Monday, February 22, 2010

Business #3½, brokerage

So, as my car business was coming to a slow and painful death, I was attempting to get into the world of brokering. It's a fairly simple idea. You basically connect two ends together. One end is somone who needs something and the other end is someone who has something that the other end needs.

I knew there was a lot of potential with brokering because I had seen it work before my very eyes. If you pay attention, you can see this pattern all over the place in business. The best example to wrap your head around is the idea of a mortgage broker. If Joe Schmo wants to buy a home, but doesn't want to apply to bank after bank and finance company after finance company, he would go to a mortgage broker. So we have Joe Schmo who needs something; financing for his new home. Then Mr. Broker, who is typically already in relations with financial entities who have lots of money to loan out, will contact his people who then bid for the chance to loan their money out. These guys are the end that has something that the other end wants.

The broker sits in the middle and scrapes his piece of the money out of the deal and then he is out of the picture. After the deal is done, Joe owes the financial entity... not the broker.

As you may know, mortgage is not the only thing that is brokered. Just about anything can be brokered. Just fit the pieces of the puzzle together and the broker gets their fee for hooking the deal ends together.

Simple right?

No, not really. It does take a bit of a skill with people and a will to dig for the people who need something and the ends that have something. For some this is a breeze. The money making potential is very much worth the hard work though. Especially if you already have or are willing to attain the skills needed to pull it off.

I love brokerage. My first jump into it was very unsuccessful. Mostly because I went at it a little too broadly. I was looking to broker any and everything. The bad thing was though, it meant I had no real focus and therefore no clear path forward. So, while I was very willing and already had some skill, my hazy efforts were fruitless. I still do brokering today, but I was out of the game for quite a while. I deal in two main types of brokering. I broker real estate notes and factoring of accounts receivables. Real estate notes are basically an agreement that one person will pay a certain amount of money regularly over a period of time. Sometimes the people holding the notes don't mind the small chunks of money rolling in a regular intervals. Sometimes, though, the person who holds the note needs the money sooner rather than later. That is where a notes broker steps in. The notes broker can find someone who is willing to pay for the note at a discount. In this way, the original note holder gets most of the money and he is free to use that money for what ever he needs or wants. The note buyer will benefit by earning more money than was spent on the note, but over a period of time.

The factoring brokering is basically the same. A company may have invoices that they are owed on. These are also known as accounts receivables. Many times one company will buy from another company, but they won't have to pay until 30 to 120 days on that purchase. Imagine a nursing home. Grandpa Skippy has medicaid which pays for his needs at the nursing home. However, medicaid doesn't pay right when the bill is created. They don't have to pay out for sometimes several months. This is all good and well unless the facility needs to make repairs or pay their staff or expand. One thing they can do is sell their accounts receivables at a discount to a factor (a person or company with money to spend on such items). The factoring broker can put this deal together by finding one or more willing entities to purchase the discounted invoices. For this, the broker gets a cut and is then out of the picture.

In both cases, it is possible to go straight to the source of the money, but this in itself is time consuming and can actually end up costing money. It is much easier to go through a broker who will often times have access to mass amounts of money and generally can find more than one entity to bid for the purchase. This means the deal gets better for the seller of the invoices.

I have worked in the customer service field for quite some time and in doing so have developed communication skills and a vast knowledge of business to business relations. This is a good fit for this type of business.

If you are looking to get into something and would like to be able to make big bucks for relatively simple work, I suggest brokering of some kind. Especially large ticket items such as real estate or accounts receivables. It is very common to make thousands per deal. Sometimes these deals are on-going.

As always, research what you are getting into and pay as much attention to the little details that you can. It is the details that will both save and grave you.

Until next time.... have a good one.

Thursday, February 4, 2010

The Field of Diamonds by Vernon Howard

There is a story you must read. It contains a very valuable lesson which I would like to speak to in my upcoming post.

The Field of Diamonds by Vernon Howard

Strive for failure! Even though it doesn't taste so great.

By this point, and even before it, many people would have thrown in the towel. I am here to tell you, the thought of giving up on being successful and financially independant seems mighty tempting especially after not really being successful multiple times. It's hard to overcome all the people who have watched you try and fail time after time. That alone makes one want to crawl into a hole and hide. On top of that, looking back at all the ways you went wrong and all the mistakes that were made along the way is quite deflating. Then, when you try to look forward and head for the horizon where success is supposed to be waiting for you with open arms, it very quickly just seems like a waste of time, money, and energy. As if all that wasn't enough, if you are like me, I already had a career that treated me very well in many ways. The "golden hand-cuffs", I believe they call it.

What does it take to overcome all of that and take the next step towards the alleged riches of success?

You have to ask yourself if it is worth all of the trouble and all of the embarrassment and all of the mistakes to come out on top. Is it worth it to try and fail over and over just for the chance that you could join the list of people who have tasted and continue to taste the good life?

What really is there to lose? You can only lose what you put at risk. There is no need to risk it all. Some people have done it and made it while others have put themselves out on the street.

For me, and I dare to think that for many others, I think there is nothing really to lose in trying until you make it or you die trying. I could see that, if I didn't try, I would work at my job making my wage and follow the path of the many who do the same and end up retired and broke. If I tried and never hit success, I would be no worse off as I would still work my job and make my wage and retire broke.

Some might say, that you should enjoy life as much as you can and not waste time shooting for stars. I think that success is not a star at all and is very achievable. I made up my mind a long time ago, that I would rather try for the chance at success rather than fritter away my opportunity to better myself.

What does it take? You must realize you are your own country and master of your own world. If you have a vision of where you want to be in the future and you believe in it, the worry about what others think begins to fade. What does it really matter what others might think if there is something out there that is truly important to you?

The key is that you must become independant before you can ever become financially independant. Hanging on the words and the will of others will never get you there. Sure, there are those that are handed success on a silver platter, but that is not the same success we are talking about. Unless someone is going to drop a bundle of money in your lap and invest it wisely for you, I'm afraid you are going to have to do it yourself.

What else does it take? It takes persistance. Ride ever towards your goals and you will find the means to reach them. Persistence is priceless.

Why should you strive for failure? It sounds a little insane when you first hear it and still seems wrong at first. Esepcially given that, for most of us, we are punished for failing and pushed for success right out of the gate. You need to realize, that human beings only succeed through failing. You didn't walk right after being born and it took many stumbles and many falls before you got it right. This is a metaphor for each person's entire life. Failure is quite natural and quite necessary. When you realize this, you will see that failure is actually a good thing. It is through failure that I have found my way closer to success. It is failure that lets you know what not to do.

Take two people and a maze. Send one person through. That person may make it through or they may not, but either way, I guarantee you that the person that went through that one time knows a turn or two that should not be taken. That person is now more successful than the other person who has not gone through the maze.

If you know what not to do, you are far more prepared for what the right thing to do is. There is a fairly famous quote by Thomas Watson, Sr. "If you want to increase your rate of success, double your rate of failure".

Still doesn't seem right does it. If you think not, I urge you to think on it longer, because it's absolutely true. If you continue to be a seeker of success, you will hear and read that over and over as you make your way.

Ultimately, don't be afraid of failure. So many are paralyzed by the mere thought that they might fail and they take the easy path towards broke-ville.

I don't know about you, but I'm sick of being broke. I have been broke my whole life. I am tired of struggling and watching my friends and family struggle.

I decided long ago to strive for failure and be the master of my world and push towards success. I have been going ever since and continue to push forward now. Success is already in reach I can tell you now that the foul taste of failure is very much worth the taste of success.

More to come...