NAVCO's new rental program

Friday, December 1, 2006

ANAHEIM, Calif.--NAVCO, a systems integrator with 12 U.S. offices specializing in the finance sector, has announced a new DVR-rental program that will charge a flat monthly fee for the DVR, plus service and maintenance, and will automatically upgrade each DVR every three years. Initially, DVRs will be rented starting at $150 a month.
The plan arose from NAVCO's Diagnostics Server software, which the company developed to integrate different DVR manufacturers' diagnostic programs into one application. With that ability in place, said executive vice president of sales and marketing Jim Kauker, "we're finding that more and more manufacturers are not able to tell us that parts would be available past the fourth or fifth year ... and our customers wanted a migration path."
While the new sales model does bring in more recurring monthly revenue, Kauker said, since 20 percent of NAVCO's revenues already comes from service contracts, that's mostly an added bonus. However, said PSA president Bill Bozeman, this model has been discussed and is being developed in the PSA Security offices as a way for security integrators to build equity in their companies.
"You also need a plan," Bozeman emphasized, "which shows the salesman how to sell it, shows the owner how to finance it, shows the accountant how to make it look on the balance sheet."
It's also a model the IT and office-equipment reseller is familiar with, as many companies already lease everything from servers to copiers.
One thing Kauker emphasized is that NAVCO's program is designed as a rental program, not a lease program, which changes the tax implications. "They're renting the ability to get the pictures," he said, "it becomes a 100 percent operating expense, that's 100 percent deductible," rather than a capital expenditure, which might be taxed as part of a business equipment tax in some municipalities.