Why Deals Fall Through

Hopefully you've read the article on Persistence about Gary Bernard, the consultant who went through 60 deals before one was accepted, and then closed two deals within 48 hours. If you haven't read that article yet, click here to read the article Persistence and then come back to read this article.

I was surprised when I read that message from Gary. I couldn’t imagine how someone could work 60 deals and not get any of them closed. Having more curiosity than tact, I wrote back to the discussion list, “I am amazed at the fact that you went through 60 deals and didn't get one of them accepted. Was there some common factor that caused them to not close?”

Below is the reply from Gary [reprinted here with permission] intermixed with my comments. I think that the five reasons listed by Gary pretty much cover the entire range of why deals don’t close.

What went wrong with those 60 deals that didn't close? There is not one answer. I'll list the problems I've encountered in no particular order.

1) My own inexperience. There is a definite learning curve even after the classes. It is one thing to be taught what to do and another to internalize the knowledge and be able to sound like you know what you are doing speaking with clients. If the client doesn't believe in you, ultimately you have no deal. That took some time and some lost opportunities.

I couldn’t put it any better than that.

The training provided by the ACFA is very good and most consultants leave the class with very high expectations. Unfortunately, it is true that you will not be an expert after only three days.

What job or skill have you been able to become proficient at after only three days? Let me guess. None. Am I right? Then you can’t realistically expect to be a cash flow pro after three days of training.

You can’t learn to ride a bicycle by reading a book or taking a class. You’ve got to get out on the street and skin your knees a few times. The only way to gain experience and confidence as a cash flow consultant is to get out on the street and skin your ego a few times.

Prepare yourself before you go out. Listen to the class recordings and watch the videos that you received as part of your training. Review the appropriate parts of the Resource Manual. Read any other material you can find about the cash flow niche that you are going to pursue.

But in the end the only way to gain experience is to go out and do something.

2) I was working with the wrong funding sources. This also took a while to discover. This business is a partnership between the broker and his sources. There has to be a good fit of personality, expectations, and ability to deliver on both sides. When I started I chose the wrong people and it took some time and lost deals for me to figure this out.

You’d think this wouldn’t be a problem, but it is.

Sometimes the consultant will have inflated expectations of what the funding source can deliver. Other times the funding source can overstate what they are willing and able to do. The funding source may not clearly explain their requirements and parameters.

As in any business, you’ll find that some funding sources are just not going to perform well for you and your client.

How do you overcome the problem of finding good funding sources and avoiding bad funding sources? There are only two ways I can think of that will work.

Trial and error. This can be painful and time consuming. But, this is often the only choice you have. While the funding sources listed by the ACFA are a good place to start, even that is not a guarantee that any given funding source will be a good fit for you and your client.

Word of mouth. Get references. Talk with other consultants. Find out from others which funding sources are good to work with and which ones are difficult. This is, of course, no guarantee that you will have the same experience with a given funding source. However, it is probably a step up from the trial and error method.

Good sources of references to good funding sources are other consultants you meet at your local chapter meetings, the Cash Flow Convention or on the ACF iChapter email discussion list. But, as always, it’s up to you to evaluate the information you get.

As a consultant you have two main jobs. One is to find a funding source that has the best solution for your client’s needs. If you fail at this job your client will not be happy. You will not receive referrals from the client. You and your client will both suffer.

3) When I started I was on someone else's payroll in a job that required me to provide 24 hour technical support. If my phone rang at 3 a.m. I had to get in the car and drive to work. In most cases I would also have to work my regular shift as well. Finding time to work the business was all but impossible. Follow-up was impossible. (Now you know why I do this full time.)

With a 50 hour work week and this kind of schedule there’s not much you can do. Fortunately, most jobs don't put this much of a burden on consultants trying to run their cash flow business part time.

There are some jobs and some cash flows that are easier than others to combine.

For example, a job with normal weekday working hours and mortgage notes as your niche can work well. The individuals that own the mortgages will be available to be contacted in the evening and on weekends.

On the other hand, if you are working normal weekday hours and want to work with factoring clients you can have a problem. Factoring clients will usually also be working normal weekday hours. To solve this problem you may have to solicit clients in another time zone. If you are on the east coast you can call business on the west coast after you get home from work. If you live on the west coast you can get up early and call east coast businesses.

For most people finding a time when they can work on their cash flow business is not the problem. It’s actually making the effort to use the time available to do so. It’s hard to hit the phones after a hard day at work. It’s hard to give up your weekend to work with a client.

You have to decide what you’re willing to do to be successful in your own business. That’s the difference between an employee and an entrepreneur.

4) Some fell through due to hidden issues on the client side. Some times cold feet, in other cases sticker shock. A few cases were very mysterious. I had one company where none of the clients showed up on a credit search by the factor.

I mentioned earlier that you have two main jobs as a cash flow consultant. Your other main job is to screen the client for your funding source. If you fail to do this job well you can still be successful, but you’ll waste a lot of time and effort that could be better spent on doing more transactions.

You won’t be able to properly screen the client or the transaction until you gain the necessary knowledge and experience. You have to know what combination of factors will make a transaction viable. You will have to learn what elements will kill a transaction. If the transaction can’t be done there is no sense in spending your time, your clients time or the funding source’s time on it.

Let’s look at some the issues above and see what could have been done to solve them, if anything, before they reached the funding source.

“Some fell through due to hidden issues on the client side.”

Sometimes the client will try to hide things from the consultant. Sometimes the client will even lie to keep the consultant from knowing certain things.

More often than not this problem is caused by the consultant not asking the right questions or not asking the questions in the right way. This goes right back to the knowledge and experience issue. You’ve got to learn what information the funding sources require and how to get it from the client.

“Some times cold feet, in other cases sticker shock.”

Again, a problem of the consultant not asking the right questions or not asking the questions the right way. Also, a problem with the consultant not knowing what is a reasonable expectation by the client.

You have to find out how much the client needs. This allows the funding source to structure the transaction to fit the client, if possible.

Does the client think he will get full face value for his mortgage? You better be able to educate him on how and why mortgages are discounted.

Does the client expect 90% of the face amount of a 30 year amortized mortgage? You better learn that, except in very unusual circumstances, that is never going to happen.

When you know what the client expects and you prepare the client for what a realistic expectation should be you will avoid the cold feet and sticker shock problems. At the very least, if you know the clients requirements are not going to be met you can save everyone time and effort by explaining to the client why their needs can’t be met.

“A few cases were very mysterious.”

There are some things you just can’t do anything about. Smile, take a deep breath and move on.

5) On at least five or six occasions I have been underbid by other brokers with other funding sources. This is the strength and weakness of doing business on the Internet. Not only do they click on you, but everyone else as well.

There are times you can’t do anything about this. Depending on why this is happening there may be solutions, however.

We need to examine why you are getting underbid. One or more of the following three reasons is probably the problem.

You haven’t structured the transaction to meet the needs of your client. If the transaction involved a mortgage maybe you only had your funding source quote a full purchase while the other consultant knew the needs of the client and got a quote for a partial sale.

You are using the wrong funding sources. These other broker/consultants have found funding sources for their clients that charge less or accept a lower yield. If this is the case you better start looking for better funding sources for your clients.

You are trying to get too much for your services. Are you asking for 10% of the mortgage for your commission when others are taking 5%? Are you choosing funding sources based on their commission rate and not on the best rate for your client?

In a follow-up email discussion with Gary he also said:

Upon reflection I would also add a point 6:

6) Working the wrong cash flow.

In my case I was working with a company that provided unsecured loans up to 300K. None of these deals ever came to fruition and they accounted for about 20 of the total.

• Fully half of the clients lied on their applications.
• Many simply didn't qualify.
• The rest that did qualify decided that they didn't want to pay the rates quoted for them by the funding source.
• The funding source in general was difficult to work with and often did not get back to clients in a timely manner. As very few funding sources do unsecured corporate loans this was a serious problem.

All of these things combined have led me to drop this cash flow. Enough is enough as they say.

It is important to choose a cash flow, or cash flows, that you can work with effectively. In the ACFA training you are encouraged to "choose a niche." I believe that in most cases the niche will "choose" you. Once you close your first few deals you well begin to get referrals from those clients. Before you know it, whatever cash flow those clients had will become your niche.

In many ways I think this last item is a summary of all the problems discussed in the previous categories.

A lack of experience resulted in choosing a cash flow that Gary wasn't able to successfully work.

The wrong funding source who wouldn't respond to the clients made it impossible to close transactions.

Client issues. The clients lied on the application or just didn't qualify. There's not much a consultant can do about a client that lies. The consultant can do some screening to eliminate those who won't qualify, but only to a limited extent.

Pricing. This is a combination of "sticker shock" under client issues and being underbid by other sources. the only thing that can be done here is to prepare the client as well as possible as to what the costs will be.

Gary concludes the original message with:

I hope this is interesting and useful reading for the group and provides a little food for thought.

I think, without a doubt, that the experience of this consultant provides a lot of food for thought.

I hope this article helps you recognize the cause and see some solutions for problems you may be having in getting your transactions to close.

Gary Bernard, Managing Partner of Funding Now www.FundingNow.biz

Bob Frank, Principal Member of Gulf Funding, LLC

Sponsored and Hosted Courtesy of Multiple Funding Solutions, Inc.
www.MultipleFundingSolutions.com