Hi, everyone. Oz Konar here from Local Marketing Stars. Today I want to take a couple of minutes to talk about a very important topic for I think every merchant cash advance industry, and that’s the question of why so many of them are failing every day, if they’re just starting out. And also why most of them are stuck at where they are. They might be doing this for four years, five years, but they’re not at the level that they thought they would be at this plant. Right?
And there are reasons why that’s the case and I find it really interesting and odd that through my conversation with so many merchant cash advance companies every day that no one really seemed to understand the full picture. The points that I’m going to talk about is very relevant to other industries as well, but I think it hits the point for merchant cash advance industry because it’s a highly sales oriented environment and people really do not see the systems they need to have in place to take this from zero to a multimillion dollar company, which you can do by the way.
Failure rate in merchant cash advance industry
But the failure rate in merchant cash advance industry is super high and super scary. Because I’m a business owner too, I just find it alarming and I wanted to kind of take a couple of minutes to talk about why that’s the case and what is the formula to succeed in this highly competitive industry. So I put together a little chart here and I’m going to kind of walk you through why that’s the case and where people usually start from, where they fail, and what to do about this. What is like the bigger picture here? What do you want to end up with with your merchant cash advance company? And you can kind of identify from my chart where your company is.
So this is not just for merchant cash advance companies starting out or someone who is planning to start out, but even for those who have been in the game for a while, but they’re kind of stuck in their ways and they’re trying to make the ends meet or they only have two or three people and they’re thinking about how they can get it to eight to ten people or close a lot more deals. I think that’s going to be relevant to many people. Why am I qualified to talk about this? Well, I’m the president of Local Marketing Star, we’re at New York Stars, we’re a New York based company and we’ve generated millions of dollars for different businesses by the marketing campaigns that we designed. And I happen to be working with a lot of merchant cash advance industry related companies as well. And I’m seeing this trend that no one really seems to tap into.
I want to take my expertise and kind of explain to you what I see. Hopefully you would agree with my points and my only goal here is to provide you information that could help you. Okay? So I’m going to kind of walk you through my chart here right now, and hopefully you can see it clearly. So this is what I put together. So the first point is that this is usually where a lot of the companies start out with. I’m going to walk you through each box here.
Starting a merchant cash advance business
So when you’re thinking about starting a merchant cash advance industry, a merchant cash advance business, when you first start, a lot of people tend to start with they go for the low hanging fruit, right? They want a pay per campaign, I call it. Pay per lead, pay per lists, pay per age lists, pay per applications because they can calculate how many leads they’re getting and hopefully a certain percentage of them will turn into applications and a certain percentage of them will be approved. And hopefully they will fund a couple of deals. Now, just a side note for those who are planning to start out or who are starting out, if you think that you can pull this off by having four or $5,000 in your bank account, I think you’re in big trouble.
And I know you might remember a story of someone who built an empire with only $2,000 in their bank account, but that’s all great and nice, but it’s very unlikely to succeed. Because what happens is usually the story I hear all the time, “Hey, we were working for this X company, big merchant cash advance company. They were closing a lot of deals for them and we noticed how much they were making versus how much we were making. We were making a commission out of this. We said, ‘heck, why don’t we just do it for ourselves and break off and close some sales and we can make the big bucks?'”
And they saved their commissions from a couple of deals, funded, and they kind of break off and start their own thing. Well, the challenge with that is when you break off and start your own thing, you’re not a salesperson anymore. Your role has totally changed. You’re running an actual company and with starting a company is a lot of expenses. If you think that your first $5,000 will be able to fund a bunch of deals so you can make some money and kind of keep adding more and more, in theory it does work that way, but in reality business requires a lot more expenses.
And also you’re playing a gamble. What if you can’t close some deals and that’s your last lunch money and you’re done. So my advice for anyone starting out, although there is a possibility that you can be successful with only spending a couple of thousand dollars, you have to put some money aside, a good chunk of money, and you shouldn’t let the system fool you because the barrier to entry for cash advance is almost nonexistent, right? Anyone can be an [ISO 00:05:05] tomorrow and just create an application and call themselves Company X, providing merchant cash advance services. I think that’s just supporting the downfall of many companies. You need a lot more than that to get the company going because you have to have a nice looking website and I know people who are sales oriented might not like what I’m saying, but a lot of your potential customers will do their due diligence before they get funded. If they can’t find anything about you online, your closing percentage at your X job is not going to reflect on your new position. Okay?
So that’s just a side note. So many companies tend to start in this area. They want to buy ready to go leads or they might hire a call center from India or the Philippines to get some appointments. So this seems to be the first route to go through that provides some leads and hopefully you close some of them. And then we talked about the importance of this area. So, within this category, I have my most favorite way of getting leads and least favorite of them. But that will be a topic for a whole different video blog.
So when people make this work, usually the next phase they should be thinking about, a lot of don’t, is the paid advertising. So how is this different than the first one? Paid advertising is you generate leads and opportunities through putting some ads on Google and Facebook and other areas. Now why is this in the first place? I’m not saying you should necessarily start with this place, but if your funds are short, which is the case for many companies starting out, this could be a good area. But the caveat, again, I can talk about this for 20 minutes, is you need to have a system in place. Just because you can sell on the phone is not enough. I see many people who are buying these leads and they talk on the phone and within the five minutes they’ve disqualified the person. And what happens to that person after? Nothing. There’s no followup process. This whole area below it is empty. You don’t have a system in place.
You can’t just rely on your own sales skills
So you can’t just rely on your own sales skills. I know it gives you a lot of confidence, but you have to have a system in place to make this piece work. Let’s assume you did this work and you put in 5, $10,000 for lead generation and you kind of triple that amount. The next area would be paid advertising. Paid advertising is a system, if done right, obviously, it brings you a consistent amount of inbound leads. Inbound leads, they’re not beaten up and they haven’t been called by 10, 15, 20 different companies, and they haven’t been resold by companies in this area usually. These are usually exclusively for you. Okay?
The caveat with this is it takes time to ramp up a paid advertising campaign. So you should be okay with getting limited results for 45 days to 60 days. I’m not saying no results, but this is a live campaign and you’re relying on Google and Facebook, that algorithm, to understand what it is that you’re trying to accomplish, then they can consistently bring you leads. A lot of the companies who try this usually stop it. I know big guys love small companies trying and stopping because they don’t have patients. They expect a pay campaign to work and bring them tons of leads within 30 days.
It just, unfortunately, no matter what anyone claims… I mean, we’ve been running campaigns where we’ve been spending millions of dollars in ad budget for companies and it just doesn’t work that way. All right? If you don’t have the patience or the budget to test it or if you’re not serious about this, you’re not going to get into this area. But if you do get into this and if you mature your campaigns, this is going to bring you massive amounts of leads. It’s just not for everyone. Okay? That’s the next phase.
The third one is usually what companies do is when they figure out these two area, they want to have their own teams. They want to hire openers and closers and grow their organic team within their own office. Although, also they can be hiring staff from overseas. So this is the next phase for you to grow from just you answering the phone and you alone, then you hire an admin person and you hire a couple of people to answer the phone and you can give them lists so they can make 200 phone calls a day to generate two appointments. So that seems to be the next phase.
This is good, but again, if you do not have the right system in this area regarding a followup system and nurture process and email marketing process here, when you get here or when you start with this thinking that you know everything you do, it is very difficult to duplicate your efforts. It’s difficult to scale because a lot of companies fail at this stage two because they hire a bunch of people and they think that they’re going to be great on the phone and then they can’t close deals and then they talk about how bad salespeople are and they can’t close deals and they’re not serious. It is difficult to deal with them. Yeah, sales people are difficult to deal with, but you got to have a system so people can learn from your system. They can build on top of their own skills and make this work.
So if you’re going to move into this stage, you better have a step by step process that you can just bring in one person and have that person literally like Matrix. So you plug them into their system, they download everything, they repeat it, they learn it, you show them how to do it, they do it themselves and you do quality control and it just picks up like that. And this is the area where you have all of these running for you. You’re getting a nice lead flow and you’re having your internal office just generating leads for you. Then you’re closing a bunch of deals.
Now I want to show you, this is not the entire drawing, if I can manage to do this. This is a funnel. In any businesses that what I’ve been saying so far is applicable to many businesses. This is a funnel. In any business, what you want to do is feed your company with as many leads as possible from as many different sources as possible. Because when you’re pouring these leads into the funnel, obviously a lot of them are not going to be good quality. You’re not going to sell everyone. This is a percentages game, right? You’re going to be selling a certain percentage and that percentage will turn into dollar figures. So the best thing you can do is have as many of these resources as running for you so you can have a lot more dollars at the bottom.
Many companies fail at seeing the full picture
But here’s the challenge and here’s where many companies fail at seeing the full picture. The challenge is this. All of these three methods of generating leads for MCA requires for you to spend marketing dollars. Right? We haven’t said otherwise so far. So you’re spending money to buy traffic either in the form of you’re paying per channel, it could be live transfers or emails and UCC lists and whatever. Or you’re spending money and/or on paid advertising channels such as Facebook and Google and Bing and other areas, and/or you’re paying your team to generate opportunities for you. Now there is a way to offset all of that cost. That is something that is very known, widely known, but unfortunately for whatever reason is not practiced commonly in the merchant cash advance industry. And that is generating organic inbound leads.
There are only so few companies focusing in this area. Everyone playing the sales game, everyone needs leads all the time. They want to buy leads, they talk to 15, 20 companies every single month. And I even met companies who hire and fire companies within the same month. They hire a company to run Facebook ads and they think it doesn’t work, and they fire, they move on to the next one. They think that they’ll find the nugget, the Holy Grail that way, while leaving this part totally alone. When you start getting organic leads, the goal is to have these leads come in and them offset the cost of your paid advertising. That’s actually how you reduce your cost of advertising to zero because the free leads that you’re getting here, you’re going to be funding some of them. And that commission you made from that, that revenue you make from that will help you pay for advertising.
So that’s the ultimate goal and that’s the level that you want to bring your merchant cash advance company to where you are okay with spending money in this area, but you have a system in place where your website or your landing pages are optimized enough that people naturally, organically find you and they trust your reputation and your name and your case studies, your place in the marketplace that they apply to be funded by you. So I posted a case that I recently… One of our clients, we rebuilt their website. They had a website in place, but like many of the merchant cash advance companies, it’s just almost a place holder. They had information about the company but it didn’t have certain triggers in the bag and sort of tracking systems or any type of optimization plays.
So we rebuilt it from scratch and after we’re done and we were starting to do SCO, spend only a month because in the world of search engine optimization, 30 days is not a lot. Usually it’s a long game. You do a lot of things to get the website slowly ranked on Google and search engines. When someone is searching for a non-bank lending, funding options, you show up in one of the first couple of pages. Hopefully on page one, that you get that lead and it doesn’t cost you anything because you’re not utilizing any of these resources.
So this client, within the first 30 days, they receive 37 organic leads and they’re still following up on some of them. I’m sure they’re going to close a couple of more deals. But most importantly, one of those deals ended up being a $100,000 client that they funded $100,000. So the money they made from that client paid for their marketing for like for the next two or three months minimum. Right? So that’s the goal. That’s where you want to get to and it’s been only a month for them. But if you’re thinking about the big picture, where you want to take your company, I just want to show you what system you should be looking forward to. Okay?
The ideal system
So this is the ideal system where you are in an industry that is in very high demand. Demand is not going anywhere. It’s just a matter of creating the right systems so you have this funnel here. Right? And you might be wondering what MCM stand for. That’s multichannel marketing. You want to have multiple channels of marketing feeding your funnel so you have multiple opportunities to close more sale. And this is a system, that system, if you have a system like this it will not only allow you to grow your company to the multimillion dollar level, it will make you a company that are desired by other companies.
So if you were thinking about an exit strategy, I know it could be really early for some of the companies, but if you’re not seeing yourself doing cash advance for the rest of your life, then the companies who would have the appetite to purchase you would look for a system like this to see how profitable you are. Obviously they’re going to look at different factors. From a marketing standpoint, they will want to see that you’re not just doing random acts of marketing. That’s what I call it. A lot of companies do random acts of marketing, but if you do have a system in place, it’s going to make a lot of things a lot easier.
All right? So this ends up being a lot longer than I thought, but I wanted to share as much as possible. I hope this was helpful. If you think that your company is in a position to either start your company in any of these phases, or you’re on this and you got these parts taken care of and you’re more involved in the organic traffic, you can contact me. You’re going to find my contact information at the bottom of this page, or you can send me an email at firstname.lastname@example.org.
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