Note Course Bonus - My Career As A Factoring Broker
Published: Wed, 08/27/08
Thanks for your interest in our first teleconferences
introducing the factoring broker business last week.
To start profiting from this little-known opportunity
you'll need the Factoring Broker's Startup Package OR the ultimate,
the FactorMax Guerrilla System. Here's more information:
www.papersourceonline.com/factor-training.htm
I thought you would enjoy the following article, "My Career As A
Factoring Broker," by Robert McMahon, president of Aegis Factors.
It's quite a story!
Regards,
Bill Mencarow
President, The Paper Source, Inc.
www.PaperSourceOnline.com
www.cashflows.org
MY CAREER AS A FACTORING BROKER
by Robert McMahon, President, Aegis Factors/DMS
While many areas of the paper industry offer career opportunities
for the well-informed, few provide the combination of ease of
marketing with exceptional commission payout structure as is
found in the factoring industry. For career-minded brokers
seeking to build a true business in cash flows, factoring remains
the "industry jewel" with almost no limitations with regard to
success.
My Introduction to the Industry
In 1982 while a stockbroker at Merrill Lynch, I was on
vacation in Las Vegas passing time at a blackjack table trying to
make up for (with very little success) what my wife was spending in
the shops at Caesar's Palace. At the table with me was a gentleman
in his late 50's from the New England area who struck up a
conversation during a respite and change of decks. When he asked
me what I did, I proudly replied that I was a stockbroker, and he
informed me that he had been a broker for many years on Wall Street.
When I asked if he missed the business, he confidently
replied, "No, not really. I found something better to do."
I then asked what he did, and he told me he was now a broker in
the factoring industry.
Over the course of the evening I learned some basics about his
business, and what I was quickly losing at the blackjack table was
more than offset by the knowledge I was gathering from
this highly successful consultant. Most importantly, I learned
that while I had made a six-figure income that year as a
stockbroker, he had earned over four times my commission as a
factoring consultant. The frosting on the cake was that he was
working from his home in the summer, his sailboat in the fall and
spring, and then wintered at a different island in the Caribbean
each year. Hmmm!
I Meet a Real Factor
Some years later in the early 90's I was at a convention of
restoration and remediation contractors in Florida looking for a
little business when I saw a gentleman with a name badge
which displayed his name and his employer, "American Factors." I
quickly went to him and asked if he was a factor, and he replied,
"yes." With that, I literally dragged him into a corner,
proceeding to tell him the tale of the factoring broker I had met
in Las Vegas nearly ten years earlier and then asking how I could
find out more and get into the industry.
He said he would be happy to send me a "Broker's Package"
which would explain a lot about the industry. He said he would
also work with me on my first deals to show me the ropes.
True to his word, I received a package of materials the next week
and became an independent broker for American Factors in the
commercial factoring industry.
Setting Up Shop
One of my first tasks was to gather as much information as
possible about the industry, and I set out to get as many "Broker's
Packages" as possible -- not really easy in the early 90's (Al
Gore was still working on the Internet), but, nevertheless, I did
find about a dozen other factors and received a package of
materials from each one. By the time I picked apart all the
packages, I had a good working knowledge of the industry, what
factors were looking for, and even some samples of marketing
materials I could order for direct mail marketing. I rented some
office space from an attorney friend, subleased half the space to
three court reporters which generated a positive cash flow, and
moved in my desk, filing cabinets and equipment. Since I already
had a computer, copy machine and dual line phone/fax system, I was
officially in business as a factoring broker.
Now, for my first account.
A Second Look at the Business
Still a little green and lacking experience, I begin to take a
second look at what factoring actually was. These guys
(the factors) simply buy invoices of quality that will pay in 30,
45, or 60 days. They buy from small business owners that need
the money now and can't afford to wait. The question then was
simply, "Where do I find small business owners that are waiting for
payment on invoices that are of high quality?" The answer....Home
Depot.
Major retail stores like Home Depot, Lowes, Sears, Target, etc.
have lots of products from major manufacturers where waiting 45 to
60 days to receive payment is no big deal. They also, however,
have many products from smaller manufacturers and distributors
where waiting 45-60 days causes serious cashflow problems.
These small operators have weekly payroll, suppliers to pay, and
other expenses that can't be put on hold while the major retailer
takes its sweet time to pay. A middle man with cash is needed to
finance the invoices, and that middle man is known as a factor.
Finding My First Gold
Armed with a small spiral notebook in hand, I began to walk
the aisles at Home Depot every evening looking for unique little
products obviously made by small manufacturers. I would gather a
bout 20 names every day, send a piece of mail to each, and
then follow up with a cold call in about five to seven days.
My first gold was struck in Florida. It was a manufacturer
of aluminum clothesline poles that was waiting over 45 days to
receive payment on their Home Depot invoices, and it was
causing severe working capital problems due to payroll and supplier
payments. I set up a conference call between the company owner,
the factor I was working with and myself. The account was opened
immediately with a "10% of the fees earned" commission now being
paid to me.
Continued Success at "The Depot"
The clothesline pole company was the beginning of several
accounts generated from my adventures in walking the aisles at the
local Home Depot. The aisle managers were beginning to
give me and my little notebook dirty looks, however, so I decided
to broaden my marketing mix and place some small classified ads
in Thrifty Nickel-style publications and see what I could
uncover.
Major Gold Struck Again
The very first ad I placed brought in a painting contractor
that refurbished local apartments when renters moved out. His
crews would mask and spray the apartment, repair drywall, re-
caulk tubs and showers, etc. and then submit their bill. Because
most of the complexes he worked for were owned by large development
companies, it was taking up to 60 days to get invoices paid while
he was being forced to make payroll each week for his labor.
Factoring proved to be the cash flow answer for his small
company and also for mine. Because he was only generating $20,000
per month in invoices, I decided I would provide the factoring for
him myself and keep 100% of the fees. I already had
copies of factoring contracts and necessary documents, and within
an evening I had created some Excel spreadsheets that would act as
advance and fee reports. I was making the major (and very early)
move from broker to factor. Most importantly, I was going to keep
100% of the factoring fees from this small account which
dramatically supplemented my income from straight brokering where
I received a standard 10% of the factoring fees earned. While I
still brokered most transactions, this was the first small account
of many I began to fund internally as I started to build my own
micro-factoring business.
Industry Brokering Today
While over 15 years has passed since I brought in my first
account, nothing has changed. If anything, the business of
brokering has gotten easier due to the expansion of the Internet
and the development of sophisticated database/contact management
systems to track marketing efforts. Still, many that attempt to
enter the industry fail miserably for a variety of reasons.
Most have to do with marketing skills (or lack thereof) and simply
the inability to stick with the business (usually due to financial
reasons) while their skills are developed.
Is This a Career for You?
Could be. Before entering, however, you should answer a few
questions honestly:
Do you have a history of jumping from business opportunity to
business opportunity looking for a pot of gold? If so, this is
clearly not for you. Being a broker in factoring and commercial
finance takes hard work and perseverance. True, there are big
rewards for success, but it takes time to develop this career.
Do you have the "human assets" necessary to succeed? Take an
inventory of your natural abilities and skills. Do you communicate
well with others? Can you look and dress the part of an
executive? Do you have the capital necessary to sustain you
while your business is developed?
Do you have the "hard assets" necessary to succeed? You will need
an office either in the home or an executive suite. You will need
a computer with a contact/database manager. You will need a
two-line phone system and likely an answering service
(not answering machine). You will need a web site. You will need
a dependable and reasonably attractive vehicle. To succeed,
you will need to have "the look."
How do I get started?
If you've been bitten by the "factoring broker bug," the
next step is to become knowledgeable in the product areas of
factoring, purchase order finance, asset-based lending, and
import-export trade finance. This is not easy but also not
difficult; most importantly, also not expensive. While some
seminar "schools" demand fees well in excess of $10,000-$12,000 for
several short training sessions, the truth is such money is much
better saved for marketing and living expenses while you bring in
your first deals and build your business. In fact complete
training, marketing materials, contact management software and
support can now be provided inexpensively through programs available
from THE PAPER SOURCE: www.papersourceonline.com/factor-training.htm
If you think the business is for you, when starting your business,
try to....
Start Small...Start from a home-based office. When you generate
your first deals and have reasonable commission income being
generated each month, move to an executive suite or small
office located within a new bank building. Reinvest your very
first commission dollars back into your company.
Concentrate on Lead Generation... Factors will all assist you in
closing deals. Focus all of your initial efforts on lead generation.
Once you have a qualified lead, set up a conference call
between you, the prospect and your factor who will close the deal
for you if it is possible.
Utilize Direct Mail and Your Website...Telephone marketing and
networking are extremely important areas to develop for success
of your overall business. Direct mail is the place to start,
however, as you build your networking and telephone skills over
time. Use direct mail to "drive" prospects to your website where
they can obtain a FREE booklet, white paper, or report on the
benefits of factoring and alternative commercial finance.
Robert McMahon is president of Aegis Factors, Inc, a small
business community factor in Ft. Myers, FL and also president of
Datamax Marketing Systems, provider of the FactorMax
Guerrilla Business Development and Broker Training System.
To learn more about the opportunities in factoring, see
www.papersourceonline.com/factorarticle.htm