I was having a beer with my friend Garrett on Friday and we got to talking about the new marketing program that I recently launched for ISOs and brokers in the alternative lending space. He heads up marketing for a relatively large investment firm here in Austin so I was interested to get his take.
During our previous get together I had told Garrett about merchant cash advances, in the context of the work I have done with Pearl Capital, so he had a high-level understanding of the market. He was blown away by how much ISOs and brokers can earn from MCA deals.
"What?! How is it possible that the commissions are so high?" he said.
Commissions north of 5% died out in the investment industry back in the 1990s with the dawn of online discount brokerage firms so he just couldn't understand why ISOs are paid so much. However, when I explained that for many small business owners an MCA is a funding option of last resort he got it. There simply is no other viable option available for them on such a short time frame. As a result, the capital is expensive and the competition for deals is high so companies like Pearl are willing to pay ISOs generously for funded deals.
So, when I told Garrett that the primary mechanism many ISOs use for sourcing deals is cold calling business owners from purchased lists he kind of laughed and said:
“Cold calling? Isn’t that the marketing of last resort?”
Ha ha ha! We both laughed but we knew he was only “kinda” joking.
In my experience, cold calls aren’t the marketing of last resort. Sadly, for most financial professionals cold calls are the marketing of first and only resort.
Here’s the thing. Cold calls do work but they take a lot of effort, time, and patience. As I wrote in an article for Pearl, successful cold calls require almost perfect timing. It also requires a set of skills that most people don’t have.
If cold calls are your primary mechanism for generating new business you are working way harder than you need to and you are almost certainly dealing with a lot of low-quality leads.
Expected Success Rate for Cold Calls
When was the last time you made a purchasing decision based on a cold call? If you’re like most people the answer is never.
If you have ever made a purchase based on a cold call was it a major financial decision? Probably not. And therein lies the challenge you are facing as a financial professional. Cold calls are not the best marketing mechanism for selling financial products. Whether it's an MCA, insurance policies, or investment products.
Effective Marketing for ISOs and Other Financial Professionals
Understanding that cold calls, in most cases, aren't actually marketing at all. They are unsolicited sales calls. Sure, occasionally you will get lucky due to the law of large numbers and someone will say yes but let's be honest that's a rare event.
Effective marketing seeds sales by attracting your target market to a marketing funnel that allows prospects to reveal themselves to you. Think of it as process that encourages someone to raise their hand to say "I think I need what you sell."
Does this mean that you should abandon cold calls? No, not 100%. But, I would recommend two things:
- Shift to Warm Calls - Get focused on a specific target market so that you are calling people who are likely to appreciate your specialization.
- Create a Call Scheduling Process - Invest in the development of a process that encourages members of your target market to book a call with you. There is a world of difference in a call that the prospect has scheduled with you versus the one where you called the prospect out of the blue.
Hopefully you found this interesting. If so, leave me a call or questions. I would love hear from you.