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Win-Win-Win-Win
by Ralf Bieler
About a year and a half ago I wrote an article for Factor-Tips, telling the story of a nice win-win deal that turned into an
even nicer success story for one of our factoring clients. Here’s a quick refresher:
In March 2003, a young couple had been sent to us by S.C.O.R.E. They were looking to start their own business, specializing in
transportation of mobile units (containers, offices, etc.). They were very committed to their idea, since the husband had been working in this industry for over six years as an employee and knew all the ins and outs
as well as the right people on the customer side.
Unfortunately, the young couple didn’t have any start-up capital to buy a truck and the materials needed to operate the
business. What’s more, they were long on operational expertise, but short on business management skills. They had also made some mistakes in the past and had managed to produce a credit history, which was anything
but stellar. In fact, when they came to us, they had a rather large number of open accounts, with quite a few of them even in collection.
S.C.O.R.E. could not really help them with an SBA loan, and in fact, nobody was willing to even listen to them, once their
financial situation and background became clear. I guess we were probably a last resort for them. Our factoring business was fairly young at that point as well, and we had a very idealistic view and outlook on
things. Being refused by everyone they had talked to so far even made it a bigger challenge for us to succeed in helping make their dream of their own company come to life.
Well, long story short, we listened and decided to give it a try. We did industry research, wrote the business plan, and
presented it to a local lender with whom we had a good relationship and who is also very creative when it comes to collateralizing a loan. When we presented the business plan to their underwriting committee, they
agreed to provide the start-up capital to buy the truck and materials needed to get the show on the road.
The extra twist: From day one of operation, we had a factoring contract in place, which guaranteed sufficient operating
capital to run the day-to-day business. Just a perfect scenario for everyone involved. From the advances we pay, we even cover the servicing of the start-up loan, which was something the lender was particularly
happy about.
Once the start-up capital was secured, we got them incorporated, designed and printed the business cards for them, and helped
with everything else it takes to make a business operational. Operations finally started in July 2003 and so did our factoring relation. By the end of 2003, i.e. after 6 months in business, it was a smooth operation
with year-end results being more or less on par with our initial forecast in the business plan.
The win-win: Against all odds, the young couple had made their dream come true. They were operating their own company (with us
providing the business management expertise and CPA services on top of the factoring). We had a great success story, a very happy client, and a profitable factoring relation. With all the adverse conditions in the
beginning of this journey, we now all felt larger than life. Success is indeed the greatest motivator!
And now, the saga continues. By mid 2004, i.e., almost exactly one year after start-up, we began with the expansion plan. So
far the business operated only one truck with the business owner doing all the operational work. He had been great with the customers, done excellent work for them, was well liked and respected by all of them, and
was continuously increasing their demand for his services.
However, due to capacity limitations, the jobs he could do produced a lot but relatively small invoices ranging from $150 -
$800, depending on the scale and scope of each project. Bigger jobs were still going to the bigger guys in the industry with more equipment and bigger teams to do them faster.
But since Mike (not his real name) was strong on quality, safety, reliability, and customer relations, and since demand was
high and the company was doing well, we decided in June 2004 to expand the operations. We bought a second truck and increased the work force to be able to handle bigger jobs.
Between July and November 2004 individual invoice sizes now range from $150 to $15,000, and compared to the same period in
2003, Mike’s sales have grown by a factor of 3.4. In only a year’s time, he has more than tripled his sales volume and added phenomenal gains to his bottom line. And except for the initial start-up loan and the
monthly payments for the second truck, the company is totally debt-free. All day-to-day operational expenses are still fully covered by our factoring.
Having seen what Mike and his team can do in this industry is simply awesome. And having been an instrumental part of it since
day one (and even ahead of time during the planning and set-up phase) feels pretty good, too.
Now, why am I not calling this a win-win anymore, but rather a win-win-win-win scenario? Well, guess what! In a couple of
weeks from now we’ll be sitting here again, revising Mike’s initial business plan in order to recapitalize the company and to outline the new way ahead. Mike’s customers have asked if we can handle even larger
projects and have sent him RFPs for projects up to $100,000 a pop! We’re now buying a third truck, more and better equipment (which we might actually lease, by the way), and are adding a third crew, which will allow
us to do just that. For the recapitalization, we’ll go back to the same lender, who initially supplied the moderate start-up capital.
So, you do the math! Who are the winners in this game?
Mike is making more money and growing faster, way beyond even our wildest initial imagination
We have an even happier client – and a nicely growing factoring volume Mike’s customers are thrilled, because they get more of what they want from Mike, which was impossible before, due
to capacity limitations The lender gets additional business from the recapitalization, and our leasing partner will profit from the
equipment leasing as well
And since we’re increasing the work force, I could have really added another two wins to this equation: We’re providing some
additional jobs, which will not only make those workers happy, but it will also send the right signal to our economy in our little neck of the woods. OK, it’s only a small contribution, but hey, everything counts!
And after all, achieving all this with a 1.5 year-old start-up company that nobody wanted to even touch with a ten-foot pole
in the beginning when it was just another “great idea” is really such a great feeling and a big reward in its own right. It just goes to show that having idealistic goals and the determination to succeed can
sometimes still move mountains, even when the circumstances are anything but optimal and many initial attempts fail. One thing is for sure though: you never win the prize if you give up too early.
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Ralf Bieler is one of the two principals and founders of Multiple Funding Solutions, Inc., a factoring / PO funding and
consulting company for new and established small to midsize businesses. He is also president and co-founder of Factor Solutions, Inc. a Florida corporation specializing in the development of BluBeagleTM business management software and other low-cost/high-value business-, marketing-, and training resources for consultants and factors.
Ralf is a member of ACFA’s Million Dollar Club and the author of the book “Marketing Magic – The Bigger Bang for the Smaller Budget”. You can reach him at Ralf@MultipleFundingSolutions.com or 561-746-1954 or at Ralf@BluBeagle.com or 561-741-7177 or through his web sites at www.MultipleFundingSolutions.com and www.BluBeagle.com.
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