Factoring 202
Understanding Marketing Economics for Factoring Consultants
Factoring 202
Marketing Economics for Factoring Consultants
Almost all decisions you make in life will involve some risk/reward analysis. As a factoring broker, you will periodically be analyzing the cost of a particular marketing strategy or campaign vs. your anticipated reward (commission income) from implementing the strategy. There is actually a third important component, however, when analyzing a marketing strategy, and that is the time period of the strategy. Is it a week, a month, a year, etc?
The good news is this. As a factoring broker, your reward (commission income) is so generous that almost any type of marketing campaign you devise will have a very high reward. This is primarily due to the fact that factoring commissions are paid on a residual basis over long (and sometimes very long periods of time.
Marketing Economics for Factoring Consultants
As a factoring broker, you have an almost unlimited source of effective marketing methods to choose from in order to generate leads and clients. Industry polls of factoring firms consistently show that the source of new clients is split roughly 50-50 between those sourced from networking/referrals and those sourced from direct marketing. So, fundamentally, the methods you choose to use to generate quality leads really boil down to this.
- Are you located in a geographic area with plenty of organizations to join and which offer quality opportunities for face-to-face networking?
- Do you possess the soft skills needed to network effectively and build relationships with those who can send business your way?
- Are you located in a more rural location where you will need to depend more on social media for networking or direct marketing for lead generation?
- Do you have the working capital to invest in the cost of producing more expensive direct marketing campaigns?
Great News! It Doesn’t Matter
The great news is this. In your first months as a broker, you will certainly struggle a bit as you learn the business and work to find the best marketing paths to take based on your current abilities. The fact is, it doesn’t matter so long as you are persistent. The commission income paid to you as the broker of record for each account you generate is so lucrative that your costs for generating that client are typically just a small fraction of the total reward you will receive over time. But here is what you should understand.
- DIRECT MARKETING: Direct marketing strategies you employ will result in faster business growth in a shorter period of time. Most direct marketing campaigns (other than cold calling) are also typically much more expensive than networking since it will involve printing, postage, insertion costs, and other media advertising expenses. Direct marketing, however, is response marketing and is designed to get a prospect to respond immediately and act NOW! In your risk-reward analysis for using this method, it is only the cash outlay for marketing costs vs. the anticipated income from new client commissions that matters.
- NETWORK MARKETING: Building networks of referrers is typically a very low-cost method of generating leads. It is also long cycle since the networking is not really what generates the referrals. Networking is just the first step in the relationship-building process, and it is relationship-building that results in referrals. And relationship building takes an investment of time.
So, while focusing on networking and relationship building is much less costly than most direct marketing strategies, the results of your networking campaigns will also take more time to fruition. And for many, the lack of significant income for longer periods of time can be critical.
Networking, however, offers the ultra-low budget option of what might be called “right place–right time” marketing, and a perfect example of this is the Story of Martha. Martha is anything but a unique case when it comes to lead generation. Her story represents a very, very typical referral to a factor by someone “armed with the knowledge” of factoring and how it can solve cash flow problems for small businesses and who also finds herself in just the right place at the right time to score a deal. In Martha’s case, and again, we showcase her deal as “typical”; she generated over $40,000 in income over the life of the account (7 years) and received a commission check each and every month from the factor.
The Lesson Learned From Martha
So the lesson learned from Martha is this. Martha earned over $40,000 from a single client referral by simply being in the right place at the right time. And the account she referred was small, initially factoring just $20,000 to $30,000 in invoices per month. But would it have made a difference if she had spent $200, $500, or even $1,000 on a direct marketing campaign to generate that single account? No! Simply because the near-legendary commission you earn as a factoring consultant are so exceptional, as to make the typical expenses incurred in the lead-generation process unimportant.
