Articles by John Tucker

I Hate Sales, But I Love Business Development

I HATE SALES

I have always hated “sales”, which is funny seeing as though I have been in what most would call a “sales position” within our industry since January 2007, all on an independent (100% commission) basis as a one man show, with merchant services direct sales from 01/2007 – 04/2009 and merchant cash advance direct sales from 11/2009 – 09/2015. As a one man show, I did pretty good, getting myself into the middle class with a great net worth for my age, with an average monthly funding of $200k per month for the 70 months I sold the MCA product, while building a processing portfolio on the side on track to hit $200 million in total volume processed.

But nevertheless, I hate “sales”.

While most would consider my place in this industry (nearly 9 years) as a “sales” role, I would vehemently disagree, as I believe my role has been that of business development, not “sales.” I was an entrepreneur (or solopreneur due to being a one man show) and my focus was on building strategic relationships with merchants, vendors, and partners, with a clear-cut focus on creating long-term sustained value.

WHAT DO I REFER TO AS SALES?

I believe there are different variations of salespeople, from the cashier at the grocery store, to the person at the fast food drive-thru window, to the waiter, to most of the inside sales people across the country. I believe the majority of salespeople are simply order-takers.

• An order-taker is not a strategic thinker, innovator, researcher, nor creator. They are not seeking to solve complex problems by creating complex solutions, with complex pricing and implementation procedures, which simultaneously include complex supporting functions.
• An order-taker is someone that usually performs a routine task of helping a customer find a particular item or purchase a particular item. The order-taker’s knowledge of the business, the industry, and the customer is very limited. The order-taker is very robotic and nothing more than a regurgitator of information taken from people within the organization who have been given the “liberty” to think, innovate, research and create.

In a corporation, the individuals who are given the liberties to think and innovate are usually the CEO, CFO, or members of the marketing department, all of which are responsible for the strategic direction of the organization in terms of markets targeted, driving in prospective customers, creating the products to push to said prospective customers, how to manage the process of turning them from a prospective client to a current client, and all of the follow-up procedures that are a result. You can sum up the actions and responsibilities of these individuals into two words: business development.

SALESPEOPLE WILL BE REPLACED BY ROBOTS AND TECHNOLOGY

As we progress through the 21ST Century, developments in technology will in fact replace salespeople (order-takers). Their duties are so routine and robotic, that it’s much more efficient in a number of cases to just implement a robot instead, and save on the higher costs of labor. Or to put up an efficient website and allow the website to navigate the customers rather than a salesperson.

But those in business development can never be replaced by a robot.

WHAT IS BUSINESS DEVELOPMENT?

Those that are in Business Development are responsible for the building of strategic relationships with merchants, vendors, and partners, with a clear-cut focus on creating long-term sustained value. Long-term sustained value always comes in the form of new markets, new products and new processes, which manifests itself in the strategic role of CEO, CFO and Marketing Departments in corporations, but in smaller companies, this manifests itself in one word: entrepreneurship.

Entrepreneurship is all about taking a look at what’s currently happening and asking, how can this be done better? What segment of this market isn’t being catered to? How are the current solutions and products being pushed to this market inefficient? And how can I create better ones? How can I acquire new clients more profitably than competitors are?

That’s business development, which is different from being in “sales.”

BUSINESS DEVELOPMENT IS WHAT I DID

I often debate other professionals in our industry on commission points, as it comes up often today on how one should be making “8 – 10 points per deal” and if you aren’t making such level of points, they believe that you are doing something wrong.

My strategy was different, when I started selling the MCA product in very late 2009, my focus was solely on targeting A and B-Paper clients, which at the time there weren’t any pricing distinctions between low risk and high risk merchants. A merchant approved for an advance in general, was given the same high cost product, whether they had a 700 FICO or a 520 FICO.

My objective was to sell a more efficiently priced product to higher quality merchants, with great supporting functions in place to produce significantly low default rates, and a much higher than normal renewal rate. This strategy was completely different at the time than what the industry as a whole was doing in terms of the merchant cash advance product.

Over on the merchant processing side, my focus was to target higher risk merchants, which were more difficult to board and service, rather than targeting the same Card-Present mom/pop shops that everybody else was doing at the time who quite frankly, had no real needs for merchant processing nor the related technologies and value-added services associated as they already were “set.”

BUSINESS DEVELOPMENT IS WHAT YOU SHOULD DO

Some of you might not have the luxuries to think, innovate, and create, as you might be on a W-2 structure which puts you at the mercy of a “sales manager” who more than likely is using outdated marketing tactics (such as UCCs and Aged Leads) and encouraging you to sell a product that is not always the right fit.

Of course if you don’t achieve the established quotas, the sales manager will scold you by saying that you don’t belong in this industry, rather than looking at the main source of the problem, which is their outdated marketing tactics and uncompetitive solutions.

But for those of you who have such luxuries, I invite you to think, innovate and create. Be different. Be bold. Go after markets not talked about and solve the pain of others that have yet to be analyzed. Market different. Brand different. Sell solutions that others have yet to hear about.

Your bank account and career longevity will thank you later.

The Broker’s Future Part Two

THE ROBOTS ARE COMING

Merriam-Webster and Dictionary.com both agree, that a “robot” is a machine that is created to do the work of a person, carrying out a complex series of actions automatically, all controlled by a computer. Sometimes a robot can resemble a human being in likeness, but often times a robot is simply a piece of software, a piece of hardware, a piece of machinery, or a cloud based infrastructure called the internet (online networks). Professor Kaku is a futurist from City College of New York, a futurist is someone who makes what one would consider “fairly accurate” predictions about what the future holds and how these future events might emerge from present day events. Professor Kaku believes the following:

The job market of the future will consist of those jobs that robots cannot perform. Our blue-collar work is pattern recognition, making sense of what you see. Gardeners will still have jobs because every garden is different. The same goes for construction workers. The losers are white-collar workers, low-level accountants, brokers, and agents.

A RECAP OF PART ONE

Back in June 2015, I did an article for deBanked about the Broker’s Future, speculating if the good times were indeed over for the brokers as it pertains to their level of profitability and survivability going forward.

• I examined the 2000 – 2007 and 2008 – 2013 time periods, speculating that the “Era of the Broker” was indeed between the 2000 – 2013 period.
• Then, I examined the current time period which begins around the middle of 2014, that is seeing so much of a mass new entrance of brokers into the space, that deBanked had to compose a cover story on the phenomenon for the March/April edition of deBanked Magazine. The only issue with this current time period is that, in my sole objective opinion, we are in the “Era of the Strategic Networks”, and no longer in the “Era of the Broker.”
• I concluded the article in June with the following: those just now trying to come in and ride the wave will soon discover that just like with the Stock Market, the real money has already been made and most of the future returns are already capitalized.

AN INTRODUCTION TO PART TWO

My analysis shows that the current time period is all about Strategic Networks, which are mainly three networks to be exact, which include the following, all designed to produce competitive market advantages, positioning, strategies, qualified leads, etc:

• The Center Of Influence Network: this includes entities such as banks, credit unions, processors, accountants, VCs, credit bureaus, etc., that allow access to exclusive leads, exclusive data, equity financing, debt financing, mergers, etc.
• The Mom and Pop Network of random independent agents across the country who resell on a 100% commission basis, providing free marketing in a way that collectively they produce a significant amount of volume (even though individually most of the agents cannot make a living from this activity).
• The Online Network with exclusivity on the growing online marketplace of merchants seeking financing, education and options via the internet.

For Part Two Of The Broker’s Future, I want to focus in on The Online Network, which in my opinion will be one of the main destroyers of opportunities in our space for the majority of brokers going forward.

DEATH OF A B2B SALESMAN

For about $499, you can read a very comprehensive report from Forrester on the death of B2B salespeople. Forrester predicts that by 2020, over 1 million B2B salespeople will lose their jobs to the growing force of IT/Robotics, which includes various forms of technology, automation and of course the internet in general through E-commerce.

In relation to our industry of merchant services, merchant cash advance and alternative business loans, I don’t believe that we have to wait until 2020 to see significant changes, I believe these changes are already in full effect and the major players within our space are the ones that are truly capitalizing on The Online Network, giving them major exclusivity on the growing online marketplace of merchants seeking financing, education and options via the internet.

MERCHANT SERVICES HAS BEEN AFFECTED

The Online Network phenomenon has totally destroyed the feet on the street MLS (merchant level salespeople) over on the merchant services side. Before the rise of the Online Network, MLS were valuable to merchants as information on merchant processing, interchange, how the bankcard transactional process worked, etc., were not readily available and most banks did not handle direct sales of the service. So the MLS would park their car down the street, randomly walk into merchant locations, and provide the education via brochures, terminal samples, etc.

They would explain how the merchant processing process works, how accepting credit cards could boost sales through more impulse purchases and consumer convenience, and more. The MLS would then go over the different options of payment processing technology, commit the merchant to a 24 – 48 month lease of the technology, and make his/her commission off the leasing sales and eventually also off the residuals. However, the rise of the Online Network completely shattered this business model:

• The Online Network now allows the merchant to comprehend merchant services on his own, without the help of the MLS, by researching interchange and conducting his own “rate analysis”. The merchant can also now see the true cost of the processing equipment, thus to no longer sign up for leases for $100 a month for 24 months ($2,400) for a $350 terminal at best.

As a result, the MLS can no longer prospect on “rate savings” nor prospect based on the equipment such as through leases or even through free terminals anymore, due to the merchant’s knowledge that the terminal is worth $350 at best. As a result, the direct sales of merchant services has become a value-add to other services, requiring yesterday’s MLS to transform into something totally different such as a financing or payroll specialist, trying to convert merchant accounts over on the side, as part of the sale.

ALTERNATIVE LENDING HAS BEEN AFFECTED

The merchant cash advance and alternative business loan products are more popular today than they have ever been before, due mainly to the massive media attention that they have received with companies going public, CEOs landing interviews on major media outlets, talking heads debating the products across a number of media mediums, and more. 7 – 15 years ago (2000 – 2008), if you were to look up a product online called “merchant cash advance”, you would not have produced many search results. As a result, to inform and educate the merchant on the product, you needed an actual human being (a broker) to sit down and explain the nuances of said services referred to as “split funding”, “revenue purchases”, and “holdback percentages.”

Compare this to today, where a simple search for “merchant cash advances” gives you pages upon pages of articles, promotional ads that follow you across the internet, company websites, press releases, and more. The merchant can easily learn about the merchant cash advance as well as other new forms of alternative financing by going online and scrolling through the vast amount of information. They can educate themselves on the products, companies, and payback procedures. They can fill out a form and get 10 quotes from 10 companies within a couple of hours and in a lot of cases, receive funding from one of the companies by the next business day. The phenomenon is so big that companies in our space are now just referred to as “Online Lenders,” totally shunning the fact that many operate with traditional brick and mortar locations and still employ brokers to still resell the products like they did “in the old days”.

THE FUTURE

Based on my sole objective analysis, The Future is going to be all about the three networks of Strategic Partnerships, which includes The Online Network. Without a shadow of a doubt, those that control these networks will be the major players going forward, as they will have the leveraged resources, knowledge, experience, financing, and connections that the newer market entrants just do not have.

The 80/20 dynamic will continue, where 20% of the players produce 80% (or more) of the production, and the other 80% of the players will fight over the remaining 20% (or less) of the production, which just will not be enough to sustain profitability going forward.

As fast as these new entrants rush in, will be as fast as they burn out. Burning through their savings and retirement funds, and/or running up the utilization rate on their credit cards, trying to take advantage of a “market opportunity” that they “heard about”, but is pretty much already capitalized on, by those who have been here long before they came on the scene.

Stop Being A Sub-Broker

In an industry with increasing competitive forces putting downward pressures on offer pricing, while simultaneously driving up demand for particular marketing channels (like SEO and quality data) which increases marketing costs, we are seeing massive downward pressures on profits. With this phenomenon occurring, you would have to wonder why in the world would anyone continually operate as a sub-broker today (willingly)? Are there any particular benefits to this, or is it just flat out non-sense? I wanted to explore this topic head on as we wrap up The Year Of The Broker.

THE VAST MAJORITY OF THE TIME, IT MAKES LITERALLY NO SENSE

There are times when I believe being a sub-broker makes some level of sense, but in my opinion those times (looking at our industry specifically) are very rare and most of the time being a sub-broker makes literally no sense based on the setup. The usual setup for a sub-broker is the same as a broker, which means you are going to be required to go out and spend money on marketing or other forms of lead generation to attract applicants.

Once you get those applications, you would forward them to the brokerage house so they can “close” the deal. A lot of sub-brokers believe this is some sort of grandiose deal, allowing them to as they say “free up time” to do other things. But this line of thinking makes literally no sense, because you have already done 98% of the work, which in our industry is just the consistent generation of high quality leads. Once you have done that and are doing that consistently, emailing the package over to a funder and chasing paperwork is the easiest part.

Why would you take only 25% – 50% of the commission structured on a deal, as well as most likely lose your ongoing renewal compensation, when you can instead take 100% of the commission, control your renewal portfolio and make renewal compensation going forward, which is the lifeblood of our industry?

LIES, LIES AND MORE LIES

Sub-brokers need to stop falling for the lies of larger brokerage houses which include the following:

“We are closers, you aren’t a closer, so let us handle it!”

This is rubbish. In our industry we don’t close, we are match-makers. The merchant comes to us looking for working capital, we pre-qualify their current standing and recommend a potential solution. If the merchant disagrees with the potential solution and we have nothing else that would work, the discussion ends. If the merchant agrees to the estimates and the product overview, we collect an application package to submit it to the funder that we believe can do an appropriately-priced deal. As long as we can get approval inline with expectations, everything moves forward on its own accord.

“We have access to special underwriting, platforms and pricing that you don’t have access to!”

More rubbish. When lenders get an A-paper deal, they give you A-paper quotes. When they get a B/C-paper deal, you get B/C-paper quotes. Look to establish a good relationship with a funder/lender. Let them know upfront that you are a small office so a smaller amount of volume will be coming through you. As long as you don’t have a high default rate, you will have access to the same systems, underwriters, base pricing, and innovative products of the funder/lender that the larger brokerage House has.

“We have access to special industry knowledge that you don’t have access to!”

More rubbish. With sources like deBanked and other popular forums, the industry has been exposed. Everything you need to know, learn and be trained on has been covered. Also the assortment of direct funder and lender blogs/websites, media publications, and all of the like covering the industry, there’s no special industry knowledge that you can’t go out and attain on your own.

YOU MIGHT NOT EVEN GET PAID

Being a sub-broker might put you in a position of not even getting paid on new deal revenue as promised, as the large (or more experienced) brokerage is fully aware of your inability to truly challenge them legally or professionally.

• Sue If You Want, It Won’t Make A Difference: You can sue the broker for the $5,000 or so that they didn’t pay you on a couple new deals in Small Claims Court. But even though you can obtain a judgment, collecting on that judgment will be nearly impossible.
• Complain Online If You Want, It Won’t Make A Difference: You can also choose to damage their reputation online through posting various negative reviews, but do you think they will care? Go on the RipOffReport all you want, the largest merchant processing ISOs are all over those reports and that doesn’t do anything to stop their growth. The organizations getting these negative reviews will just say, “we serve thousands of clients and when you are as large as us, you are bound to have unhappy customers.” And that’s exactly what the brokerage house will say to their prospective merchants who bring up these negative review listings that you made.

BUT DOES BEING A SUB-BROKER “SOMETIMES” MAKE SENSE?

On very rare occasions do I believe being a sub-broker makes sense, and it includes if there’s some sort of initial training period and if the larger brokerage has significant marketing competitive advantages.

Training

So if you have zero experience, can’t spell Merchant Cash Advance, and believe you could benefit from a 6 month period with an established broker to show you the ropes, then being a sub-broker for a short period of time could make sense. However, I still believe that with the industry being exposed the way it is, you can train yourself and have to deal with insane non-compete agreements.

Marketing Competitive Advantages

So as a small shop, your marketing budget might be limited to $1k a month, whereas the larger brokerage is spending $20k a month and in a perfect world, might give you a deal where you can work with them without being required to generate your own leads.

They’ll claim to supply everything in terms of your dialer and warm leads, with funder networks already established. So all you have to do is come in, sit down, pick up the telephone, and sell all day to the warm leads coming in from their $20k in marketing. You don’t have to do any cold-calling. So you might be getting 50 leads a week that you convert to 12 applications, which you then convert to 4 new deals. If the average funding is $30k, then that’s $120k in funding with let’s say an average 6% commission that you would split 50/50 (3%/3%), giving you $3,600 per week which is $14,400 per month.

But we don’t live in a perfect world, now do we? Do you honestly believe the structure will be established as promoted? Such as more and more of the 50 leads you receive per week turn into mainly start-ups that don’t qualify for anything. Or, most weeks you don’t receive any warm leads at all, and are required to call UCCs, aged leads, or random listings out of the Yellow Pages, which are all horrible marketing mediums.

EITHER YOU GET IN ALL OF THE WAY, OR MAYBE YOU SHOULD GET OUT

If you are going to be in this industry, then properly set up your office, marketing plan, business plan, funder network and work your own deals. Get 100% of commission structured on new deals and control your renewal portfolio (the lifeblood of our business). If you are going to operate as a sub-broker, for the most part you are going to get a raw deal as we don’t live in a perfect world. We live in a world full of inefficiencies, “rah-rah” sales motivational speeches, and promises that don’t get kept.