If you’re curious about the Payday Loan business, read this!
I had never been inside a check cashing place, until I opened one. It was an unexpected and unusual career event.
At that time I owned a well regarded and in demand computer and systems company. Our primary market was Universities and Colleges. I was tired of computers, of technology and the big city grind.
On a whim, I moved to a very small city (Vero Beach), from a large city (Ft. Lauderdale). Vero is a great little place, but there’s not much going on business-wise. And I tried to run a little computer shop. My heart wasn’t in it, and after a few months, I was closing it down.
Next door to me was Check Cashing/ Payday Loan place. The business was owned by a local businessperson, and they were giving it ZERO time and attention. The loan employee was always late, always left early, took long lunches, and the clients kept coming in. As I was closing down MY non-busy store, I was approached by the payday store owner if I wanted to take it over. I had nothing else going on, so I agreed. We drew up a one page contract. My first time in a Check Cashing store was the day I took it over. This was March.
Originally, I went in with the owner of the building, but quickly bought him out.
I’m 90 days in. And I’ve spent $8,000 to get into the business. I’m now the sole owner. Remember, I don’t know ANYTHING yet. I bought Jer’s book about Payday lending, I joined the State and National Association. I found a software program that would track my loans and create loan documents. I went to any/every meeting within 500 miles.
Just as I’m gaining momentum, I’m paid a visit by State officials. It seems that a regulation was passed that required me to have a LICENSE to operate. I had to CLOSE down for 3 months while my application was being processed. For those three months, I’m living on Credit cards. But paying rent/phones/ utilities to secure the location. And this location wasn’t fancy. NO bulletproof windows, or cameras, or high tech.
I re-opened in October. I’d joined up with a funding partner. By Dec 31, we had enough revenue to:
* Pay back all my expenses, and outlays from day 1.
* Pay me a Salary back from Day 1.
* Equip the store with state of the art equipment, cameras, computers and printers
* And we still made a profit for the end of the year.
Starting with that one small location, we grew to 4 stores, and 2 of those were superstar locations. Each one doing $30-$35k per month in fees.
Because I’m foolish, I wandered off into other investments. Got into some consulting. Began working in online lending.
Looking back, my storefronts were exceptionally stable operations. Low collections, good staff. Nice customers. The other stuff was fun to do, but by solid measures, the stores were a top-notch businesses.
If you have the opportunity to get into a store front. Don’t be a snob, or think it’s not worth it. It absolutely is. I got back many, many more times my original $8,000 investment.
Here’s a sample of my new book, “How to Start a Payday Loan Business.”
Don’t think I focus strictly on payday loans! Traditional payday loans are evolving into small dollar, installment, line-of-credit, workplace loans… so be assured, I cover all the bases.
Your job description as the OWNER
When you own and operate any business, there are many different functions that are required to keep the place going.
As you get bigger, you delegate these different roles and activities to other people. If you’re lucky, these folks are, at a MINIMUM, competent, honest, and diligent. At the worst, you’ve got a bunch of thieves and liars working AGAINST you; much like the government does.
My PDL Powerhouse Course is created to help you FOCUS your time and attention on activities that are crucial to your success.
However, as the owner/director of a PAYDAY loan business, there are two tasks that should dominate your time, energy and attention:
Your number one JOB is marketing. That is, building the scale and profitability of your business.
Marketing is hard work! Marketing is an ongoing search for new ideas. Then putting those ideas to the test. Do more of what is working, and trash those strategies that get poor results.
Allow your business and your marketing strategies to grow and to speak to you. Let this morph and evolve. As the owner, you have to do it. If you delegate this or out-source it, it’s not going to get done properly.
You also need to know and understand your numbers (key metrics) and reports. You need to know right away if something, or somebody is (not) working.
A shift in the market, organized fraud, or a sloppy employee not following your underwriting guidelines can wreak havoc on your bottom line. You’ll be much, much happier catching this sort of thing EARLY on.
You don’t want to get HUGE? You have one store and you’re happy with that?
That’s fine. Then you use marketing to replace your “lost” customers with new ones. You should be working to bring in the BEST customers and as many of them as you can possibly CRAM into your store.
Employees are the way that we scale up and have LIFE outside our stores. However, a sloppy, or lazy employee will cost you money AND aggravation. A dishonest employee can get you into trouble with regulators, they can steal ALL of your money, and even get you sued. Hire slowly. Watch closely. Fire quickly.
So, how do you measure how you’re doing? How do you benchmark your own results against your competitors? That’s easy. You look up the financial statements for the publicly traded payday loan companies. But, you’re going to have to do some math.
For example: Advance America had revenues of $630,000,000; that’s from 2600 locations.
$630,000,000.00 / 2600 = $242,307.00
That works out to $242,307.00 per store. IF, your store is doing more than that, then you’re doing ok. If you’re doing less, then you have to work a little harder.
There are some superstar stores that just click. Check-n-go had a store in a region that was making 1.4 million in fees every year.
You can do the same math for profits, collections etc.
Bottom Line: 80% of your time and energy should be spent on marketing your business, and watching your staff.
I’ve always had other people do my book-keeping for me. It’s been a task I’ve always hated to do. I was a big shot. An ideas guy. Why would I waste my HUGE brain for such a menial task?
After YEARS of other people doing it WRONG, doing it LATE, or not even doing it at all, I’ve given up.
Three years ago, I woke up and noticed I was 4 years behind and all the books were a disaster.
It turns out that it’s faster for me to do it myself, than it is to spend months nagging and complaining for somebody else to do it for me.
I don’t enjoy it more than I used to, but I’ve realized (the hard and expensive way) that proper record keeping, thorough accounting, and timely Tax Filings are crucial to running a solid business. It’s taken me 25+ years of business to get to this point.
Time and again, the books were screwed up. The numbers I was making business decisions were wrong. Nothing was filed on time.
I’m sometimes a SLOW LEARNER.
If you’re in business, or want to be, get your books under control. Know your numbers, and don’t let anybody else touch them. When you go see your Tax Professional, you should have it all ready for them.
You don’t need fancy or expensive software. Export your online banking into a spreadsheet and go.
Here is a free step by step course on how to use Google tools to improve your business. We address marketing, communications, and workflow.
Treasure is REAL. Not just movie fantasy.
I’m based in Vero Beach Florida. This area is called the Treasure Coast. Not just because the area is a treasure in natural beauty. In 1715, there were 12 ships carrying Silver and gold from Havana, Cuba back to Spain. A hurricane sunk 11 of the 12 ships just offshore. In 1965, the first of these ships was discovered, and to this day, coins often wash onshore, and there are “NEW” discoveries made all the time.
It’s exciting to see and touch gold bars that have been underwater for almost 300 years. Yet, the bars are shiny, and the stamping is clear and crisp.
Where is your MAP? Where are your beautiful gold coins?
If you’re in Payday, or Autotitle, you’ve already jumped into a dynamic and exciting, and profitable business.
It doesn’t matter if your doctor friends call you a loan shark. You’re the smart one. You have total control over how much money you make, and WHO you take on as clients.
You’ve already done most of the work. We have maps for you. We’ve created courses that provide information and resources.
Our courses aren’t just about making more MONEY. They’re about attracting MORE and BETTER clients. Our courses have practical and PROVEN plans to improve not just your lifestyle, but also your LIFE!! You shouldn’t have to work 80 hours per week to be successful. If your staff isn’t making your LIFE better? You’re doing it wrong.
Collections? New opportunities?
If you buy a treasure map on the street, there are no guarantees, only empty promises.
There’s no risk here. All of our maps(courses) are guaranteed 100% to be useful, and practical.
Get out there. Do the work. Dig into resources. Participate. Engage. Connect.
I promise you. It will be worth it. You’ll make more money, create a business that’s impervious to competition, or regulatory changes. And we’ll help you have fun doing it.
Last week, we got a note from Ralleigh Grandberry IV.
“Jer and Miro, why do Autotitle lenders fail? I’ve seen a few guys open up and close. What went wrong?”
Ralleigh is starting out in Payday, and wants to expand into Auto Title lending. Here are Jer’s comments, and I’ll follow it up.
Seriously, Failure? Let me count the ways… undercapitalized, poor collection skills, lack of focus, wrong state, one catastrophic error in the 1st 12 months, infighting amongst your Team, internal theft, poor customer service, failure to think long-term in all aspects of your business particularly regarding customer retention/remarketing/building referrals, not incentivizing your CSR’s in alignment with your short/long-term goals… Need I go on?
Having said this, there is serious money to be made and I like the future of car title much more than PDL’s and installment products.
I’m sure the “mercurial” Miro will COMPLETELY disagree with me on ALL my ramblings :o)
This is free counsel so implement at your peril.
Jer – Trihouse
Jer covers most of the big issues. UNDERCAPITALIZED is a big one. I had a conference call with a lady that was intending to open an auto title operation. She had $15k to open the store. I assumed that was her budget to get a small store open. NOPE. That was her entire budget PLUS her working capital. She had projected that she’s earn $3375.00 per month on that amount. This is fantasy.
If she’s extra careful, MAYBE she can open a 10×10 office with a laptop, printer and camera for $10,000.00. She’s not even considering signage, permits, 1st, last & security, etc. That leaves her $5k for the street. That’s enough for 5 customers. After that she has to turn people away.
Having deep pockets in this industry is an absolute must. You’re going to have to experiment to find your sweet spot as far as underwriting goes. It’s going to take some trial and error. That means, you’re going to give out money, and NOT get it back. Especially when you’re new. You’re going to attract every professional debtor within a 200 mile circle of your store. If your bank balance is FAT, you can take your hits, keep going, and then it’s going to magically turn around for you.
I think if I had to offer a few key suggestions:
1: Have deep pockets
2: It’s a people business. Be amazing with people.
3: Supervise and verify everything. Especially employees.
PS: My Auto Title course is going to be released very soon. Watch out for it.
As you are doing your homework, your first decision is which software company you are going to use to operate your business(LMS Loan management system).
Some programs provide you with a Total turn-key solution that includes a website template. Some programs provide an interface that you can use to LINK your website directly into your LMS.
Before you sign the contract get the technical and interface specifications. With these specifications, you can interview different web contractors and determine IF they can make the interface WORK. If the LMS is using .NET (Microsoft based internet structure), then you need to find a .NET guy.
If you’re in a store front, it’s nice to have a website that can gather leads for you, and looks professional. If you’re ONLINE? Having that interface working perfectly is critical.
The LMS vendor will blame the web guy, and the web guy will blame the LMS company.
This is a long standing tradition in the tech industry. But it leaves you out in the cold. Whatever gets built for you, make sure that YOU test it. You want to enter clients into the website and see how they turn up. You want to try it on a fancy computer, Apple, Ipad, phone, etc. You want to make certain that it works. You can always make it pretty later.
Hire somebody that’s experienced. Preferably a person that has done this type of job before. Many computer guys “learn as they go”. That’s awesome for them, but you don’t want to pay for somebody’s education.
For a small project, I hired a guy out of college. He looked great on paper, and at only $40/hr a total bargain! Can you guess what happened? He spent 4 weeks doing a 2 day project, and when it was done, it was a steaming pile of crap.
Before you hire ANYBODY for any technical work, you have to understand and create a very specific and detailed project. If YOU don’t know exactly what you want, then how will they know?
They’re going to nod politely, and promise the world to get the contract, but if what you need is OUTSIDE their ability? You have to know.
This detail should include the programming language, the LMS information, as well as other interfaces that may be required.
AS a Title loan operator, you’re going to want to:
Interface to you LMS system
Capture client information
Have a window that clients can use to estimate their cars value
Have videos for marketing and client education
Have interactive maps for locations
Perhaps have a client interface where the client can view/change payment structures.
Send receive SMS messages.
I HIGHLY recommend that you view competitors’ websites. At least 20-30 different sites. Make notes of common elements. What’s important. Simplicity is beautiful.
When you write the text, write clearly. Don’t expect the web design company to write the copy, and legal disclosures for you. That’s not their job. You want them focused on making your website work.
By the time you create a RFQ (request for quotation), you should have your entire website, and work flow mapped out on paper. If you’re not organized, your website won’t be either.
You’re creating a technical, marketing and operations funnel for your business. Make it good.
You want as few surprises and changes as possible. Because any changes or issues are going to cost you extra $$$ and time. If you’re building an online organization, you don’t want the whole project sitting while some computer guy is messing with code.
Should you use an offshore web design company? That entirely depends on how capable and patient you are with project management. If you’ve created a comprehensive plan, then your project won’t be that hard.
I’ve had mixed results with offshore. Very capable and skilled programmers, but they are more interested in the money transfer than in completion of your project. In any venture or business, the last 5% of a project is the hardest to get completed. This happens most of all with this type of work. Most will get you 95% of the way there, and then lose interest and wander off.
My suggestion is to find somebody that’s done these before, and if you can, find somebody local. If you have to go to their house and pound on the door? Then you can.
I use: Tino Sebastiani
954 529 7633
As a funny side note, Tino’s web page makes you answer a math question as part of the verification process. I suspect he’s using this as a way to filter out potential clients that are very bad at math.
Final note: Don’t pay until everything is 100%. Keep at least HALF the money until you get that final 5% done.
The Payday Loan Tsunami, ACH, Virtual Wallet, Paytoo: Thoughts and Interpretations
By: Jer Ayler Trihouse
It’s Tuesday, Sept. 10th and I’m in Paris contemplating the TSUNAMI that hit the payday loan industry!
As YOU know, this is an incestuous industry. Billions $$ are at stake! We’re in the midst of a hurricane! Operators are bailing, consumers can’t get a loan – they’re calling out-of-state stores and literally begging for cash. Loan portfolios are being abandoned or sold at fire sale prices, call centers are shutting down right and left…
I’ve been on the phone 6 AM to past midnight with EVERYONE for the past 14+ days non-stop; Saturday’s & Sundays’ included. You know me! Until this firestorm hit, I woke-up whenever I felt like it ) Half the time, I was kayaking on the back-bay when I pontificated on our industry.
As you digest this, remember, “Disruption rarely comes from within.”
So what happened?
New York Banking Commissioner Lawsky launched a series of punches to banks and online payday loan lenders demanding they stop making loans to residents of New York. Additionally, he said all outstanding loan principals and fees with NY borrowers are “void and uncollectable.”
Then the NY AG piled on with more…..
ACH providers, NACHA and banks were attacked for enabling payday loan lenders to “skirt NY usury laws.” The Native American Financial Services Association walked the halls of Congress demanding the State of NY back-off on all this “ACH noise” and “end their attack on tribal sovereignty.” ACH providers reacted in knee-jerk fashion and began shutting-off lender access to the ACH system – virtually overnight without warning! Even state licensed payday loan lenders were cut-off!
The bottom line? The online payday loan industry had its business model cut-off-at-the-knees. Lacking the ability to utilize the (ACH) Automated Clearing House, the industry couldn’t deliver funds (debits/credits) to borrowers nation-wide.
Payday loan lenders having “bricks-n-sticks” were jubilant! Suddenly their online competitors – the offshore, the tribes, the choice of law lenders were out of business! Phone calls to stores by consumers “looking” for a loan increased 1000% overnight. Little payday loan stores in places like Lake Forest, California (Danny Verette – Paid2Day.com) were receiving 20, 30 40+ calls per day from consumers all over the country!
During this “firestorm” of attacks and, what APPEARED TO BE eminent destruction of the payday loan industry, a company called Paytoo arrived! What IS Paytoo you ask? Simple! A “virtual wallet.” Literally, a consumer’s financial purse or wallet “in the cloud.” Cash-in, cash-out and money management all from a mobile phone, a tablet, a computer, an ATM machine… The Paytoo virtual wallet platform enables a consumer to access ALL their financial data, bill pay, payroll loan request, transfer funds to friends, family, merchants, load a Discover or MasterCard, get cash at an ATM machine, create a virtual check, deposit payroll proceeds, manage their finances… a Paytoo virtual wallet is literally a depository for a consumer’s dollars made available anytime, anywhere, 24/7 “LIVE.”
What’s this mean for consumers? NO need for the 30,000,000+ so-called “unbanked” to physically visit their local check casher and pay 3% – 9% of their net payroll proceeds to cash their check. Paytoo does this FREE! No one gives a crap about having a bank account. YOU NO LONGER NEED ONE! ASTOUNDING! Via Paytoo, a consumer can deliver money to merchants, family members (in Mexico City, San Diego, or Paris ) FREE! Cash savings with each “spend.” “Virtual” pay by check is featured. A consumer having a bank account, can choose to “tie” it to their “Wallet.” Paytoo’s platform subscribes to the philosophy of 1 wallet/1 consumer/1 lender. Paytoo brings “real-time” 24/7 comprehensive money management tools to the masses.
What’s this mean for lenders and the AFS industry? No more “check is in the mail.” No more waiting for an ACH to be batched, submitted and wait 2-4 days for transactions to clear. No more 3-5 days of “reserves” to be held by your ACH provider. The lender is at the “front-of-the-line” to be paid by the consumer. The Paytoo platform lowers your “scrubbing” and due-diligence costs on the front-end. Check cashers are DEAD! MoneyGram ?? Western Union?? The stored value cards we’ve all been trying to peddle with ridiculous consumer fees; DEAD! Implement the Paytoo API and launch today.
What’s this mean for Regulators? 1 consumer = 1 payday loan. (Hm.. appears to be a state data base “killer.” States may not be happy to lose the revenue many of them currently receive from Veritec. Think Florida for example.) KYC (Know Your Customer) issues? Solved. Paytoo Corp, a wholly owned subsidiary of Paymotech Finance Corp., is a registered Money Service Business (“MSB”) with The U.S. Department of Treasury.
Mobile phone owners have already achieved “KYC.” Should Paytoo become the “de facto” payday loan lending platform, a federal solution to multiple, simultaneous PDL’s would be moot.
So, what’s been the reaction by the payday loan industry to the intro of the Paytoo platform? “Every lender wants to keep this for themselves.” Not possible. Could not keep the “lid” on this thing. All hell broke loose! It’s like a shark frenzy )
And, how is it that Paytoo just “happened to appear” on the scene at this moment in time? Just as this “ACH TSUNAMI” nearly annihilated a $50B industry?
Paytoo CEO Michael Poignant has been quietly laying the groundwork for the Paytoo virtual wallet “killer application” since 2005. Michel P. has been beating on our vertical for years! He was used, abused, disrespected, left waiting in lobbies…until “The Perfect Storm!”
You might ask at this juncture, why Jer finds himself in the enviable position of playing a role in helping Michael Poignant, Brett Hudson and the rest of the Paytoo Team re-introduce the Paytoo platform to the AFS industry? All I can say is, “Thank god I promptly responded respectfully (and with humor) to the communications Michel P. shot out to me over the past many, many months!
Those of us in the AFS industry who survive, and come out on the other side, bent but not broken, will be rare. The “Virtual Wallet” is the future. ACH will remain but there are better, cheaper options. Europe, S. America, Mexico… even Africa is ahead of the States with adoption of digital, virtual currency, bill pay, money transfer…
Is Paytoo the “killer app” for our space and more? Will Paytoo become the “default” $$ delivery platform for the AFS industry as Google is for search? How far along are Paytoo’s competitors? Can Paytoo scale fast enough to meet demand? Can DLLR, CSH, EZPW… or any other behemoth build/employ/scale as robust a platform as Paytoo has already deployed in Europe and S. America and now the USA? Paytoo is inundated with Demo Requests and “sandbox” setups for testing. Lenders with $100M + are testing now; they’ve only dipped their toe in the waters so far… afraid they could be eaten by a SHARK. Afraid of what happens to their data, their customer… Can Paytoo sell-out? Get eaten?
Remember: 1 wallet; 1 consumer; 1 lender. If Paytoo IS the “killer app,” lenders better “jump-on board” and secure market share FAST! Are you listening Al Goldstein., Mark C., CSH, DLLR, EZPW, FCFS, OLA, CFSA, FISCA, NAFSA…?
Paytoo has 4.5M world-wide consumers currently using the Paytoo virtual wallet! Only 300,000 are U.S. based. These numbers are increasing daily. Who wants to partner with Paytoo? Who wants to do business with Paytoo in the USA NOW?
“Apple will sell a few to its fans but the iPhone won’t make a long-term mark on the [financial services] industry.” Bloomberg, January 14, 2007. (THX to Bank 3.0 by Brett King. Attention: READ THIS BOOK or die! Better! Buy Brett’s book and bring it to FISCA for his autograph )
No single Lender has a large enough market share to slow adoption/integration with the “virtual wallet.” A complete and irreversible DISRUPTION is upon us. Fail to embrace the “Wallet” and your business will perish. We are in the midst of a MAJOR SHIFT in financial services. The $$ distribution system HAS changed.
Today’s consumer has grown-up with Facebook, Twitter, iPhones… Lenders who fail to figure out this new paradigm will soon be irrelevant. As a lender, your costs will come down, your market share will increase, Big Data loan decisioning algorithms will improve your ROI, human loan officers will soon be archaic, consumer rates and fees will fall…
OK, ENOUGH NAME! Signing out from Paris. I’m hiding out from all the flack… :o) Use this in its entirety!
You’re kidding me? You’re a lender and YOU STILL have not seen the “Paytoo Wallet demo?”
GO HERE: http://trihouse.wufoo.com/forms/request-for-demo-of-wallet-via-trihouse-consulting/
WHAT? You’ve demo’ed the Paytoo Wallet and you’re still on the side lines? Then get out of the way. You are about to be crushed.