by W. J. Mencarow
President, The Paper Source, Inc.
In today's competitive market, you'll be tempted to cut your profit
margin drastically just to get the deal.
Don't do that. That “strategy” has put a lot of people out of
business.
Maybe you can be a successful auto dealer by making a low profit on
each sale if you have huge volume, but that doesn't work in the
note/cash flow business. Why? Because most note brokers cannot deal
in
volume.
The reasons most people cannot be high-volume note brokers are:
(1) it takes a long time to put each deal together;
(2) you probably won't find enough notes to create a high volume
business, and
(3) your transaction costs, especially the cost of your time, are
high for every deal.
Most people have no idea how to put a price on their time, so they
ignore it. That's a big mistake. To calculate how much your time
is worth, go to http://www.businessknowhow.
It is possible to be a high-volume note broker. You could tap into
a market where notes are created in high volumes. For example, you
could develop relationships with land developers or manufactured
home dealers and/or dealer/builders.
But, if you are like most note brokers, you have tangible and
often-overlooked intangible overhead that will eat up a low profit
and leave you with nothing except red ink.
Don't Negotiate A Loss
When you are in a negotiation and have your back to the wall, just
tell the note seller that $XX is your final offer, and if he can do
better elsewhere, then he should go there.
Either way you win. Either the note seller is conning you and when
he discovers you are serious he will agree to your price or terms,
or he will go elsewhere — which is fine, too, since you cannot
stay in business being the cheapest broker in town.
Here are some rules for you to consider based on my experience
over the years:
1. No matter how low you quote the note there is always a newbie
out there willing to do it for less.
2. The more you cut your price to get business, the more likely
you are to go out of business.
3. The more you try to compete on a price basis the lower your
prices will go. Corollary: Your income will follow.
4. Increasing your ad size increases the percentage of low profit
calls you get.
5. The bigger your yellow pages ad, the more low-priced calls from
non-repeat customers you will get.
6. The prize for beating out all of your competitors for the
biggest, most expensive ad in all of the different yellow pages
books is bankruptcy.
7. The more you advertise that you have 24-hour service the more
security guards and insomniacs will call you in the middle of the
night to ask you how much you will give them for the mortgage they
are paying on.
8. Advertise 24-hour service and you will get angry calls
from people who stopped by your office at four in the morning and
you weren't there.
9. After you teach them the business your best note buyer will
quit, go out on his own and undercut your prices.
10. The one who is untrainable will stay with you forever.
Did you like this article? You can get many more like it, plus the
latest news of the note business, new note investors, new laws,
court decisions, etc. affecting the business, interviews with the
experts and much more every month in THE PAPER SOURCE JOURNAL.
With your subscription you also get the latest edition of THE
PAPER SOURCE REGISTRY OF NOTE INVESTORS, plus the E-Registry on the
Internet, the most accurate compilation available of true note
buyers (not brokers) and what they buy.
We've been doing this for over 20 years, and we know who the real
players are.
See www.PaperSourceOnline.com/
“The Paper Source Journal has been a very valuable source of
information for me. I've been a subscriber for most of your years
