sales
Are You Weak, Or Are The Leads Weak?
January 13, 2016
A LOOK BACK AT A CULT CLASSIC
The 1992 film, Glengarry Glen Ross, is a cult classic and one of my favorite movies of all time, with excellent writing, storyline and acting work done on behalf of the stars. In my opinion, the best part of the film was the beginning, when Blake (played by Alec Baldwin) was sent in from Mitch & Murray to fire up three of the office’s sales reps who were “low on the board” in terms of their sales performance. Blake’s “always be closing” speech has been glorified and imitated in sales offices across the United States since the movie’s release on Friday, October 2nd, 1992. I can hear the conversation between Blake and the late Jack Lemmon’s character, Shelley “The Machine” Levene, right now:
Blake: You laughing now? You got leads, Mitch & Murray paid good money, so get their names to sell them! You can’t close the leads you’re given?! If you can’t close sh*t, then you are sh*t! Hit the bricks pal and beat it because you are going OUT!
Shelley “The Machine” Levene: The leads…are weak.
Blake: The leads are weak?! F**king leads are weak?! You’re weak!
Blake was sent in to “fire up” The Machine as well as Dave Moss (played by Ed Harris) and George Aaronow (played by Alan Arkin), who were all struggling to meet sales numbers due to what they believed to be mainly their Office Manager’s fault (John Williamson who was played by Kevin Spacey) for supplying them bad, outdated and dead leads. The main character of the film was Ricky Roma (played by Al Pacino) and Roma wasn’t having the same struggles as his three counterparts, as he received the “premium leads” from Williamson for being number one on the board in terms of sales performance.
WAS ROMA’S SUCCESS MORE OF A RESULT OF HIS PERSONALITY OR THE GOOD LEADS?
Could Roma’s sales success have been based on the fact that he was just a “tad bit” more charismatic than The Machine, Moss and Aaronow? Or, could the bulk of Roma’s success be tied to the fact that he wasn’t sent out to sell to dead leads? Were the reps weak, or were the leads weak?
Moss believed it was all about the leads, even suggesting to Aaronow during the film that they start their own agency. Towards the end, Roma himself revealed that he believed it was all about the leads as well, as once someone broke into the office to steal the premium Glengarry leads out of Williamson’s office (which was later revealed to be The Machine and Moss), Roma was offered some of Williamson’s “dead leads” and Roma quickly rejected them, throwing them back into Williamson’s face and stating that he wasn’t going out until he got the Glengarry leads.
As mentioned, this movie is a cult classic, but often art imitates life as this movie displays one of the fundamental problems of the sales profession today as a whole, and it’s the fact that most Sales Managers are completely out of touch. As a result, for this article let’s take a deeper look into this topic to determine if you’re weak, or if the territory, market and leads you are being asked to “sell” or “sell into” are weak.
IT’S TIME TO DO AWAY WITH MOST SALES MANAGERS (THEY ARE USELESS)
As globalization and technology automation in the 21st century surely replaces the jobs of many retail salespeople, customer service agents, and low level brokers, what I’m really hoping for is that someway and somehow, we can get rid of most Sales Managers. They are one of the biggest problems in the sales profession today because:
- They are completely out of touch
- They promote sales strategies that don’t work
- They teach their reps to read off “scripts”
- They don’t equip their reps with research, trends and ground breaking solutions
- They don’t train their reps to become component professionals who can critically think
- They instead train their reps to become a robotic, script reading, mindless drone
On top of all of this, most Sales Managers do not understand the B2B Sales cycle, as they “train” their reps as if they are selling a box of girl scout cookies or a new music album, focusing on over the top personalities, how cute someone is or their level of charisma. Instead, they should be focusing on providing knowledge, research, trends and other information to build a competent critically thinking professional, to implement market solutions that fulfill unmet market demand.
The majority of Sales Managers need to be done away with. These incompetent fools believe that it’s mainly the personality of the sales rep that makes them successful, thus, they will throw their reps out in a bad territory, a bad market, and calling on dead leads because in their mind a “good sales rep” has the “personality” to sell fire to Hell. As a result, their belief is that the quality of the market, the territory, the leads, nor the competitiveness of the products they sell don’t matter!
DO NOT WORK UNDER A SALES MANAGER
I usually recommend that B2B sales professionals work on an independent basis so that they don’t have to be subjected to an out of touch Sales Manager, which does nothing but stop your career progression and limit your earning potential. This is especially true when these out of touch Sales Managers provide you with their “leads”, as a vast majority of the time, their “leads” are inefficient.
THEIR LEADS ARE REALLY JUST DATA RECORDS (BUT THEY DON’T KNOW THAT)
Most of the time the leads aren’t leads, they are data records. You are going to have a much lower conversion rate on data records than you would leads, but the out of touch Sales Manager (who thinks he just gave you “leads”) will think that your conversion should be a lot higher and thus, he might “inform you” that you just aren’t cut out for this business.
THEIR LEADS ARE OLD AS HELL AND THE SALES CYCLE IS OVER (BUT THEY DON’T KNOW THAT)
Or, they might supply leads that are aged, sometimes from 90 days ago or more, thinking that the sales cycle is still active with these leads when the fact is that for the vast majority of them, the sales cycle was over months ago. Aged leads are usually leads where a merchant requested financing, but there’s usually one of three issues with these types of “leads”. Number one, the merchant either received the funding they wanted two months ago, or number two, they were declined by everybody and gave up on speaking with anybody else about the topic. Or number three, it could have been the case where the merchant wasn’t truly serious about getting funded anyway, deciding not to move forward with anybody. The few leads that you do convert, because your Sales Manager believes these were “hot leads”, he will end up scolding you over the low conversion numbers.
THEY USE THE GLENGARRY GLEN ROSS MODEL (WHICH REVEALS HOW INSANE THEY ARE)
This is the biggest pet peeve right here, they might use the Glengarry Glen Ross model, which makes absolutely no sense. So here’s what they would do.
They would spend a lot of money on a marketing budget to produce a good stream of leads of merchants looking for financing assistance from an alternative basis. However, instead of dishing them out to their sales reps in equal number, they will give the majority of them to the reps “already high up on the board” and give hardly any of them to the reps at the lower end of the stick. All this does is causes the “rich to get richer” in that the reps getting the hot leads will just continue to stay up high on the board while those at the bottom can never move up.
What I don’t get is this, if you don’t believe in the reps at the bottom of the board, why not terminate them? Why the hell would you keep them on your staff, if you no longer believe in their abilities to perform and thus, aren’t going to provide them with the resources needed to move up on the board?
ARE THE LEADS WEAK, OR ARE YOU WEAK?
The truth is that in professional sales, it’s all about supply, demand, and solving complex problems with innovative solutions. It takes research, strategic planning and strategic market segmentation in terms of who we target, as the target of our prospecting has to be someone who is currently in a situation to utilize our services. This means that 90% of the job is that of finding the right territory, market and/or leads to sell to. Now, there are a lot of incompetent salespeople in the world, and you could equip them with the resources needed to succeed and they still fail to execute. That would indeed make those reps “weak” rather than the leads being weak. But in my opinion, far too often are competent salespeople at the mercy of a weak Sales Manager that provides them with weak training, weak products, weak markets, a weak territory, and weak leads. It’s based on this that my opinion stands, in that most of the time it’s the leads that are weak, rather than the competency of the sales professional.
Don’t Quit So Early: Sometimes The Merchant Just Needs More Time
December 4, 2015To this day, I still have no idea who The National Sales Executive Association is, such as what they do, where they’re located and how long they have been in existence (if they even exist at all). But a couple of years ago, I read a quote that was supposedly from this organization, that went as follows:
Follow Up
- 48% of sales people never follow up with a prospect after the first attempt
- 25% of sales people make two attempts with a prospect and stop
- 12% of sales people make three attempts with a prospect and stop
- 10% of sales people make more than three attempts with a prospect
When Sales Are Made
- 2% of sales are made on the first call
- 3% of sales are made on the second call
- 5% of sales are made on the third call
- 10% of sales are made on the fourth call
- 80% of sales are made on the fifth – twelfth calls
From these statistics, we could conclude that 10% of sales people pick up 80% of the sales, due largely to the fact that they initiate five or more call attempts to the prospective client in particular.
While I have no idea who The National Sales Executive Association is, over my time in B2B sales, I can surely say that giving the merchant more time to respond to you surely works. Matter of fact, 2% is very generous, I think that less than 1% of my “closes” have been on the first call attempt and over 90% of my “closes” have come from making at least 5 attempts through either telephone or email.
OUT OF TOUCH SALES MANAGERS
One of the main reasons I have only participated in the profession of Sales on an independent basis, is mainly so that I can contain 100% creative, strategic and operational control, and not be subject to out of touch Sales Managers.
The fact is that far too many Sales Managers are just out of touch, either they will have their team using outdated marketing tactics such as calling UCCs, Aged Leads, or random listings out of the Yellow Pages, or they might have their team selling inefficient products. In terms of inefficient products, they might have their reps trying to push 1.30 factored rated advances on A Paper clients in the age of Lending Club and other A Paper lenders filling up the merchant’s mailbox, email and voicemail with A Paper offers.
But if these two aspects weren’t bad enough, far too many Sales Managers also have a very impatient disposition when it comes to the B2B sales cycle. Far too often, they will set B2B sales quotas either by the day, the week, or the month, rather than by the quarter or the year, as they should be set.
The bottom line is that sometimes it just takes a merchant longer than usual to move forward, which while it surely delays the sales cycle, it doesn’t mean that the merchant is disinterested or trying to pull your chain, sometimes there’s just legitimate delays in the B2B sales cycle.
THE REALITY OF THE B2B SALES CYCLE
Far too many Sales Managers are just out of touch, as they still believe in the mythical smooth walking, talking and overly charismatic sales guy who can sell fire to Hell. According to these types of Sales Managers, you should be able to get all of your applications within the first call or within the first week of speaking with a merchant, and if you don’t, then apparently you don’t belong in this industry and should seek opportunities elsewhere.
How out of touch could these guys be? Have they ever in their life managed an individual B2B Sales Pipeline? In reality, here’s how the deals go most of the time:
Week One
- Your first attempt with the merchant is on a Monday. The merchant is interested but is very busy right now as he’s about to enter his afternoon rush. He gives you his email, says to email him over information and follow up on Thursday.
- You email information that Monday night and then follow up that Thursday. You get his staff member on the telephone saying he had to leave early today, but will be back on Saturday. You send him a follow up email on Thursday night.
- You call back on Saturday and he answers the telephone, he confirms that he received the email but just hasn’t had time to sit down and take a look over everything. Says to follow up with him this Monday at 2:00 p.m. before his afternoon rush.
Week Two
- You call back that Monday, he says he has a good 5 minutes to talk and before you can begin speaking, he immediately begins a long discourse. He talks about how he’s looking at setting up this second location and how he has it all lined out, he just needs a good $100k to get the second location up and running. His bank hasn’t been that much of a help for this project and he reviewed your email, he likes the premium estimated price ranges that you have listed with up to 24 month terms. You begin to ask him some questions to properly pre-qualify him, you discover that he’s an A Paper client and you estimate that you can get him approved for the $100k over 24 months that he’s interested in. You go over the documentation needed to get started and the estimated timeframe until funding completion. He says that sounds great and to email everything you need from him by email tonight, and he’ll work on getting that back to you as soon as he gets back to his home office tonight.
- You email him that Monday night with items needed to move forward. Tuesday, Wednesday and Thursday go by, you don’t hear anything from him.
- You follow up with him on Friday and his staff member says he’s not there but he will indeed be back on Monday. You leave a message for him with his staff member as well as send him a follow up email that Friday afternoon.
Week Three
- You call back on that Monday, his staff member says he is available and goes to bring him on the telephone. He gets on the telephone and says he’s been working on the items this morning and will fax them shortly. He asks for your fax line once again.
- On Wednesday morning, you get a fax from him with only partial items of the application package, such as only 2 pages of your 3 page application, and only 2 months of bank statements even though you requested 3 months. You call him that Wednesday afternoon to confirm receipt and request the additional items that were missing. He says he will get that right over to you here shortly.
- Thursday and Friday go by, you receive no additional items. You send him a follow up email on Friday night about the additional items.
Week Four
- You follow up with him that Monday to touch base for the additional items, he gets that over to you by fax that afternoon, now giving you a completed application package. Now you have a completed application package, or what is referred to as a “close”, but that took four weeks of follow up which included 8 follow up calls and numerous emails.
SOMETIMES IT COULD TAKE 6 MONTHS OR MORE
This was just one example of where it took four weeks to get a completed application package, however, sometimes it could take up to 6 months for me to receive a completed application package from a merchant due to various reasons.
Some of the reasons include: waiting for an existing balance to come down, waiting for a tax lien payment plan to get finalized, waiting for a bankruptcy discharge, waiting for NSFs to come down, the merchant running into a family emergency, or the project for which the merchant needed funding gets put on hold in some way.
SOMETIMES THE MERCHANT JUST NEEDS MORE TIME, DON’T QUIT SO EARLY
This is why any B2B sales quota that’s measured on a daily, weekly or monthly basis is completely and utterly insane. B2B sales cycles can take longer and are usually more complex than B2C sales cycles which involve fewer decision makers, lower dollar exchanges and usually less complex solutions.
This is why Sales Managers and Agents alike should be more patient when it comes to the B2B sales cycle. On a daily basis, the focus should just be on continuing to grow your B2B Sales Pipeline as well as follow up on said B2B Sales Pipeline through telephone calls, email, mail and social media. You would then begin to receive emails, faxes and mailings with various application packages from members of your B2B Sales pipelines at random times of the day and night.
You should judge the effectiveness of your process on more of a quarterly or annual basis, rather than daily, weekly, or monthly, as sometimes the merchant just needs more time.
Don’t quit so early.
Business Lending: Sell The Whole Solution
November 26, 2015
The year of 2015 went by rapidly, as it felt like yesterday that I was sitting back in my office chair, reading an article from the March/April 2015 edition of deBanked Magazine, composed by Ed McKinley, a man with nearly 40 years of journalism experience.
McKinley began a discussion about a “year of the broker,” based on analysis, interviews, and criticism of the mass new entrants of brokers into our space within recent times. I have spent the better part of this year continuing this discussion both here on deBanked and within our industry circle, with discussions that have been both conventional, out of the box, and even at times peculiar. Speaking of peculiar, this brings us to the opening of this discussion, in which I must quote RuPaul.
RuPaul once stated that, “life is about using the whole box of crayons.” In my opinion, if you can figure out the profession of sales, you can pretty much figure out most of everything there is to life. And if RuPaul is right in that life is about using the whole box of crayons, why do so many of the mass new entrants of brokers within our industry, believe they are going to properly sell a merchant without using the whole solution?
It’s common knowledge that every individual crayon provides its own distinctive color, which in and of itself creates its own distinctive value, as value in this case is based upon where the color fits on the page to provide its role in the total coloring scheme. But just like crayons, every part of our alternative financing solution provides a distinctive value that altogether creates the whole solution for the merchants we serve.
(Q) + (S) + (P) = THE WHOLE SOLUTION
The Whole Solution equation is based on three letters. “Q” stands for Quality, “S” stands for Support and “P” stands for “Pricing”. How many brokers within our industry focus only on offering the “Q” and “S” portion of this equation, without the “P” portion? How many brokers within our industry focus on offering the “Q” and “P” portion, without the “S” portion?
QUALITY
Quality is all about bringing to the merchant what they deem to be value, and in our space (alternative financing) that means capital when they need it. Thus, you should have a comprehensive resource network of alternative financing products from merchant cash advances, alternative business loans, equipment leasing products, factoring, purchase order financing, and more, with approval amounts that can solve the working capital needs of the merchant. This creates value.
SUPPORT
This is all about your professional competency, merchant servicing and merchant education.
- Professional competency is all about you and your team having knowledge of the industry, the various products, the competing products, the market trends, understanding your merchant’s industry, and understanding how the product could help (or hurt) the merchant in achieving their operational objectives.
- Merchant servicing is all about providing tools for your merchant to manage their account with you, such as online access to statements, balances, transactions, or at least providing such information in a monthly statement. It also includes having easy access to live support agents during business hours to properly handle merchant questions, payment issues, collection issues, as well as there being an option for payment modification if a situation warrants it.
- Merchant education is all about educating the merchant based on the big data analytic information that you have currently, and how they can use this to help their business in various areas such as how to qualify for more conventional financing, better marketing strategies, etc.
PRICING
In our industry, proper pricing is based on utilizing risk-based pricing, which is to price a merchant based on their paper grade. This can only be done after efficient pre-qualification of the merchant to understand where they stand.
Some merchants have low risk measurement, thus, they are A+ Paper and A Paper. Some merchants have moderate levels of risk, thus, they are B and C Paper. Then some merchants have higher levels of risk, thus, they are D and E Paper.
A+ Paper: Should be priced similar to a P2P lender’s pricing schedule, which includes longer terms up to 60 months. These terms and conditions mirror that of a conventional loan.
A Paper: Should be priced on 6 – 18 month payback cycles. The shorter ranges of 6 – 8 months having 1.09 – 1.20 pricing, 9 – 10 months having 1.22 – 1.24 pricing, 12 – 15 months having 1.25 – 1.32 pricing, and 18 months having 1.28 – 1.35 pricing.
B and C Paper: Should be priced on 6 – 12 month payback cycles. The shorter ranges of 6 – 8 months having 1.22 – 1.26 pricing, 9 – 10 months having 1.28 – 1.30 pricing, and 12 months having 1.35 – 1.45 pricing.
D Paper: Should be priced on 4 – 7 month payback cycles. 4 – 5 months having 1.28 – 1.35 pricing and 6 – 7 months having 1.40 – 1.45 pricing.
E Paper: Too high of risk to usually find a decent approval.
FINAL WORD
I usually debate other sales professionals (within our industry and outside of it) in regards to selling the whole solution.
Some believe that if you put majority of the focus on quality and support, then you can literally price your client however you prefer, including well above their marketplace pricing.
Some believe that if you just focus on providing the lowest price, then you can get away without having the best quality and support functions.
Both of these approaches are selling the partial solution, but the whole solution should always be the best solution as it provides the best in quality and support, while tying in a proper pricing model for the client based on their standing in the marketplace. This leads to client longevity, loyalty and stickiness. That’s why I believe the best approach is to sell the whole solution.
Are Your Sales Methods Wimpy?
August 24, 2015
Do you remember Wimpy? Some of you probably don’t but those who do remember Wimpy, remember him as being a silent scam artist who promised the famous phrase, “I will gladly pay you Tuesday for a Hamburger today.” He never adhered to that promise. I never ascribed cartoons to real life but we can learn a few things from Wimpy and how we understand business relationships.
Back in the day, there was something called Trust. It was a little thing that was swapped like currency with the people that you interacted with on a daily basis. Today, trust has been traded for the Internet and now we have nothing to stand on. We must work harder to build relationships in any capacity and at the end of the day, you might still question if a developing level of trust is reciprocal.
Take trust and mix it with a sales position in 2015 and you have disaster. The countless nos you must endure to get to the few yeses and the pressure to close those yeses is exacerbated by the fear that a Wimpy or the Internet will come and take them away.
While reading Personal Touch Makes Big Difference in Small-Business Loans on the WSJ this morning, I immediately got a little upset. This is such a “Duh Article.” A “Duh Article” is one of those articles that are true, but so true in the fact that you end up saying, “Duh, I know that!” and wonder why such basic teachings become important when they are finally backed up by a case study. Did anyone really not think that personal relationships help? Or that Wimpy, the borrower you didn’t know, would not really pay you on Tuesday when you relied on just his word? It goes both ways.
Below are a few ways to avoid the Wimpy traits of sales when building a relationship between you and a business owner:
#1 Rule of Sales Relationships: What are you even selling?
You are selling money so it shouldn’t be that hard right? WRONG. Even though everyone could use an influx of capital, you have two factors that impact your sales in the MCA Industry. PRICE and PROMINENCE.
- Price: We are already slandered for putting a hefty price tag on advances and even if you say, “We offer factor rates as low as a 1.08!”, How many 1.08 deals do you really close?
- Prominence: Names, Logos, and Promises. Characterization plays a big part in what you represent. With so many MCA Entities popping up, how do you set yourself apart?
You have to offset the two factors by building the relationship and creating an understanding.
Example: Imagine you are selling a line of ketchup to every hamburger shop in the U.S.
Do they already have ketchup? They will eventually need to reorder. So where do they get it now? Are they content with this outlet or have they never thought to seek out an alternative? This is the same “question scenario” you have to answer when selling. Note: Replace Ketchup with Capital.
- Do they need capital now?
- Will they need more capital soon?
- How do they get capital when they need it?
- How can I deliver all of the above and be their new preferred choice?
If the answer to the first question is no, that’s okay, move on to the next question. You are more likely to close double the sales when you answer the second and third one. Either way, one of those will have an answer.
#2 Rule of Sales Relationships: Understand the Market you are Targeting
Who is your target market and do you understand them? This is one of those situations where I feel offering a factor to a manufacturing company that is based on invoices is just plain dumb. There are many alternative financing options that are more mainstream than you think and it all boils down to the top 3 things:
- Industry: Do you understand the industry you are selling to? You will connect better with your merchant if you understand the inner workings, schedule, and the ways they obtain their receivables. Their Industry is their passion. If you don’t connect with their passion (unless there is a dire need for emergency capital) you will not be taken seriously or remembered. Ask yourself, “how can I demonstrate an understanding of the way the business makes money or works with different vendors to get paid?”
- Credit: Don’t promise a low rate to a business that you know has a credit score below 600. Research the different tier programs PROVIDED to you by most Direct Funders. Categorize your tier sales structure and request examples of similar past funded industries from the Funders you work with.
- NEED:If they do need capital now, what is it for? This is a great conversation starter. Whether it’s a seasonal need, equipment-related, or plain ol’ working capital, probe the conversation by finding out their goals so you can better represent the merchant and fit them to a better funding program.
#3 Rule of Sales Relationships: The Follow up
This may go far beyond the basic sales guidelines, but categorize your prospects!
Example: Say you have a book of restaurants that you have connected with before and you know they are going to start gearing up for the holidays. Let them know you UNDERSTAND this time of year and how you can assist! Personalize the need of capital with something they base their business on. This is where direct marketing comes into play. If you remind them of who you are and that you are to assist them to manage the most stressful money making times of the year, they will think of you as their go-to when they NEED it.
The Myth of the Exclusive Lead
May 14, 2015
The Small Business financing space is getting crowded. There’s no disputing that. With new ISOs and Direct Funders appearing each day, this space is getting tighter and tighter. With a finite number of small businesses that are receptive to a certain type of loan instrument, competition can be fierce. Both existing and new funders are looking for ways to gain new business to ensure a stream of income. Many turn to lead providers like myself, but many ask the same question “Do you do exclusive leads?”
When theLendster was first starting out and getting its sea legs, a meeting was held with the management team and the idea of selling exclusivity to our clients was raised. This idea was warmly received all around the table. After all, the price would be higher. However, this became more troublesome than it was worth as we soon found out exclusivity was a myth and made us look not forthcoming with our clients.
The number of small businesses is finite but measurable. There are 319 million people in the United States today. Broadly speaking, small businesses are about 10% of this number. Therefore, we are looking at more or less 32 million businesses across the nation. Now, how many are looking for what we’re offering? 10%? 25%? 50%? Using these percentages, the “goldilocks” businesses (not able to get a bank loan but at the same time able to pay back an MCA or small business loan) number anywhere from 3 million to 16 million.
While this is a wide margin, it demonstrates something regardless: the number isn’t that large. So when adding in lead generators and funders/ISOs who do their own direct marketing, the competition to get a lead’s attention is fierce. The problem is everyone is reaching out to the same businesses. These prospective customers are being bombarded from all angles: telemarketing, email and direct mail. Each of these all sound like there could be some exclusivity and while a salesperson may have a small window of opportunity to grab the attention of the decision maker, it doesn’t last forever.
So when a business is identified, the whole industry zeroes in on them. Let’s give a hypothetical example: A salesperson is connected directly to the business’s decision maker via a live transfer telemarketing campaign and is able to talk to them about the product. This can lead to an application sent out. However the second the business owner hangs up the phone, they’ll go to their mailbox and get a letter from another funder or ISO. Now their attention is shifted to the letter. Then while reading the letter, in between serving customers, the phone rings again. It’s another funder. They listen and perhaps send an application. And then, When going to read their email, they are part of drip marketing campaigns from still other funders or lead generators. So right then and there, the attention that the original salesperson was fortunate enough to grasp has quickly faded away.
So how can a lead generator guarantee exclusivity? The answer is this: beyond promising not to sell the lead multiple times, there’s not much they can do. Going back to when theLendster was in the middle the exclusivity experiment, our clients would come back day after day saying that we were misleading them. Business owners would answer their phone and say, “I’ve been contacted by you dozens of times.” While this was true, it wasn’t an entirely accurate statement though. The leads that were sent were only delivered to one client. However, anything that was occurring outside the confines of theLendster was beyond our control. So clients believed that multiple competitors were contacting the leads from theLendster’s list, which was not the case.
In the end, theLendster decided to move to a shared lead model to ensure that clients who signed on were aware that not only would they be competing against others for the lead that was delivered, but also against others who reached that lead through other lead generators or marketing initiatives. Since then, clients have been satisfied and were able to adjust their sales tactics to make sure that they have a fighting chance on closing the business. In fact, many of the clients we have expressed that they are more successful using this approach.
But why are funders drawn to the exclusive lead? It’s simple. They believe that they are the only ones that will touch this potential customer. This gives their sales team a competitive edge. However, with the funding space as crowded as ever, it would be a success if the day the lead comes in that it was only touched by 3 or 4 other companies. This is why the exclusive lead is a myth. With hundreds of marketers dipping their hand in this well, nothing like exclusivity can be guaranteed.
All is not lost though, as leads themselves provide an invaluable service to ISOs and Direct Funders. Without this necessary marketing tool in the hands of sales teams, there would be no selling. Simply put: leads are the lifeblood of this industry. It’s what powers the sales engine and connects funder and funded.
From a funder and ISO viewpoint, exclusive leads should not, and from now on cannot be viewed as a siloed item. Business owners are not sitting by the phone, the mailbox, or the computer waiting for a funding opportunity to arise. They are out there running their businesses and trying to make their living. However, in between the day-to-day running of their business, they are being exposed to multiple solicitations from a wide range of funders. These prospective customers live in a world where they are constantly being exposed to your competition. Exclusivity is not the “golden gun” that can change a funder’s narrative. Because it was never existed in the first place.
Why Your Deal Got Stolen
September 16, 2014
Back in April, I presented the idea of trigger leads coming to the alternative lending industry. In subsequent discussions about that blog post, many folks particularly in merchant cash advance questioned whether such a concept could possibly exist or would even be legal.
For those not familiar, this is the methodology behind trigger leads using a hypothetical scenario:
- OnDeck runs the personal credit of a merchant using Experian.
- Experian sells the contact information of that merchant to OnDeck’s competitors immediately after credit is pulled.
- Competitors solicit that merchant and convince them to go with them instead.
Again, the reaction I get to the above scenario by most people is, “yeah, right. I don’t believe that could happen.” But if you look at the raw amount of ISOs complaining their deals got stolen, it’s evident that perhaps there is something else brewing than just the usual assortment of rogue underwriters and shady funders.
Most ISOs are convinced that if their client is working with them and only them, that a shady business dealing has taken place if that client is randomly called out of the blue with the knowledge that they’re pursuing funding. To them, the only conclusion is that their deal got backdoored.
And while backdooring does seem to happen out there from time to time, another culprit may very well be trigger leads. Credit bureaus and big data aggregators are selling credit pull data in real time. UCC-1 leads are leads after the funding has taken place. Trigger leads are leads before the funding has taken place. But do they really exist?
Elsewhere in alternative lending, trigger leads are the backbone for how companies tailor their direct mail campaigns. If a consumer’s credit was pulled today by a mortgage lender, companies like Lending Club and Prosper will make sure that consumer receives a mail ad for a home improvement loan tomorrow.
Today at the Apex Lending Exchange conference in New York City, Ron Suber, the president of Prosper, referred to this trigger methodology as “getting to the right borrowers at the right cost.” In their sector, trigger leads are marketing 101. In merchant cash advance, it’s perceived as a pipe dream. Odds are that whoever is taking advantage of trigger leads in this industry would want to keep all the other players in the dark about it.
As much as you might hate to believe it, all of the backdooring paranoia that’s been rampant lately might actually be caused by the credit bureaus, not the funders. The lesson here is that as soon as your merchant’s credit is pulled, the clock is ticking until your competitors find out even if that merchant talks to nobody else.
I know ISOs want to believe that their merchant is only theirs, but in the age of advanced technology and big data, your merchant belongs to the cloud. As soon as your relationship with the merchant interacts with technology, somebody else will find out about it. And that’s why your deal got stolen.
Merchant Cash Advance Hits Shark Tank
October 26, 2013
If you missed Friday night’s episode of Shark Tank, you absolutely must catch a rerun of it. Jason Reddish and Val Pinkhasov came on the show to pitch their merchant cash advance company, Total Merchant Resources. It was one of the best few minutes in merchant cash advance history for several reasons:
- Mark Cuban, the 213th richest man in the U.S. feared the growing popularity of expensive short term financing would invite tough government regulation.
- Kevin O’Leary understood that there were no barriers to entry and thus anyone with money can get into the industry.
- Robert Herjavec thought the capital was too expensive for small businesses.
- Kevin O’Leary said that non-bank alternative lenders like Total Merchant Resources were necessary to keep businesses afloat.
- Jason Reddish went at the Sharks like a Shark himself.
TMR walked away with a rather small 400k valuation through the deal they made with Kevin O’Leary that gave them 200k for 50% equity. It was O’Leary’s claim that his connections and capital would blow the lid off their business that was too good to pass up.
O’Leary had a compelling argument for why his terms were non-negotiable. Anyone can be in this business. The valuation itself was moot because two guys with a relatively small operation just became partners with a famous venture capitalist worth $300 million. Had I been in their circumstances, I would’ve taken the deal as well.
O’Leary’s name in the space makes TMR relevant and a company to watch out for, but they are by no means guaranteed success. They are up against much deeper pockets. Dan Gilbert, the 126th richest man in the U.S. owns RapidAdvance (through Rockbridge Growth Equity), a firm that got an enterprise valuation of over $100 million. Google and Peter Thiel have their hand in On Deck Capital. Google also has a stake in Lending Club, a peer-to-peer lender worth $1.55 billion that threatens to disrupt the alternative business loan market with their new loan product come early 2014. Capital Access Network funds nearly three quarters of a billion dollars a year. Every day another power player swoops in and raises the stakes, putting O’Leary in a position he’s probably not used to being in himself, in the shark tank.
At the end of the day, there are a lot of profitable ISOs and small funders. Pinkhasov and Reddish did what no one else to date has done, gone on TV and pitched Mark Cuban on merchant cash advance. And for that, they will go down in history. We’ll follow their story as it develops and I invite them to e-mail me if they’d like to comment.
You can follow the thread about their appearance on the show and find the link to the video on DailyFunder.
Don’t Throw That Deal Away, Factor It
September 3, 2013
As we start off our first blog post in Merchant Processing Resource, I’d like to talk about a deal that we just got a factoring line for:
A landscaping company came to SFS because his business was starting really to take off and was beginning to get large contracts to provide masonry and landscaping work. The merchant was approved for a cash advance but it was not enough to cover the funds he needed. He applied to SFS+ for an Accounts Receivable factoring line and was approved for $500,000. The line allowed the merchant to sell SFS+ outstanding invoices for work that was already completed for a large office complex and shopping center. Between the factoring line and the Cash advance line the merchant received $650k in working capital!
He went to his local bank and while the bank said they love the depositing relationship, they have no interest in lending him money. Next stop: his accountant — the accountant said they would have to have a balance sheet for the bank. Well his business did not have 12 months to build his balance sheet he needs to address the opportunity (not a problem) today!
He found us though an SFS ISO and realized that we were a one stop solution for ALL of his cash flow needs.
SFS and SFS+ provided his business with a cash advance and factoring line. So, not only did they address his current opportunity they also enabled him to expand his business as much as he wants, and when his balance sheet is stronger he can go back to the bank.
So how do you know when factoring is a good option??
Ask them: “does your business have receivables?” if they say yes, ask them to submit your cash advance application and their business’ accounts receivable aging reports, we can then give you a quick response on how we can move forward.
