Can a Broken Window Be a Good Thing?

November 2, 2012
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broken windowThere’s a ton of controversy right now as to whether or not the devastation caused by Hurricane Sandy will, or will not, serve to stimulate the economy.

Obviously there are two camps: one says Sandy is stimulating and the other days it isn’t. It would appear that the only thing we can be sure Sandy is stimulating is controversy over whether or not it will serve as a boon to what many see as our nation’s less-than stellar economic recovery (at least in the areas devastated by the storm.)

But this debate isn’t limited to people duking it out on Facebook using terms such as “jerk” and “idiot” to prove their point (otherwise known as an ad hominem, or “against the man” argument that confuses name calling with intelligent debate.) We’ve got some serious academic economic theory out on the table.

On one hand you’ve got your Keynesians (20th century economist John Maynard Keynes gave us the theory.) Keynesians were/are considered “revolutionary” in that they deny the ability of a free economy to “fix” or stabilize itself and instead feel that, in order for an economy to consistently support full employment and stable prices government must implement policies that stabilize prices and create full employment scenarios.

On the other hand you’ve got economists who support a “laissez-faire” economy. (18th century economist Adam Smith provided us with this theory.) Adams and his adherents felt that since human beings are guided by self-interest as long as you leave the economy alone (i.e. no government intervention) the result will be a balanced, self-regulating economy because that is the state of economy that best serves self interest.

And then we’ve got Frédéric Bastiat. Ironically he happens to be a great defender of laissez-faire economics. We say ironic as it is his “Parable of the Broken Window” that tells us that, in fact, destruction, whether it be caused by natural forces (such as Hurricane Sandy) or man (such as wars) do not stimulate the economy by creating more business (and therefore more jobs.) Bastiat included the story in an essay entitled “The Seen and the Unseen.” Here’s the short version of the parable:

The Seen: A boy breaks a store window. The owner now pays for a new window, which creates income for the glazier.

The Unseen: Because the store owner has to fix his (or her) window, he (or she) now doesn’t have money to invest in the growth of their business – or for anything else they might have spent it on.

In other words, Bastiat’s theory is that destruction doesn’t create more income, it simply reallocates income. Obviously, if this is true, disasters that cause mass destruction don’t stimulate the economy.

As far as the battle between laissez-faire and Keynesian economists are concerned, for our purposes let’s just say the jury is still out, especially after suffering through this last (or current depending on who you listen to) economic debacle. On the one hand, Keynesians can gloat over seemingly infinite corporate greed that resulted in lost homes as well as lost jobs – on the other hand, those who live on the laissez-faire side of the street can gleefully cite how President Obama’s stimulus package perhaps did nothing more than (as Bastiat might say) help us see that the economy was “worse than we realized.”

window display

Back to Bastiat

Whether or not laissez-faire or Keynesian policy should be pursued in the effort to cure the economy really isn’t the point as related to the impact of Hurricane Sandy – at least for the purpose of this article. What is at hand is whether or not Bastiat was right. However, perhaps we’ve left out an important economic theory. And that would be Darwinian, or “evolutionary economics.”

There is no getting around the fact that evolutionary economics is pretty darn complex. Evolutionary economists like to use a lot of math – especially something called game theory which uses math to explain/describe what might appear to be “irrational” economic choices or events.

However, one thing we can all understand is that evolutionary economics uses methods and ideas similar to those used to study biological evolution. And most of us are very familiar with the evolutionary concept of “survival of the fittest.”

Just for a minute let’s suppose that two store owners find that someone broke their window (destruction.)

The Seen: Both hire a glazier to fix their window (and we see the glazier benefit.)

The Unseen Store Owner #1: Poor guy (or gal) is forced to use money previously identified to be used to pay for an ad in the local newspaper to promote an upcoming sale. Now that the cash is gone, the store owner responds by throwing up their hands in despair.

The Unseen Store Owner #2: Decides to take President Theodore “Teddy” Roosevelt’s advice and “Do the best I can, with what I’ve got, where I’m at.” Knowing the ad is now out of the question, and without any funds left to promote the upcoming sale, she (or he) decides to use the new window to showcase the sale.

The store owner pulls out every old decoration from every holiday or special event sale from the back room and decorates the new, clear as a bell storefront window. She (or he) then gets on Facebook and Twitter and announces a contest to come up with a name for a sale that encompasses every holiday and special event known to man. The contest winner will receive $200 to donate to their favorite community charity. She (or he) contacts every existing customer via email to inform them of the upcoming sale and contest and asks them to spread the word.

The local community newspaper (ironically the one that the paid ad would have run in) picks up the story. The sale is a huge success. Too many people assume that “fittest” always means strongest. Wrong. “Fit” means the organism that is best able to adapt when the environment changes.

Obviously Store Owner #2 fits that bill. The moral is that, no matter what the “disaster”, be it hurricane or recession, crossing your fingers and hoping for the best or hoping the government will save you are not your only two choices. One choice will always be yours to make, and that is choosing to do the best you can, with what you’ve got, where you’re at.

Guest Author
– Merchant Processing Resource

Why You Need FundersCloud – An Independent Review

August 29, 2012
Article by:

Picture this:

You get up in the morning, take a shower, brush your teeth, and hop on to your computer. 73 new e-mails are waiting in your inbox. Ugh! Some of them are saying “Hey buddy, I got this deal that I think you might want to co-fund. Give me a call later and I’ll try to give you a breakdown.” Half of the time when you call these guys back, they’re busy, have already found a participant, or the deal is way too risky for you to be interested in. Fortunately, you don’t really have to deal with this hassle ever since you joined FundersCloud. You close Outlook, log in to the Cloud and check out the menu of fresh deals that have been posted to the site. You read them aloud to yourself as you scroll down the list. “15k in monthly credit card sales, 40k gross, 720 credit, in business 3 years, ooo.. and it’s a restaurant! $10,000 advance for $13,700… I like… I like… oh and $7,000 has already been raised.” You click ‘Bid’, type in $3,000, and click ‘Bid’ again to finalize. That’s it. You’re done. Once the agent closes the deal, your $3,000 is automatically withdrawn, along with the amounts from the other participants to fund the merchant the $10,000. Satisfied, you walk into the kitchen to make toast…

And that’s what FundersCloud has done. Whether you are an independent agent, an ISO, or a funder, deal syndication is now as easy as:

Wake up -> Log on -> Bid only on deals you like -> Make toast

FundersCloud is not the competition. They’re the turbo boost button to the marketplace that already exists. This Cloud doesn’t threaten or replace your existing cloud, system, database, or CRM but rather complements it, integrates with it, and adds even more value to what you already have.

toastFundersCloud makes funding quicker, smarter, more efficient, and incredibly transparent. This isn’t a paid advertisement. In fact we spent a few weeks on the phone with the FundersCloud team to come up with our own independent assessment. “How does this work? Who reviews this data? How can people trust you?” and so on… We’re actually thankful their team is still accepting our phone calls after our barrage of questioning and requests for details.

The reason we believe FundersCloud is the future of syndication is because it allows people to continue syndicating with funders and people they already trust.


Allow us to explain using a fictional example:
Funder 123 encourages friends, agents, and funders to participate in funding certain deals. ISO ABC likes to syndicate some of those deals but not all of them. So the owners of ISO ABC wait and hope that Funder 123 will call them sometimes with a deal that they like. Sometimes they hate the deal. Sometimes they like it. Other times, they play so much phone tag that they miss out on the opportunity. The process takes phone calls, emails, and time, time, time. Not to mention that Funder 123 may make several of these calls to other people to join in on the participation as well.

In a perfect world, ISO ABC would automatically be notified that Funder 123 has approved a deal and is seeking participants. The key factors like credit score, processing volume, batch frequency, gross sales, and other pertinent information would be immediately available. The ISO could then click a button if they wanted to participate and the rest of the process would all be automated. This perfect world exists because this is the FundersCloud model.

Ohhh yea! And it gets better
An agent is tired of submitting his/her deals to 5 funders at once, hoping that one of them will approve it. The funders are tired of the agent doing that too. Because the agent is forced to maximize the odds of approval, there is really no alternative solution than to continue operating this way. FundersCloud resolves the mess.

Hypothetical Agent DEF uploads their deal to the Cloud and selects one company from the vast array of Deal Controllers to verify and underwrite the file. Deal Controllers are typically existing funding providers, companies that have the ability to pay commissions, collect funds back from the merchants, and track the activity. Perhaps Agent DEF’s deal does not accept credit cards but does more than $10,000 a month in gross revenue, something that a lot of companies like to look at now. So Agent DEF selects a funder as the Deal Controller in the Cloud. The underwriters at that funder are then able to access the deal through the Cloud and underwrite it. If the file meets their standards, they Verify it. The funder can then choose to fund 100% of the deal themselves or pledge to fund anywhere from 1% to 99% of it and put the remaining percentage of the approved funding terms up for auction on the Cloud.

The key details of the deal are then immediately posted and viewable to all members of the Cloud. Thousands of people will now see that a funder has verified this deal and is willing to fund part of it. If you trust that funder’s judgment, have participated with them before, or just love funding anything you can get your hands on, you can opt to participate in the deal with them. You’re not flying blind because the credit score, processing volume, gross sales volume, time in business, type of business, and batch count are all there for you to see. Cloud members can’t steal deals because any information that could be used to identify the merchant is not visible.

So why is this better? You’re only submitting your deal to one Deal Controller (funder) through the Cloud, which then allows thousands of agents, ISOs, and funders to participate if the Deal Controller chooses to fund none of it or less than 100% of it. With this kind of system, why the hell would any agent continue to send out their deal to multiple funders and then wait a week to hear back from all of them? The merchant’s credit would get hit 5 times, one of those funders might steal the deal for themselves, and at the end of the day, only 5 people are looking at it. Wouldn’t you rather let one funder Verify your deal and then give thousands of companies and agents the chance to fund it? Seriously…

If the Deal Controller is verifying the deal and can see the full file, what’s to stop them from stealing it?
A contract, a zero-tolerance policy, and a reminder that it’s up to you to choose your Deal Controller. If there are two choices in the Cloud to Verify your deal and one is XYZ Funder and the other is someone you know very well, you can pick the company you like. Many other people may trust XYZ Funder but if you don’t know who they are, then you need not select them. Besides, if a Deal Controller is caught stealing a deal from the agent through the Cloud, they will be banned. The industry is competitive and even though there are many safeguards already in place, FundersCloud will not tolerate anyone who tries to pervert the system.

Is this process difficult for the agents?
We must admit that when it was all first explained to us, some of the terms went over our head. That’s mainly due to the fact that for all the evolution within the Merchant Cash Advance industry, many things are still kind of old-fashioned. For all the systems, databases, and clouds floating around out there now, too much time is spent e-mailing, calling, and meeting up for lunch to discuss the details that we must then go back and enter into these systems, databases, and clouds. Once you sit down and play around in FundersCloud for yourself, you’ll kick yourself for not developing this on your own or curse the Merchant Cash Advance gods for not having introduced this into your life years ago. This process is just as easy for the agent as it is for the other roles.

Agent uploads deal -> Agent chooses Deal Controller -> Deal Controller Verifies Deal -> Cloud members pledge money by placing bids -> funding contract is automatically generated and made available for download to the agent -> Agent closes the deal and uploads signed contract to the
Cloud -> The Cloud automatically pulls the funds from the pledged participants and transfers them to the Deal Controller -> Deal Controller funds the merchant and is responsible for managing the account -> Agent gets paid the commission by the Deal Controller -> Agent makes toast

The deal’s performance is then made available to the involved parties through the Cloud in real time. And since the Deal Controller is obligated to manage the deal on the Agent’s behalf, the Agent retains full control of the deal on renewals. Similarly, participants are given the option to join in on renewals or new participants can be brought in altogether. Many things can happen, but all of them lead to more funding, faster funding, and a system that’s more transparent for all the parties involved.

Your own internal cloud, system, database, or CRM is probably doing wonders for data management within your company. So why resist technology in other areas? FundersCloud isn’t a concept, it’s live. Deals are already being posted, funded, and tracked. Which means, even if you’re skeptical or have a thousand more questions, you need to sign up (it’s FREE) and see this for yourself. We’ve kept tabs on a lot of events in the Merchant Cash Advance industry, and this is one of those moments where we need to pause, join the Cloud, and make toast. Because the toughest part of getting a deal funded in the future, will be deciding if you want White, Rye, or Whole Wheat afterwards.

The FundersCloud Website

– deBanked

Note: This article was originally drafted in late April but was on hold while FundersCloud made some key upgrades. We apologize if we left out any of the new cool features.

Remember “Thinking Out of the Box?”

August 10, 2012
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think outside the boxRemember when “thinking out of the box” was all the craze when it came to finding solutions and building business? Today most of us disregard thinking out of the box and much prefer being “creative” and “innovative.” We’re much more sophisticated in our approach. Thinking out of the box appears to be a metaphor that has outlived its use. In today’s business environment if you want to succeed you’re better off concentrating on coming up with creative, innovative solutions and products.

Not so fast say American and Chinese researchers who conducted some pretty interesting research into the psychology of creativity.

Here are a few examples of what they found out:

  • An experiment was conducted where people were placed either in a five foot by five foot “box” or seated outside the box. The people outside the box were found to perform at higher levels when taking tests that required creative thinking.
  • In another experiment it was found that being able to walk freely about stimulated more creative and effective thinking and problem solving than those who were instructed to walk in a straight line.
  • In a particularly interesting experiment people were asked to put two things together. The group who received instructions to act out the metaphor of putting “two and two together” were more successful in developing different ways to approach the problem successfully.

Taking the Research Out of the Lab and into the Real World
It might appear that this research has very little, even nothing, to contribute to the growth and development of your small business. So let’s take a second look at the findings as they relate to your business and the workplace:

The first experiment found that most people work better in an open environment. How many of us and those who work for us do that work in square offices or cubicles? Not everyone would be comfortable working in a completely open space, but doing our best to provide work spaces that evoke creativity and innovative thinking would likely be good for business.

In the second experiment people were found to be better able to solve problems as well as think creatively when not required to walk in a straight line. Most small businesses owners see productive workers as workers sitting at their desk or station. For example, it could be that an employee might think better when solving a problem when speaking to a client or customer on the phone if standing and allowed to move about. This increase in innovative thinking may not apply to just physically walking in a straight line. Small business owners might want to consider examining policies and procedures to see if allowing employees to “walk more freely” might mean more effective and productive employees.

The last experiment where people were asked to put things together poses more of a challenge to apply in the real world your small business operates in. Perhaps the best way to look at this finding is to view to approaching what needs to be done in different ways to be an effective means to find the best way to do things. After all, what better metaphor is there for solving a problem correctly other than “put two and two together?”

The last thing these experiments demonstrate is that perhaps we’re wrong to believe “thinking out of the box” is a method to improve business that’s seen better days. As a matter-of-fact, thinking out of the box appears to be another term for creativity and innovation.

Guest Authored by Annie:
– Merchant Processing Resource

The Funders of Summer

August 2, 2012
Article by:

What’s new? Who funded? What happened? Merchant Processing Resource will try to give you a glimpse into the Merchant Cash Advance (MCA) universe:

We all know salespeople love to fund, but underwriters?!! This banner hangs on the wall of the underwriting department at mid-sized MCA firm, Rapid Capital Funding:
rapid capital funding banner

Holy Moses Batman! $10 Million in a month?! Yellowstone Capital is reporting a new personal monthly funding record of $10,245,000.
batman yellow

There has been an influx of really creative instructional/promotional videos about MCA lately. Cartoons are really “in” right now:

PayPal white labeled a Merchant Cash Advance program in the U.K.

Will the mega banks be next?

It feels like 2006 all over again says First Annapolis Consulting in a recent article:

This seems to be the same bullish sentiment that surrounded the industry in 2006, when there was a constant influx of new MCA providers into the industry and what appeared to be unlimited financial sources. What might be different now is the experience accumulated in the industry during the recession. In the last few years, and as a result of the mounting losses that the industry suffered during the economic crisis, MCA players have implemented more conservative risk management practices and procedures.

Underwriters industrywide are also reporting that stacking, splitting, double funding, and fake statements are on the rise. It certainly brings back some nostalgia for veterans and not the good kind. A screenshot of a current ad on craigslist that is directed at bad apple merchants:

novelty bank statements

A new chapter opened for Merchant Cash Advance (This is soooo last month but a great read if you missed it).

Is the loan shortage a banking problem or a merchant problem? Ami Kassar makes the case in his New York Times column.

Where are the leads? I need the leads. Can you tell me where the leads are?” We literally get asked daily where to get leads from. We recommend:

By the way… for every company that says cold calling doesn’t work, there’s a company getting rich doing just that. Same goes for SEO, mailers, e-mail blasts, PPC, and so. Marketing is an art form. Just because it doesn’t work for you, doesn’t mean it doesn’t work period. Keep doing what you’re doing. Too many ISOs/agents/marketing directors abandon campaigns after 30-60 days. Practice makes perfect!

Have you abandoned social media? We ask this question: What looks worse to a prospect?

Not having a business twitter account or having one but failing to tweet at all in the last 8 months?
Not having a business blog or having one but failing to add any new blog posts in over a year?

We didn’t spend much time researching hard data but we would surmise that freshness is a psychological component to a prospect’s shopping experience. If a business blogged regularly on their site up until May, 2011 and then stopped, might a merchant think the entire business itself is abandoned or gone? Is a facebook fan page with 1 post from 8 months ago a positive or negative selling point? WE SAY: If you build it, maintain it. Nothing brings down your presence on the Internet like abandonment. We understand that smaller companies might not have the manpower, time, or creative energy to write informative articles or engage people through social networking, especially when it’s hard to measure the results and value it creates. Consider the value you might actually be losing by projecting to the world that you have given up. It’s like operating a store with a sign out front that says “THIS BUILDING HAS BEEN CONDEMNED” even though you are actually open for business. If WE stopped posting articles for a year, would you still come back several times a month?

abandoned blog

Here are two examples of MCA firms that keep it FRESH!:

Don’t you just love MCA? We do! Visit our site again soon.

– Merchant Processing Resource

Smart Small Business Owners Have After Sales Strategies

July 27, 2012
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baklavaWe all want to be successful small business owners. And that means being a Smart Small Business Owner. Part of being a Smart Small Business Owner (SBO) is understanding the importance of designing and implementing effective after sales strategies.

SBO’s know that it really isn’t about attracting customers. Keeping that pipeline of potential customers flowing is really just a basic cost of doing business. You can be pretty darn successful when it comes to attracting customers. You can be pretty darn successful converting those prospects into making a purchase. But what’s really going to grow your business isn’t only attracting and converting prospects into customers – it’s building strategies into your business model that pull another couple rabbits out of the customer hat: repeat and referral customers.

The term “After Sales Strategies” should not be confused with selling extended service or product subscription programs. Not that these aren’t something to consider as they both represent excellent additional revenue streams. It’s great to sell a customer a jar of face cream – it is even better to sell them a pre-paid jar of face cream for a year. It’s wonderful to conduct a home inspection for a client before they purchase a home – it’s even better to sell them a pre-paid seasonal inspection service.

However, that’s not the kind of “after sales strategies” we’re talking about. What we’re going to address here are a category of after sales strategies that do some pretty important things when it comes to growing your small business:

• Improve Customer Satisfaction
• Improve Customer Retention
• Increase Positive Word of Mouth

It Pays to Act in The Best Interest of Your Customer

But first we need to talk a little bit about exactly what type of “After Sales Strategies” we’re talking about here. Simply put, these are strategies which, from the customer’s perspective, are “freebies.” They’ve already pulled out their wallets and handed over their cash and then receive a pleasant surprise: the business they’ve already handed their money over to does something in their best interest without trying to sell them something else in the process.

Here’s a really simple example of how powerful after sales strategies can be.

You decide to try out a Greek restaurant you’ve never been to before on date night with your spouse. You order your meals and they’re pretty good. No complaints. The server is friendly and attentive. The décor is nice. You’re in the process of signing your check. You’re not overly wowed, but you might come back. Maybe, if you happen to be hungry and in the area at the same time.

And then you get a nice little surprise. Your server approaches your table and places two small cups of Greek coffee accompanied by two small, yet perfect squares of baklava.
You say, “We didn’t order desert, I’ve already signed off on the check.”

Your server says, “Oh, this is just a little treat with our compliments to top off your meal. I can put it in a box if you’re ready to go.”

You don’t even like baklava (but your wife does) and you’re not sure how you’re going to feel about Greek coffee. But there is one thing you’re sure of now – you’ll be coming back. There were those rolled grape things on the menu you’ve always wanted to try. When you show up at work on Monday you tell your friends about the great Greek restaurant you took the wife to over the weekend. Hearing about the free dessert, a few of them ask for directions. On Friday, a group from the office runs over to catch lunch.

That coffee and dessert was a simple, low cost, yet effective, after sales service strategy. As a result you:

• Were more satisfied
• Planned on making another purchase
• Told others about your great experience

All three of the above are certainly responses you’d like from your customers after they’ve bought from you. Which leads us to a great question all you SBO’s out there should be asking yourselves right now:

What are some simple, low cost, yet effective after sales service strategies I can put into place?

Article By: Annie