The Green Sheet Online Edition
January 11, 2016 • Issue 16:01:01
The one man show: Be a piker, dream middle class
Napoleon Hill was a founding father of The New Thought Movement, which focuses on producing literature, speeches, religious sermons (the prosperity gospel), songs and related artwork centered on personal prosperity. One of Hill's quotes is applicable to this installment of the one man (or woman) show series: "If you cannot do great things, do small things in a great way."
The financial services industry deals with many terms that are unfamiliar to the general public, such as derivatives, diluted EPS, EBIDTA and par value, as well as piker. To be called a piker in the financial services realm is to be called someone who reaches for small goals and doesn't dream big.
In this article, I'll share thoughts on why being a piker might be the best option for most industry professionals in terms of true, reality-based goal planning.
New agents, big dreams
For a long time, the majority of new merchant level salespeople (MLSs) all have had big dreams inspired by myriad industry recruiting ads emphasizing that with little-to-no experience, you can jump in and build $10,000 a month in residuals.
The "rah rah" sales speeches soon follow with examples of how one guy is making $20,000 per month in residuals, how another made $1 million within three years, and how you can, too, if you just come in and start selling. So the big dreamers envision they'll become what Dave Ramsey calls Whopper Floppers. Instead of working at a Burger King drive-through, they'll start making their dreams come true today.
New agents join the rolls of other new agents randomly calling restaurants out of the Yellow Pages on a web-based predictive dialer promoting a "free" terminal, or they are parking their cars on commercial streets and randomly walking into merchant locations, pitching lower processing rates. New agents will burn out fast (usually within 60 days), when despite all their efforts, they hardly get anywhere. The reality is that the Main Street, card-present, mom-and-pop retail shops newbies are targeting know more about merchant processing than they do, are already using 21st century POS technology, and their processing rates are so low you wonder how their merchant accounts are even profitable for their current service providers.
Reality sets in
The reality is that success in our industry is mainly due to leveraged resources, rather than superior selling capabilities. What happens is that 20 percent of the ISO and MLS shops in the market remain profitable and sustain good career opportunities and operations going forward. The other 80 percent don't last more than three to six months, mainly because the 20 percent have access to resources that the other 80 percent don't have. These resources provide them with a significant market competitive advantage. These resources include having access to:
- Strategic partnerships with banks, credit unions, professional associations and community organizations
- Financing (debt and equity) allowing for a much higher marketing budget
- Better quality data
- Better SEO positioning
- Better marketing channels
If you are a new MLS, you were hired to be a part of what I call the mom-and-pop network, which is just a group of random agents who will resell for free (you pay for all of your expenses). So they might maintain a mom-and-pop network of 2,000 MLSs that bring in an average of 10 applications a year (20,000 apps) with a board rate of 70 percent (14,000), and with the average merchant processing about $100,000 a year this is $1.4 billion in annual processing volume. Individually, you as an MLS won't make much, but your ISO is making a significant amount of profit from this mom-and-pop network.
A different approach
How about instead of following the "rah rah" sales crowd, you join me over here on the piker side and we set some goals on being solidly in the middle class instead? Advantages to being middle class:
- Based on individual income, you are considered middle class in the United States, for the most part, if you are living in a low to average cost-of-living area and you make over $40,000 a year (lower middle class), $50,000 to $60,000 a year (the middle of the middle class) or $70,000 to $85,000 (higher middle class).
- $50,000 to $60,000 a year in a low cost-of-living area will still allow you to live in a great quality suburb if you strategically manage your expenses with efficient budgeting and tax reduction strategies.
- Also, as part of this class, you'll be able to put, let's say, $7,500 a year into your retirement or investment accounts. If you do this for 40 years, from 25 to 65 years of age, with just a 5 percent per year return, you will have over $1 million at age 65. At 65 you could put that $1 million principal into a long term CD paying, let's say, 3 percent per year, opt to receive the interest every month, and get $30,000 a year. Then, when you add in your Social Security payments of, let's say, $20,000 a year, this now gives you $50,000 a year in spending power without even touching the $1 million principal.
To implement this approach, the first thing to do is make sure you stay in a low cost-of-living area. If you are in a high cost of living area, like New York City or Los Angeles, I recommend you move immediately.
Second, set up your virtual office in the cloud to include your telephone and fax lines, website, etc. Third, conduct market research on various market niche challenges where you can come in and creativity solve outstanding problems. For example, you might:
- Find new solutions for niche industries
- Find new solutions for startup companies
- Analyze big data sources to find merchants in particular situations that you could address.
Map out a complete strategic business plan with sales forecast and return on investment estimates, and partner with companies that have the infrastructure to deliver the solutions you laid out. Keep your credit clean, and use no-interest credit card promo deals to creatively finance your office.
How big should dreams be?
You might ask, If I became a piker wouldn't I be dreaming too small? Shouldn't I focus on how to be the next (insert the name of your favorite large ISO here)? My issue with the "rah rah" sales speech is that those at the podium preach from the top of the ladder when citing extravagant monthly residual estimates ($20,000 per month) while providing little to no information to new MLSs on strategies, competencies, networks and resources needed to amass such levels of income. It doesn't make sense.
So my advice for new MLSs is to be a piker ‒ establish yourself solidly in the middle class first. Once that's done, look at ways to expand on your competencies, resources and networks to progress into the six-figure income range.
John Tucker is Managing Member of 1st Capital Loans LLC, as well as an M.B.A. graduate and holder of three bachelor's degrees in Accounting, Business Management and Journalism. Tucker has nearly 9 years of professional experience in Commercial Finance and Business Development. You can contact John Tucker by email at email@example.com or by telephone at 586-480-2140.
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