One of the most common question asked by career seekers exploring the opportunities for freelance consulting (brokering) in the factoring industry is…“Can I succeed as an industry factoring broker?” The answer to that question is definitely…“It depends on your definition of success”.
From a true career standpoint, launching a career as a freelance factoring broker is no different than launching a career as a consultant in almost any other profession. Consulting is consulting…plain and simple. Consulting is one of the most popular types of home business simply due to it’s low startup costs and tremendous operational flexibility and it is a great way to become your own boss. And, all consultants will have their own definition of “success”. Take, for example, the story of Martha.
Martha the Greeter
Martha was a greeter in a local community bank, directing the bank’s customers to the various departments as they walked in. One day, she saw an acquaintance come into the bank seeking a small business loan for his pressure washing company (Pressure Wash Co) and she directed him to one of the bank’s loan officers.
Unfortunately, Martha’s friend had relatively no credit history and his company had few assets and although he was an established customer at the bank for several years, the loan was denied. His pressure washing business, cleaning algae, mold, and mildew from the common areas of local gated communities was growing exponentially. The problem was the management companies responsible for paying his invoices were very slow, sometimes taking 60 days and Martha’s friend was having trouble making weekly payroll.
As her friend was leaving the bank she asked him how it went? He told her the results and she then said…”You know what might solve your problem? Factoring! And with that she wrote the named phone number of a local factor on the back of her business card with the instructions to call.
Armed With the Right Knowledge
The story of Martha is a perfect example of someone being in the right place, at the right time, and armed with the right knowledge. You see, Martha knew exactly what factoring was and the power it has to solve many problems associated with cash flow and especially payroll problems. You see, Martha sat in on a “pizza lunch” presentation the local factor made at the bank earlier in the year. One of the examples used by the factor was how factoring could often alleviate payroll problems just like her friend was having.
Factoring to the Rescue
As he was instructed, Martha’s friend made an appointment to visit the factor’s office the next day and was pleasantly surprised with the results. Factoring would indeed solve the cash flow problems of Pressure Wash Co. Although Pressure Wash Co. itself had no credit history, the management companies responsible for payment on Pressure Wash Co’s invoices were, although slow payers, excellent credits and a factoring arrangement for Pressure Wash Co. was put in place that very day.
Martha: Factoring Broker of Record
After the meeting, Martha received a call from the factor thanking her for the referral and also letting her know she would be “Broker of Record” on the account. This meant Martha would receive 10% of the factoring fees earned each and every month by the factor and although Pressure Wash Co’s business was initially small, just $20,000 per month in invoices, the factor felt the business would grow rapidly due to the cash flow solutions provided by factoring. And…he was right! No longer cash-strapped and turning down customers, Pressure Wash Co. would grow to the point of doing well over $75,000 per month in business within the first year of factoring and over $100,000 per month by the second year and nearly $200,000 by the third.
Martha’s Factoring Broker Commissions
So as the “Broker of Record”, the factor paid Martha a commission each and every month. Her first checks were small, just $60 – $75 per month. But as Pressure Wash Co’s business and volume of monthly factoring grew, so did Martha’s commission checks. In fact, they grew to the point that she was earning between $500 and $700 each and every month in factoring broker commissions. So how much did Martha earn overall on this single referral? Pressure Wash Co. utilized the services of the factor for over 7 years as the business grew and grew. And Martha’s total factoring broker commissions earned over the 7 year period totaled over $42,000!
So…Was Martha a Success?
So was Martha a success as a factoring broker? If you were to ask her, the answer would be…”absolutely”. You see, as an avid fisherman, Martha used her factoring broker commissions to buy a fishing boat. As a factoring broker, this turned out to be her only goal. She never marketed for additional business, she had no website. She didn’t network. She turned in no new business. But she met her goal which was a boat! The question is, how much additional business could Martha have done, located right in a bank, if she focused on simply referring the bank’s turndowns to the factor. What if she joined some business organizations and began actively networking. Surely, the $42,000 earned from a single referred account would have just been the start. So you see, the answer to the question of “Can I do this business”, is very much dependent upon your goals and the amount of work you invest in reaching them.