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Because of the nature of factoring small business receivables, I’ve observed two types of people are often attracted to it.
There are unique risks each type faces, and everyone who acts as a factor shares certain common risks.
On one hand, the high returns from factoring attract people who are strongly motivated by high financial
gain. These people like making money. They are often very successful in other investment or business ventures, know which strings to pull to ensure their funds will continue to grow, and are sometimes seen by others
as having the Midas Touch. Often these people see factoring’s unbelievable returns and want “their share” of that juicy pie.
The risk such people face is that of simple greed. There is a danger when greed –
wanting nothing more than just making more and more money – is the primary focus. Not concerned with the good of the people their factoring service is established to assist, such people can easily lose the loyalty
of their clients – if they ever had it in the first place.
What’s more, when greed takes over their factoring practices can become cold and calculating. Quality of service, not to mention the quality of life
and inner spirit, are compromised. Factoring simply becomes a means to a selfish end: making a lot of money. Those with a balanced perspective realize there is a lot more to life than just getting as rich as
possible.
In short, don’t sell your soul or healthy perspective on life just to make big bucks. This risk is not apparent to most people early on.
On the other hand, the other unexpected risk lies at
the opposite end of the spectrum. There are people who get into factoring because they sincerely want to help
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others, and the returns (while nice) are incidental. This is quite commendable but such a perspective has its own dangers.
These folks are great people yet are what cynics might view as saps: naïve, easily taken advantage of, an easy mark. Unfortunately certain people – too often dishonest clients with no integrity or scruples – can
spot such people a mile away.
I have seen some very well-meaning people enter factoring and go overboard trying to help their clients. They give loans in addition to invoice advances, provide uncompensated
extra service, give back rebates sooner than is wise, and generally knock themselves out for these clients. They not only go the extra mile – they go the third, fourth, and fifth miles.
These people run the
high risk of being taken advantage of by clients and all too often end up losing a tidy sum when the client finally shows his or her true colors. And what hurts these kindly souls most is not just the money they
lose: it is the loss of their innocence and trust in people. They’re humiliated to have appeared so foolish, when in fact they did nothing morally wrong.
I have seen both of these scenarios – people in it
only for the money who begin to rot inside, and genuinely nice people who get burned and lose their sweet outlook on humanity. For those who wish to factor successfully, they must find a middle ground where sound
business practices, prudence and common sense overcome greed or excessive generosity.
When that middle ground is found you can successfully invest in receivables and not only make very good money, but truly
help a number of people…and the world becomes a little better place. That’s what this book and others in The Small Factor Series are all about.
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