ACH Advances
MCA Industry More Fractured
February 1, 2013
Everyone agrees that the Merchant Cash Advance (MCA) industry has grown substantially over the last few years. Our best calculations estimated that $600 million in MCA deals took place in 2010. Some believed that figure was too low, especially when Capital Access Network (CAN) projected they would fund $700 million all by themselves in 2012. Could CAN really be funding more alone than what the entire industry including them funded in 2010?
The debate starts there because they have put a large focus on their NewLogic subsidiary, a company that specializes in short term loans, not MCAs. And like NewLogic, much of the growth the industry experienced in the last few years has not been centered around split-funding purchases of credit card sales, but on the alternatives. We’ve made it a point in previous articles to point out the lack of consensus on what the product is being called now, especially since everyone is offering their own version of short term financing. We even went so far as to say that by 2015, the term MCA won’t even exist anymore. We may have exaggerated a bit, but after playing around with Google’s Trends tool, we realized that prediction was much more than a hunch.
If MCA has grown so much in the last few years, why is it that 38% more people searched for MCA on Google in December 2007 than they did in December 2012? Why is it that searches for MCA information peaked in February 2009 and never recovered? According to Google’s search data, nearly 50% fewer searches are being made for MCA today than there were three years ago.
Notice that MCA as a term did not really exist on the Internet prior to June 2007. We presented our estimate of when that term was coined in Before it was Mainstream. It first appeared in print in May 2005, but didn’t pick up traction until March, 2006 in private Internet forums. The first Merchant Cash Advance Internet blog began in July 2007, weeks before people began to first start searching for information about the term. It is very likely they were also trying find the blog itself.
So is Google’s data just plain wrong? Is something fishy? The only thing wrong is the belief that the MCA industry is just about MCAs. The creation of alternatives and the recent practice of private labeling have contributed to the decline of MCA.
three new terms: merchant loans, ach loan, merchant financing
Business Cash Advance takes a dive. Seriously, who calls it that anymore? Merchant Funding is on the way back up.
There were 500% more searches for small business loans in April 2004 than there were in December 2012.
So what does this all mean? We leave you to draw your own conclusions. 2007-2009 was a period of sudden mass awareness of MCA but there has never been as much money in the industry as there is now. There are experts that say business owners feel that the recession never ended, causing them to continue hunkering down instead of seeking financing to expand. There are insiders who will attribute this to the negative stigma the product had and the need to call it something else. We believe the most likely suspect though, is the fracturing of the MCA industry. It’s possible that people aren’t typing “small business loans” or “merchant cash advance” into Google because so many companies are promoting alternative financing options that people are looking for those specific products instead.
Whatever the answer is, it appears that alternative business financing has grown tremendously but the MCA term has not. Share your thoughts about this with us. We want to hear theories.
– Merchant Processing Resource
https://debanked.com
MPR.mobi on iPhone, iPad, and Android
Wonga Retreats
January 30, 2013
For about a month, we’ve discussed the merger negotiations between On Deck Capital and UK based lender, Wonga. It seems now that our quest to evaluate Wonga’s potential success in the US was all for naught. BusinessWeek reported yesterday that the deal is off after a price disagreement. The only figure known to us is the amount originally publicized in November at $250 million. We hope our readers realize that we made a lot of fuss about this merger because it was said to be in an advanced stage months ago.
With the deal dead, it has become evident that something was gained by all of this, and that is the valuable insight from Merchant Cash Advance (MCA) veterans on a range of topics. LinkedIn lit up like a light bulb when it came to debating UK lending practices and algorithmic underwriting. Below are a few snippets from the conversation:
There are significant cultural and other differences between MCA and small business lending in the UK and the US that work against a purely algorithmic MCA underwriting model in the US. In the UK, most small businesses have been established or owned for generations – or longer. Imagine underwriting a pub that has been in existence for 200 years, or a bucolic inn in the Scottish highlands that has been owned by the same family for over 100 years. The entrepreneurial culture in the US where anyone who needs a job starts a small business – and applies for a cash advance – doesn’t exist in the UK.
The rates MCA companies charge is less of an issue in the UK, there is more alternative finance that is generally accepted and rates are not objected to, which is probably why Wonga doesn’t have an issue with the rates they charge, and when borrowers don’t have a problem with the rate they are less likely to feel entitled to default. Also borrowers don’t move as much in the UK and tend to be much more stable in their communities and banking relationships which is correlative to default in the US. Lastly we saw very little fraud in the UK, which is a significant underwriting issue in the US. It will be interesting to see if this deal gets done and what Wonga might do in the US market with their business intelligence, but it may not be as easy as they think.
Our company uses a algorithm to help with our underwriting practices, but there is something to be said about the personal touch when it comes to merchant cash advance space.
After several years of researching the U.K. marketplace and preparing for significant differences—including no UCC filings–what I found were striking similarities. These included resistance to higher (than bank) fees, switching processors, mistrust of terms or the agreement (sale and purchase of future credit card receipts), difficulty recruiting referral partners or ISO s, etc. There were, however, two very important differences between the U.S. and European business models. The first, as J. Brown points out, is cultural. The European attitude toward debt assumption and repayment is more “responsible” than it is in the U.S. Many Pubs and Inns in the U.K. have been in the family for generations. Additionally, there are over 10,000 India restaurants in the U.K. most are run by hard working families. These are considered “honorable” professions and defaulting on an obligation is not “proper.” The second is product distribution and monitoring the performance of the distribution channels. In the U.K. distribution channels were “business referral partners.”
Automation and the proper utilization of technology is certainly the backbone to having a viable and more importantly scalable lending business. I do have however disagree that algorithms and data can completely eliminate the review of a file by a human brain. The ability to ascertain the credit worthiness, borrowing ability and most importantly likelihood of repayment of a business differs vastly from the consumer finance space.
Credit goes to J. Brown, F. Capozza, M. Landau, H. Francis, and everyone else for excellent input on these subjects.
Previous Wonga Articles:
Made for Each Other? 12/12/12
Funding Down to a Science 12/21/12
Not Science 1/14/13
– Merchant Processing Resource
https://debanked.com
MPR.mobi on iPhone, iPad, and Android
Coming In From the Cold: Connecting With Prospects
January 29, 2013
A small business owner posted a great question on the LinkedIn group “Small Business Networks for Startups and Entrepreneurs” board:
Are cold calls effective? Or is it old school? For a small company, what is the best way to promote the business? Any advice will be greatly appreciated.”
The small business owner who posted this question got more than her fair share of advice and opinions regarding the practice of cold calling. And, while most every single comment had a jewel of truth and wisdom when it comes to cold calling – the comments also conflicted with each other. For example:
“Not only is it old school but its intrusive and offensive.”
“Cold calling is old school indeed but it is still one of the most effective ways to reach prospects.”
So – which is it? Offensive or Effective?
Fortunately for the small business owner uncertain whether to pick up the phone there was one comment that simply rocked. Sandra Hoedemaker owner of ChefinDemand.com an online business coaching service specializing in providing services to personal chefs, posted a completely different perspective and approach to cold calling – something she calls “Connect Calling.”
Connecting is Warm – Cold is…well, Cold
Those commenters who identified cold calling as intrusive and offensive make a good point. Today’s consumer not only isn’t interested in hearing uninvited sales pitches, they can (and quite often do) find unscheduled sales calls as a definite intrusion into an already too busy day.
Sandra notes that she does, in fact, “cold call” and also indicates that these calls are always most successful when she is able to connect with the decision maker. So far her comment sounds like your run-of-the-mill cold calling advice. However, Sandra definitely breaks rank because she goes on to say that she “doesn’t sell on the phone.”
OK, if she’s cold calling, but not selling – what exactly IS Sandra doing when she makes those calls?
Sandra knows prospects aren’t interested in “being sold” – but they are interested in learning real ways to solve their problems and get their needs met. Sandra knows that the best way to do that is to establish her credibility as an expert who knows how to solve common problems and meet the special needs of her niche. How does she do that? She offers to provide them with carefully selected free services. This allows her to:
- Build her email list and then connect with prospects freely because they have invited Sandra to contact them.
- Stay connected to her prospects via blogging, teleclasses, and other virtual events (she’s also in the process of putting video presentations in place.)
Outside of the above, connecting with prospects versus cold calling prospects has resulted in Sandra receiving referrals and she’s also garnered invitations to speak as well. Sandra has successfully used Connect Calling as a tactic to connect with prospects in meaningful ways. She’s taken an “old school, annoying” tactic and turned it into a powerful tool to build a community of prospective buyers.
What is most impressive about her approach is the opportunity to begin to establish trust with prospects via Connect Calling. Offering useful, applicable free services and information allows prospects to begin to build a relationship where Sandra becomes a Trusted Advisor who’s got their back versus someone trying to make a sale. Sounds more like networking than cold calling doesn’t it?
And when those prospects pick up a phone to make a call when they find themselves in need of services Sandra charges for, Sandra’s much more likely to be the one who hears it ring.
Sandra’s business serves a unique niche – but Connect Calling can be a valid, productive, and profitable tactic to market your small business no matter what market you serve.
Guest Authored
– Merchant Processing Resource
https://debanked.com
MPR.mobi on iPhone, iPad, and Android
History of Merchant Cash Advance
January 24, 2013The History of Merchant Cash Advance
Before it was mainstream, it was kind of mainstream. Merchant Cash Advance (MCA) is not new or even relatively new and it definitely isn’t a byproduct of the 2008-09 financial crisis. In fact, in 2007 some people thought the best days of the industry were already behind it. In an August 2007 issue of the Green Sheet, Dee Karawadra expressed reluctance to write about MCA because he believed the subject was stale.
When a GS Online MLS Forum member suggested I write an article on cash advance, I explained my research and said, “I think that boat has come and gone, and I missed it.”
Dee’s article is an excellent snapshot of the feeling of 2007. Excitement was running wild and bold predictions were being made. A lot of the same questions being asked today were asked and answered back then. Those employed in the industry that do not take the time to read up on MCA history are at a disadvantage. And one thing this industry did a great job of, was chronicling all of the events that unfolded.
The Green Sheet
Prior to 2007, The Green Sheet’s forum was the only source for information. It is still filled with threads going back as far as 2003 on the subject. The discussion seems to begin by one user posing the question:
Who thinks a cash advance program, (a loan) on future credit card volume will help themselves get more deals and their merchants operate better?
March 2003
By 2004, MCA was all the rage. Competition began to nibble at AdvanceMe’s monopoly, a monopoly they were rightfully entitled to because they owned the patent on split-funding. Many chose AdvanceMe anyway simply because they had already established a name for themselves.
You might want to check out AdvanceMe. I think they have a superior product and service as well as more money too … that you will be better served by AdvanceMe than you would by any of the other Cash Advance companies of which their [sic] are not that many.
August 19, 2004
And many weren’t even sure what they were selling exactly. Merchant Cash Advance had not yet even been coined as a term:
quick show of hands as to what title you would place on this product… A) Factoring of receivables B) Cash Advance C) something else… Just for the record – I don’t know what to honestly call it.
August 20, 2004
Those that responded called it an unsecured loan, factoring, merchant funding, and cash advance. Some that weren’t even familiar with the concept appeared completely lost in the conversations. It was common to confuse cash advance as meaning to take a cash advance out on an actual credit card. The need for a universal term was badly needed. An industry couldn’t progress forward if no one even knew what the industry was.
A Way to Build and Strengthen Merchant Account Portfolios
But on the subject of giving money to merchants in exchange for more back, programs offered by AdvanceMe and Rewards Network were compared on the merit of the cost to the customer. Since reps viewed MCA as an acquisition tool to obtain merchant accounts or retain them, commissions and renewals were rarely discussed. They were basically a non-factor and some folks from this era carried this mentality straight into the financial crisis age of MCA. Funders advanced merchants not to make money on advances, but to build their own processing residual portfolios and to sell or lease more POS equipment. The loan, cash advance, merchant funding, or whatever it was of the day was a tool to drive business, not a business itself. Right before and during the financial crisis, funding companies began to streamline their focus and suddenly it became all about funding and nothing else.
The MCA industry has remained in that state for about 5 years and some are starting to think that it’s time to evolve. A poster on DailyFunder.com recently ranted that his company can’t grow unless it diversifies, coincidentally citing that MCA would be better served as an acquisition tool. If this happened, history would repeat itself.
This should be a lesson to the MCA industry which is trying to make a product out of something everyone else views as an acquisition tool. Are we just lenders or diversified businesses? We are the former. As such, prices will never come down, margins can only get slimmer.
1/19/2013
In 2004, when the MCA industry was joined at the hip with payment processing, becoming a dedicated funder was a way to stand out from the crowd. But perhaps now that the market is saturated with dedicated funders, it is getting more difficult to build a presence in the market.
Behold! Merchant Cash Advance!
In May 2005, The Green Sheet was forced to label the product when it published a story about Merchant Cash Advances. We’re not claiming that this article coined the phrase, but it is a good approximation of when it started to be called such. A few sentences in, they actually disclaim their own term.
There isn’t even consensus on what to call the product, except that it is most definitely not a loan.
The three word term was not even used in the Green Sheet forums until October 2005, and then not again until March 2006. Soon after, that became the term of choice.
The One and Only MCA Blog
As MCA financing took on a life of its own outside of payment processing, the industry turned to a blog to learn about the unfolding events. From 2007 to 2010, David Goldin, the CEO of AmeriMerchant wrote weekly updates about his firm and experiences. He wrote about his harrowing battle with AdvanceMe. After invalidating their patent, he opened the floodgates for any funder interested in utilizing split-funding. He offered honest opinions and had excellent foresight, forever documenting what it was like for the MCA industry during the financial crisis. Anyone that didn’t get to experience that time firsthand should read it start to finish.
As Goldin’s company grew, he turned his focus to other matters. The North American Merchant Advance Association (NAMAA) was formed on April 29, 2010, a non-profit alliance designed to bring peace and order to an industry that had gone through tremendous turmoil in the last few years. He all but abandoned the blog afterwards.
Free Info for All
Where Goldin left off, I resumed by starting a credit card processing/MCA blog in July 2010 named Merchant Processing Resource (MPR). At that time, I was an MCAer that had toiled away as both the head of an underwriting department and as an account executive. The blog covered a lot of topics and was targeted towards business owners and ISOs simultaneously. I believed there was a vast amount of data that newcomers didn’t have about MCA and set off to share as much as I could without self-promoting a product or service.
By December, my web host (a very simple blog site named Webs.com) informed me that the website was using too much bandwidth for the current package. I upgraded it only to encounter the same problem again 9 months later. The site was forced to transfer to a real host in order to grow and be able to handle the surging stream of visitors. Webs.com’s format was not conducive to transfers and as a result, every article written prior to August 23, 2011 was time-stamped with that very date.
Three History Books
To recap, the Green Sheet and their forums were the places to follow MCA from 2003 to 2007. Goldin’s Blog narrated the story from 2007-2010 and MPR has carried the torch since then. If we go further back, and we believe everyone should, you’ll find that AdvanceMe kind of existed in a world of their own in the late 1990s. In 1999, they funded $9 million. What they were funding annually increased to $200 million by 2006, a time when they had already amassed more than 14,000 clients. These aren’t exactly the humble beginnings of a new industry. These are serious numbers that could arguably support the theory that MCA was already well into the mainstream.
MCA in Black and White
MCA information was publicly available nearly two decades ago via the U.S. patent office. Barbara S. Johnson is listed as the official inventor of split-funding AKA Automated Loan Repayment in documents filed in 1997. There were no forums or bloggers to explain how it worked. There was only this:
Systems and methods for automated loan repayment involve utilizing consumer payment authorization, clearing, and settlement systems to allow a merchant to reduce an outstanding loan amount. After a customer identifier (e.g., a credit, debit, smart, charge, payment, etc. card account number) is accepted as payment from the customer, information related to the payment is forwarded to a merchant processor. The merchant processor acquires the information related to the payment, processes that information, and forwards at least a portion of the payment to a loan repayment receiver as repayment of at least a portion of the outstanding loan amount owed by the merchant. The loan repayment receiver receives the portion of the payment forwarded by the merchant processor and applies that portion to the outstanding loan amount owed by the merchant to reduce that outstanding loan amount.
The Automated Loan Repayment kicked off an industry that would evolve significantly over the next 15 years and yet a payment processor was already doing this to fund merchants as far back as 1992. Litle & Company didn’t call it MCA. That name didn’t even come about until around 2005, but they were the first MCA funder in the country. The makes MCA more than 20 years old.
Been There, Done That
We may have closed a chapter in 2012 when it became evident the product had finally graduated from the minor leagues, but there is a forever long story that preceded it. MCA financing existed before some account reps were even born. Sadly some of these kids talk to prospects today without really even knowing what they’re selling. Then again, in 2004 no one knew what the heck they were selling either. There is still technically no formal name especially since split-funding is no longer the standard. If the poster in 2004 posed the same question today about what to label this product as, there would be just as much disagreement. Business cash advance, merchant financing, ach advance, cash flow loan, ach funding, merchant cash advance, unsecured loan, merchant loan. Nobody really agrees and nobody really even does it the same way as everyone else. It’s all MCA to me and I’ll keep reporting on it for as long as it lasts. And as long as it keeps reinventing itself, there will always be a chance to get in early. Those that read up on the past or were there and experienced it firsthand have a major advantage. History repeats itself in MCA.
You know those butterflies you’re getting about 2013? They were felt before in 1998, 2004, and 2007. MCA was kind of mainstream before it was mainstream. 2012 ignited a spark and some of us know what’s going to happen next. As for the rest of you, brace yourselves. It’s going to be more crazy than you can imagine.
– Merchant Processing Resource
https://debanked.com
If They Were in MCA
January 23, 2013
If Gordon Gekko (Wall Street) was in MCA, he would be that strict underwriter that everyone hates.
On Approvals: “I look at a hundred deals a day. I pick one.”
On making an exception: “I don’t throw darts at a board. I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought.”
On a phone call with the rep: “You stop sending me information, and you start getting me some.”
On ordering a site inspection: “I want to know where he goes, what he sees, I want you to fill in the missing pieces of the puzzle.”
If Agent Smith (The Matrix) was in MCA…
His thoughts on the underwriting department: “Never send a human to do a machine’s job.”
On a collections call: “As you can see, we’ve had our eye on you for some time now, Mr. Anderson.”
In regards to the secret terminals the merchant is using to avoid repayment: “Find them and destroy them.”
If Michael Scott (The Office) was in MCA…
On what type of merchants to target: “There are four kinds of business: tourism, food service, railroads, and sales. And hospitals/manufacturing. And air travel.”
In response to his ISOs wondering why there is no website to check balances for their merchants: “We can’t overestimate the value of computers. Yes, they are great for playing games and forwarding funny emails, but real business is done on paper.”
Just for fun
– Merchant Processing Resource
https://debanked.com
MPR.mobi on iPhone, iPad, and Android
Not Science
January 14, 2013
We’ve published 2 articles recently about UK based lender, Wonga. In both, we expressed awe at their scientific algorithm that makes loans in 15 minutes without human interaction. Now we’re not sure that praise is deserved. A Guardian article recently revealed that their top secret super computer racked up 41% bad debt in 2011 as a percentage of annual revenue. 41%, a number that equates to 76.8 million pounds in write-offs. That’s apparently 4x higher than what it was in the previous year.
Is this science? Charge a high enough interest rate and you’re bound to find a balance between bad debt and profit. This isn’t science. This is what the average man calls rolling the dice. The problem with this strategy in the US is that most states cap the maximum interest rate so you can’t force a profit by charging an unlimited APR. Besides, there is proof that the worse the economy gets, the more their defaults pile up. Shouldn’t their algorithm factor in an economic downturn? What will their P&L look like in 2012 and 2013?
For years, we’ve made the case that aggressive lenders who make a point to grab market share while boasting of their dominance are the first to get smoked in the market. For some reason we let our guard down on this one. Maybe it had something to do with it being a British company. Believe it or not Wonga is still profitable, but to claim there is some kind of magic behind what they do is wishful thinking. To take a blogger’s words about this:
I’m sure Wonga would much rather it could know in advance who was going to default. Then it could charge its non-defaulting customers a lot less for its service.
Wonga apparently can’t do what it claims it is best at. Congrats on earning a profit Wonga, but here’s some words of advice about lending in the US. Technology is great, but don’t lend without humans. Trust us.
—–
Previous Wonga Posts:
Funding Down to a Science
Made For Each Other?
Surprise! We Are the Market
January 13, 2013Merchant Cash Advance (MCA) is an alternative to a small business loan. Look around. MCA players have spent so much energy on gaining mainstream acceptance, that we’ve become oblivious to reality. We ARE the small business lending market. There are alternatives out there such as credit cards and SBA loans, but they are industries of their own. Small businesses in 2013 really only have one place to obtain fast unsecured short term financing, and that’s here, the MCA industry. That assumes of course that you agree with our definition of MCA, which we stopped limiting to a purchase of future credit card sales some time ago.
Over the past few months, we began to realize that the only small business lenders making headlines are people we know. Is the country that small or does MCA dominate the market that much?
A glimpse at the sponsored advertisements on Bing in the NYC region:
Where are the multi-billion dollar banks? If $15 a click isn’t in their budget, something is wrong, and it may possibly be due to the fact that business loans aren’t on their priority lists.
Lenders, brokers, and bankers on the front lines can’t stop talking about MCA. It is a recurring theme in their columns:
The alternative financing industry is growing rapidly and, I believe, will continue to grow in 2013. These lenders are extremely entrepreneurial and are leaving the banks behind with their speed and use of technology. Many are backed by premier investment banks and Silicon Valley venture capital powerhouses — investors who understand that entrepreneurs and small-business owners are throwing up their hands in frustration over how long it can take to get a loan from a bank, especially if the loan is backed by the S.B.A. More and more businesses are willing to pay the price of the alternative lenders just to be able to get their capital and move on.
-Ami Kassar
The State of Small Business Lending – NY Times 1/8/13
Ami’s Column on NY Times
Cash advance companies, accounts receivable financiers, factors, and micro lenders all have become increasingly more attractive funders for three reasons: flexibility, use of technology, and speed.
-Rohit Arora
Three Reasons for the Rise of Alternative Lending – Fox Business 11/29/12
Rohit’s column on Fox Business
Here’s a dilemma that might have contributed to the growth of MCA… Banks don’t like offering loans and business owners don’t like applying for them if it’s hard:
There’s a large small business segment that needs and wants to borrow on a commercial basis, but their needs are very small. Business owners want $10,000, $20,000 or $30,000 loan–the average is somewhere around $25,000. Traditionally, that’s been a very unprofitable business for a bank. Some banks argue that they are willing to lose money on those loans because they can make it up in deposits. But what happens when the borrower has no deposits? It’s a very tough balancing act.
– The Federal Reserve Bank of San Francisco
A newsletter report that reveals banks lose money on small business loans
Community Investments Volume 8; No 4; Fall 1996
Business owners say the documentation involved is overwhelming. They’ve also found the qualification terms almost impossible to meet.
– Catherine Clifford
Feedback reveals that a burdensome application process and extensive paperwork requirements are enough to discourage business owners even if the loans carry 0% interest.
CNN 1/26/10
Thousands of researchers publish statistics on bank lending every month. Not only do they all contradict each other but journalists that use this data to make bold claims often fail to acknowledge that an increase in bank lending has nothing to do with the applicants, the economy, or the banks themselves. It has to do with the Government. We all know that the SBA will cover the losses banks incur, but there are programs that go one step further. The Federal Government actually bribes banks to make loans. For example, the Small Business Lending Fund is a dedicated investment fund that encourages lending to small businesses by providing capital to community banks. Meaning, covering the losses on defaults doesn’t seem to be enough, so they’ll actually provide the money to make the loans as well.
Click to see full size on mobile
According to the SBA, small business bank borrowing totaled $584.1 billion in the third quarter of 2012. That number dwarfs the volume produced by the MCA industry, but its not an apples to apples comparison. A loan of $1 million dollars is within the range of a small business loan by the SBA, an amount atypical (though not impossible) in the MCA world. Banks are also prodded and coddled by the Government so much that it has reached the extent that we dare claim they are an extension of the Federal Government itself. There’s some food for thought for the Occupy Wall Street movement! They also conveniently got bailed out when they were on the verge of failure, a safety net that MCA companies don’t have.
Subtract the Federal Government’s meddling and there is only one profitable form of B2B lending, Merchant Cash Advance. That is of course again if you accept our definition. There are many young B2B lending firms that claim to be an alternative to MCA, who then go on to describe their product in a manner that is textbook MCA.
Our thesis may be debatable and lacking in concrete proof, but we’re not writing dissertations here. Business owners are increasingly looking to the Internet for loan information and it’s obvious what they’re finding. One would expect a quick Internet search to bring up ads for the billion dollar powerhouses, you know the ones that are given millions to lend out and then millions again when the loans go bad. Instead we find companies owned by friends or friends of friends. The small business loan market isn’t run by anonymous Wall Street kingpins, it’s run by a small community of entrepreneurs that all started from the ground up. Only the community isn’t so small anymore. There was once a handful of MCA companies claiming to be an alternative to a small business loan. Now there are a handful of companies claiming to be an alternative to MCA. It doesn’t take a genius to figure out why that is. After years of fighting to be recognized in the market, something remarkable happened, we became the market itself…
– Merchant Processing Resource
https://debanked.com
The #1 Sales Skill for Small Business Owners
January 10, 2013No matter how well you performed your due diligence before opening the doors at your small business, once you opened them you got a few surprises. And, unless you were in sales before opening your doors, the biggest surprise you got was likely just how difficult it is to “sell.”
Selling is a skill. Now, it’s true that there are “natural born sales people” – but all that means is that they have a talent for selling; they still need to develop their skills. The great thing about skills is that we can learn new skills.
The first skill you need to learn in order to sell successfully is often learning how to change how you think about “selling.” Not sure what we mean by that? If you read the word “zebra” an image of a zebra pops up in your head. Now read the word “salesman” – what image just popped up for you? Most likely not a very positive one.
It might take you a bit of time and effort to get over the prejudices you may have about sales. Unfortunately, as with many things in life, negative experiences we have a tendency to stick to us like glue. To make things even more difficult when it comes to changing attitudes, we also often have a tendency for negative experiences to stick with us much, much longer than positive experiences.
Don’t think that’s true? Here’s a brief exercise to prove our point:
- Write down 10 bad experiences you had with a sales person in less than 3 minutes.
- Write down 10 great experiences you had with a sales person in less than 3 minutes.
We rest our case.
Do You “Hate” Selling?
Let’s face it, if you’ve got a history of “not trusting” sales people it’s going to be pretty tough to feel very good about selling. Successful sales are based on trust and, in order for your customer to trust you, you’ve got to have a strong belief that what you’re doing is of value to your customer. Hard to do if you “hate” sales.
If you hate or are “extremely uncomfortable” about selling those feelings quite likely stem from beliefs you have about the process of selling in general and sales people in particular. For instance:
- Sales people are manipulative.
- Sales people are pushy.
- Sales people lie.
Right out of the box, it is true that some sales people do/are all of the above. But not most – and certainly the Top 5% are about as far away from manipulative, pushy, and dishonest as you can get. Think about it. You don’t want people to buy from you once – you want to create loyal repeat customers who also refer other loyal repeat customers to your business. Certainly the words “manipulative, pushy, and dishonest” aren’t behaviors that are going to result in creating a loyal customer base. That means that all those bad experiences you had with sales people happened when you were buying from “bad” (under-performing, unprofessional) sales people. While it might have looked like they would do anything to make a sale, it was probably because they were desperate to make a sale because they were so bad at it. Sales people who operate like that and are successful are actually the exception and not the rule. They also frequently aren’t successful for very long periods of time.
Hopefully you’re feeling a bit relieved to find out that learning how to sell does not mean honing skills related to being manipulative, pushy, and deceitful. Most successful, top-performing sales people are the exact opposite. Instead, sales is about solving your customer’s problems and meeting their needs. It’s about having their back and bringing them value even when they don’t buy from you. Why? Because that is how you create trust – and people like to do business with people they trust.
Believing in what you’re doing isn’t the only sales skill you need to learn – but it is definitely the first thing you need to get under your belt, and in a big way. No matter how many sales books you read or seminars you attend, unless you believe in what you’re doing and that your ability to sell is a value to your customer – you run the risk of becoming that manipulative, pushy, less-than-honest image of a sales person you love to hate.
Guest Authored
– Merchant Processing Resource
https://debanked.com
