0.75 13,524

Year 4 - 18,000 18,000 0.68 12,294

Year 5 - 18,000 18,000 0.62 11,177


Net Present Value


NPV DEPENDS HEAVILY ON THE DISCOUNT RATE

• The Discount Rate: The opportunity cost of Capital = the potential return the company could have made if it had invested in something else

• Weighted Average Cost of Capital is the rate that a company is expected to pay on average to all its security holders to finance its assets


Weighted Average Cost of Capital (WACC)

Invested Capital $ Weighting % Cost of Capital % WACC

Shareholders' funds 2,000 50% 30% 15%Long term borrowings 2,000 50% 10% 5%

Total 4,000 20%

Risk

ROI


Cost of Capital By Industry Sector• http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/

wacc.html.htm

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.html.htm

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.html.htm



What should this be compared against?Decision Rule1. Positive NPV = value

created, investment should be made


Year 0 75,000 (75,000) 1.00 (75,000)

Year 1 - 18,000 18,000 0.91 16,364

Year 2 - 18,000 18,000 0.83 14,876

Year 3 - 18,000 18,000 0.75 13,524

Year 4 - 18,000 18,000 0.68 12,294

Year 5 - 18,000 18,000 0.62 11,177


Net Present Value


Case Study – Phase 1• Gerus rents flexible office space for small and medium sized businesses and

includes in their offer a range of services from access to servers and telephony to catered lunches and boardroom facilities.

• Gerus is exploring whether to set up Video Conferencing Units in 10 locations around the world offering collaboration services to its tenants.

• Gerus has asked Cisco to submit a solution with costing and they would prefer the Cisco solution, given its branding and quality, which would drive adoption.

• Cisco submitted a Statement Of Work that included the following: Hardware for the 10 locations - US$1,400,000 payable within 30 days Installation services - US$600,000, payable on installation Maintenance services - US$150,000 per annum, payable in advance A managed call service contract from a SP partner - US$90/ hour, decreasing 5% per

year

The CFO has rejected your offer! You want the deal. How would you respond?


Case Study Scenario - Phase 2After repeated phone calls the CFO has agreed to provide you with her assessment of the Cisco offering, including the financial model she developed for Gerus:

• In year 1, Gerus would sell 3,000 hours of Telepresence time increasing the usage by 20% annually for the next 5 years.

• Gerus would charge US$300 per hour for a Telepresence session in year 1 but due to commoditization this rate would fall by 5% per year, as would the SP call costs of $90 per hour.

• Above Cisco’s costs, Gerus expects space and administration costs to be US$70,000 per year.

• Gerus’ Weighted Average Cost of Capital (WACC) is 20%.

• The residual value of the equipment at the end of year 5, when Gerus expects to replace the equipment, is deemed to be US$70,000.


Customer Financials – Phase 2Customer cashflow Day 0 Year 1 Year 2 Year 3 Year 4 Year 5 TOTALNet Investment in Telepresence ($2,000,000) $0 $0 $0 $0 $70,000 ($1,930,000)Revenues from Telepresence $900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064 $5,949,094Call costs ($270,000) ($307,800) ($350,892) ($400,017) ($456,019) ($1,784,728)Maintenance costs ($150,000) ($150,000) ($150,000) ($150,000) ($150,000) ($750,000)Other costs ($70,000) ($70,000) ($70,000) ($70,000) ($70,000) ($350,000)Net cashflow ($2,150,000) $410,000 $498,200 $598,748 $713,373 $1,064,045 $1,134,366

Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL$900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064 $5,949,094

($490,000) ($527,800) ($570,892) ($620,017) ($676,019) ($2,884,728)($386,000) ($386,000) ($386,000) ($386,000) ($386,000) ($1,930,000)

$24,000 $112,200 $212,748 $327,373 $458,045 $1,134,366

Customer income statement

Net profit

CostsRevenues

Depreciation

• This is what she sent you. This looks great as it produces a profit. So what’s the problem with the CFO?

• As you have no idea, you have now got your financial accountants on the case.


Investment Appraisal Techniques


Customer Investment Appraisal – Phase 3

The financial accountants say this is not good.

What should they be?• ROI?• Payback?• NPV?• IRR?

You have asked your financial people to explain how these metrics are calculated.

ROI 59%Payback 3yrs 10 mthsNPV ($344,221)IRR 13.54%


Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL$900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064 $5,949,094

($490,000) ($527,800) ($570,892) ($620,017) ($676,019) ($2,884,728)($386,000) ($386,000) ($386,000) ($386,000) ($386,000) ($1,930,000)

$24,000 $112,200 $212,748 $327,373 $458,045 $1,134,366

Net profit $1,134,366Net Investment $1,930,000Return On Investment 59%

Customer income statementRevenues

DepreciationNet profit

Costs

Why is this ROI not acceptable?

Return on Investment (ROI) – Phase 3 The simplistic view used by many accountants


Customer cashflow Year 0 Year 1 Year 2 Year 3 Year 4 Year 5Net Investment in Telepresence ($2,000,000) $0 $0 $0 $0 $70,000Revenues from Telepresence $0 $900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064Call costs $0 ($270,000) ($307,800) ($350,892) ($400,017) ($456,019)Maintenance costs ($150,000) ($150,000) ($150,000) ($150,000) ($150,000) $0Other costs $0 ($70,000) ($70,000) ($70,000) ($70,000) ($70,000)Net cashflow ($2,150,000) $410,000 $498,200 $598,748 $713,373 $1,064,045Accumulated cashflow ($2,150,000) ($1,740,000) ($1,241,800) ($643,052) $70,321 $1,134,366

Payback 62.93 41.91 24.89 10.82 - 0.79 - 12.00

Payback is 3 yrs 10.82 mthsWhy is this Payback not acceptable?

Payback – Phase 3 The duration it will take for an investment to be repaid by the incremental net benefits


Why is this NPV not acceptable?

Net Present Value (NPV) – Phase 3 Today’s value of all cash flows after taking into account the time value of money

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5($2,000,000) $0 $0 $0 $0 $70,000

$0 $900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064$0 ($270,000) ($307,800) ($350,892) ($400,017) ($456,019)

($150,000) ($150,000) ($150,000) ($150,000) ($150,000) $0$0 ($70,000) ($70,000) ($70,000) ($70,000) ($70,000)

($2,150,000) $410,000 $498,200 $598,748 $713,373 $1,064,045Discount Rate 20%

100% 83% 69% 58% 48% 40%($2,150,000) $341,667 $345,972 $346,498 $344,026 $427,616($2,150,000) ($1,808,333) ($1,462,361) ($1,115,863) ($771,837) ($344,221)

Net Present Value ($344,221)

Discount FactorDiscounted cashflowAccumulated Discounted cashflow

Customer cashflowNet Investment in TelepresenceRevenues from TelepresenceCall costsMaintenance costsOther costsNet cashflow


Year 0 Year 1 Year 2 Year 3 Year 4 Year 5($2,000,000) $0 $0 $0 $0 $70,000

$0 $900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064$0 ($270,000) ($307,800) ($350,892) ($400,017) ($456,019)

($150,000) ($150,000) ($150,000) ($150,000) ($150,000) $0$0 ($70,000) ($70,000) ($70,000) ($70,000) ($70,000)

($2,150,000) $410,000 $498,200 $598,748 $713,373 $1,064,045Internal Rate of Return 13.54%

100% 88% 78% 68% 60% 53%($2,150,000) $361,116 $386,482 $409,103 $429,307 $563,993($2,150,000) ($1,788,884) ($1,402,402) ($993,299) ($563,993) $0

$0Net Present Value

Other costs

Customer cashflowNet Investment in TelepresenceRevenues from TelepresenceCall costsMaintenance costs

Net cashflow

Discount factorDiscounted cashflowAccumulated Discounted cashflow

IRR = 13.54%Why is the IRR not acceptable?

Internal Rate of Return (IRR) – Phase 3 Discount Rate used to arrive at an NPV of 0


Investment Appraisal TechniquesCase Study – Phase 3

You now understand why she has rejected your proposal.

ROI 59%Payback 3yrs 10 mthsNPV ($344,221)IRR 13.54%

So what are you going to do now?


Potential Answers1. Negotiate for better outcomes

• Revenues• Other costs

2. Restructure the deal• Finance lease• Operating lease• Consumption model

3. Improve the costs from Cisco• Hardware discount• Services discounts• Timing of payments

Now get Cisco Capital involved!


Case Study – Phase 4• You have asked Cisco Capital if they can rescue the deal. You think the

customer’s problem is they do not have the money to finance the deal.

• Cisco Capital says: They can finance the deal with a cost of capital of 5%. Over 5 years this will mean six annual payments of US$403,417 with the first

payment due on signing. They tell you this is not a CAPEX to OPEX deal.

• You ask them if that will achieve the customers investment hurdles. They tell you to figure that out.

What gives you hope?


Financial Outcomes – Phase 4

Hardware, professional services, and the up-front payment for maintenance is being financed by Cisco so no investment required by the customer.


Payback – Phase 4The duration it will take for an investment to be repaid by the incremental net benefits

Payback is now 3 yrs, 4.13 monthsNearly there!

Customer cashflow Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 TOTALNet Investment in Telepresence $0 $0 $0 $0 $0 $70,000 $70,000Finance lease payments ($403,417) ($403,417) ($403,417) ($403,417) ($403,417) ($403,417) ($2,420,500)Revenues from Telepresence $0 $900,000 $1,026,000 $1,169,640 $1,333,390 $1,520,064 $5,949,094Call costs $0 ($270,000) ($307,800) ($350,892) ($400,017) ($456,019) ($1,784,728)Maintenance costs $0 ($150,000) ($150,000) ($150,000) ($150,000) $0 ($600,000)Other costs $0 ($70,000) ($70,000) ($70,000) ($70,000) ($70,000) ($350,000)Net cashflow ($403,417) $6,583 $94,783 $195,331 $309,956 $660,628 $863,865Accumulated cashflow ($403,417) ($396,833) ($302,050) ($106,719) $203,237 $863,865

Payback 735.34 50.24 18.56 4.13 - 3.69


Net Present Value (NPV) – Phase 4Today’s value of all cash flows after taking into account the time value of money

Now positive!


Internal Rate of Return (IRR) – Phase 4Discount Rate used to arrive at an NPV of 0

IRR = 32.65% - Makes it!


Case Study – Phase 4

You have now WON THE DEAL by leveraging the power of financing and Cisco Capital!


The Power of Cisco CapitalHelping you sell more

Agree the availability of financing was critical in choosing their IT supplier

Said their companies use leasing to balance project costs with future benefits, accelerating ROI

70%

48%

Said leasing is a way to free up capital for other uses58%


If you don’t participate in these discussions early, with the right people, you risk that the decision will be made based on factors outside of your control.

Why We’re Here

A Finance or “How to Buy”

decision occurs for

EVERY purchase, especially

Larger Ones.


A 2008 IDC survey of 153 IT organizations that lease/finance their IT equipment found that over 70 % reported the following leasing/financing benefits:

• Aids in protection against obsolescence• Means to balance project cost with benefits• Faster approval process• Budget flexibility and equipment

disposal/decommissioning services

Don’t Take Our Word for it…


Enhance YOUR Selling PowerWhat’s in it for YOU?

Act and Bain Findings for Cisco Capital

Close Ratio: +12.4%Deal Size: +25 – 30%Sales Cycle: Close 5X FasterProfit Margin +.5%


Looking for Clues• Project Delays: Technical or Financial?

• Unique Features of Business: cycles/seasonality

• Are they planning for an event? Going public/capital infusion, downsizing or expanding

• Obsolete equipment they can’t get rid of?

• Financial Challenges: Cash flow, profitability

• Budget Restraints: Is a project delayed because of something financial?

• Can we fix it?

• This isn’t going to be solved from a brochure

• Be Creative: Build the Financial Solution


Cisco Capital FY14 Offershttp://www.cisco.com/web/ordering/ciscocapital/channel_partners/offers.html

z

Cisco Mid-Market

Collaboration Customer Financing

Cisco collaboration solutions based on the Business Edition 6000 with attractive rates as low as: 0% for 2 yrs.; 1% for 3 yrs.; 2% for 4 yrs.; 3% for 5 yrs.

Expires: January 25, 2014

Cisco Collaboration

Breakaway PLUS

FinancingCisco collaboration solutions via competitive replacement with attractive rates as low as: 0% for 2 yrs.; 1% for 3 yrs.; 2% for 4 yrs.; 3% for 5 yrs.

Expires: January 25, 2014

US SMB Customer Financing

3-year, 3.5% ($1 buyout) financing up to $250K for U.S. small and mid-sized customers for all Cisco hardware, software, and bundled services

Expires:July 26, 2014

Three Month Deferral

3-month, interest-free payment deferral for all Cisco hardware, software, and bundled services

Expires: July 26, 2014

US SMBGame

Changer

3-year Fair Market Value (FMV) lease. up to $250K per customer – U.S, SMB. For all Cisco, hardware, software and bundled services

Expires: July 26, 2014

http://www.cisco.com/web/ordering/ciscocapital/channel_partners/offers.html

http://www.cisco.com/web/ordering/ciscocapital/channel_partners/offers.html


IRS Section 179


What Is Depreciation?• When a business buys certain items of equipment, it can write

them off a little at a time through depreciation.

• Example: Company spends $50,000 on a machine, it gets to write off $10,000 a year for five years (your situation may vary)

• Section 179 allows for a faster write off and more immediate tax savings

• The goal is to motivate the American businesses to invest in themselves, grow and generate more profits.

• Learn more at: http://www.section179.org/section_179_deduction.html

IRS Section 179

http://www.section179.org/section_179_deduction.html

http://www.section179.org/section_179_deduction.html


IRS Section 179

What Is the IRS Section 179?• Section 179 allows businesses to:

• Deduct the 100% of the FULL PURCHASE PRICE of qualifying equipment and/or software purchased or financed during the tax year on their CURRENT YEAR TAXES!

• Customers can SIGNIFICANTLY LOWER their tax bill and generate positive cash savings

• Equipment CAN BE LEASED

• The 2013 limit is $500,000. The 2014 limit? Only $25,000


So if a customer is looking to make a capital purchase within the next year, educate them on Sec. 179 and encourage them to DO IT NOW

IRS Section 179

Purchase Cost of Equipment, Vehicles, and/or Software: $650,000Section 179 Deduction: $500,000

50% Bonus Depreciation Deduction: (on remaining amount above $500,000) $75,000

Normal 1st Year Depreciation: $15,000

Total First Year Deduction: $590,000

Cash Savings on your Purchase: (assuming a 35% tax bracket) ($206,500)Lowered Cost of Equipment, Vehicles, and/or Software after Tax Savings: $443,500


IRS Section 179Recap

1. Deduct the FULL purchase price of qualifying equipment and/or software purchased or financed during the tax year

2. A customer can purchase up to $500,000 and write off 100% of it in the current tax year instead of depreciating it over 3-7 years

3. Can be combined with Cisco Capital financing, making for net positive cash flow in the first year!

4. In 2014, the total Section 179 allowable deduction will be reduced from $500,000 to only $25,000

5. So if a customer is looking to make a capital purchase within the next year, encourage them to DO IT NOW

6. Visit http://cs.co/sec179/ for more information

http://cs.co/sec179/


Tools and Calculators


Financial Calculator App• iTunes App Store

• Google Play Store

https://itunes.apple.com/us/app/ez-financial-calculators/id494170744?mt=8

https://play.google.com/store/apps/details?id=com.financial.calculator&hl=en


NPV CalculatorNPV Calculator

• http://office.microsoft.com/en-us/templates/net-present-value-calculator-TC010015268.aspx

http://office.microsoft.com/en-us/templates/net-present-value-calculator-TC010015268.aspx






Cisco Capital

• http://www.cisco.com/web/ordering/ciscocapital/docs/quote_calculator_tool.xls

http://www.cisco.com/web/ordering/ciscocapital/docs/quote_calculator_tool.xls

http://www.cisco.com/web/ordering/ciscocapital/docs/quote_calculator_tool.xls


@onceFinance• Online credit application and approval tool

• @oncefinance is directly linked to automated credit scoring, enabling:

submission of applications onlinemanagement of pipeline businessvirtual review of portfolios

• Contact Cisco Capital to request access(800) CISCO-80

• www.oncefinance.com

http://www.oncefinance.com/


Cisco Capital Financial Calculator • Cisco Capital Financial Calculator is a tool in which Partners can

use to receive indicative financing quotes when registering a deal in Cisco Commerce Workspace

Generate an instant indicative financing quoteSave Time - calculate a finance quote 24/7

• Request access - [email protected]

mailto:[email protected]


Call To Action, Next Steps


• Revisit and become familiar with the concepts and language that CFOs and financial decision makers use

• Engage with Cisco Capital early and as often as possible – use financing instead of a price discount!

• Try it: Find a deal over 100K at an early stage in your funnel and engage in proving Payback, ROI, NPV and adding a financing offer

Find your Cisco Capital

Financial Solutions

Manager and engage with

them

Start engaging, asking

questions about customer’s

ability to execute and

finance

Understand where they are in the buying

process

Don’t be afraid to ask about the

budget/ financing question

1 2 3 4

www.cisco.com/go/growit/ Call To Action

http://www.cisco.com/go/growit/

http://www.cisco.com/go/growit/

http://wwwin.cisco.com/europe/capital/about_cisco_capital/contacts.shtml


Cisco Capital Engagement

Cisco Capital Finance helps you expand customer relationships, accelerate and grow deals, create account control, and enhance cash flow.

• Include finance quotes with your proposals – use financing to overcome budget and cost barriers up-front!

• If you have any questions, please contact your Cisco Capital:

Financial Solutions Manageror Alice Cullison @ [email protected]

• Great resources available via Cisco Capital partner portal - www.ciscocapital.com/partner/us

http://wwwin.cisco.com/FinAdm/csc/globalsalescontacts.shtml

http://wwwin.cisco.com/FinAdm/csc/globalsalescontacts.shtml

mailto:[email protected]

http://www.ciscocapital.com/partner/us


For Your Reading Pleasure

• Corporate Finance For Dummies By Michael Taillard

• http://www.barnesandnoble.com/w/corporate-finance-for-dummies-michael-taillard/1111631814?ean=9781118412794

http://www.barnesandnoble.com/w/corporate-finance-for-dummies-michael-taillard/1111631814?ean=9781118412794




Join Us Next Week!

Next Quick Hit BriefingCloud Opportunities for Cisco Partners Thursday January 9th, 2013 at 9:30 ET

Check http://cs.co/quickhit for registration links and replays

http://cs.co/quickhit

Thank You!

Documents

Cisco Quick Hit Briefing Financial Selling for Dummies