Money Report #3 by Jay Abraham Copyright 1996 by Venture Marketing Society, L.C. All rights reserved, Reproduction or copying of this report is not permitted without written consent of the publisher, This report is intended to outline a business concept that the Society believes is potentially profitable and ‘worth further investigation, but its profitability cannot be guaranteed. Readers arc hercby cautioned that any business, especially a small or new business, invalves a significant ris of failure. ‘This is not a ‘business plan, It is the opinion of the publisher thatthe information contained hercin is not sufficient to start a business and it will be necessary forthe reader to do further research on the opportunity described, ‘Venture Marketing Society, 1.C. is an information provider onty. It does not provide any training, back- vp or personal consultation on the implementation or execution of this or any othet idea. The information provided in this ropor is believed to be accurate, but its accuracy cannot be guaranteed. In some instances the Society may have relied on information provided by third parties and the Society may not have tested the concept in practice. Finally, while the report may speak of investing capital, the concepts described are not passive investments. They require active management. Name of Concept Generate leads/inquiries for brokers of professional practices. ‘Type of Concept Lead generation Overview of Concept This concept drove one of the preeminent brokerage firms in a specialized industry to leadership in their field. T suspect you could master it also. The concept is very simple. ‘A company that specializes in selling accounting practices, i.c., CPA firms and bookkeeping practices around the region came to me and T devised this program for them. The concept is really easy. 1. They got a list of every viable accounting practice in their marketing area. 2. They got alist of the major influence heads or the decision makers in these agencies, These are available by calling trade publications, consulting professionaldirectories and also from various list sources. There is more information on to how to do that in your Confidential Member’s Manual. After they got this list, this broker did something very, very astute. Twive a year, he did the following: (a) He would send a letter to all the practices that were on his list asking them if they would like to sell their practice for top dollar, all cash or mostly cash with very short pay-off terms. (It is important to note that in selling professional practices the sellers do not want low cash down and loag pay-off terms. ‘They want high or all cash or very short pay-off terms with high security.) The letter would say, “T have the buyers and they are ready to make generous, ‘full market value offers’ immediately. If you are interested, write or call so and so in confidence.” He might mail out approximately 30,000 of these letters and get back approximately 2% response of 600 practices that are open or interested or eager to be sold, Then about two weeks later, he would send another letter to all the people on the list but he would purge off the 600 names, meaning he did not mail the 600 names who had responded the first time, The second letter would say, “Would you like to buy a solid, high-net-income-generating accounting practice? I have 500 great practices for sale, very attractive pricing and the principals are motivated sellers now.” Interestingly, when he mailed that letter to the same 30,000 people, less the 600 practitioners who wanted to sell their practices, he would get approximately 600 potential buyers. Guess what he did? He would match the sellers to the buyers and while a lot of the respondents who said they wanted to sell wanted too much or weren’t really interested in selling now, and a lot of the people who responded and said they were buyers didn’t really want to pay fair market value and weren’t really that interested, when all the dust settled, he would always find about 30-50 buyers and 30-50 sellers. With that simple strategy repeated twice a year, he made himself an exceedingly high six-figure income, He had most of his year to indulge his hobbies, which were fishing, and athletics. What is the opportunity here for you? Incredible. Find somebody who specializes in brokering accounting practices, law practices, dental practices, medical practices, you name it, Go to them and tell them you will find a turnkey program to build them leads and find them buyers, Tell the broker that in exchange you want to recover your costs out of first monies back plus a percentage of his commissions after that. You have to be strong in your negotiating or use a nominee or designate to negotiate for you (turn to the section in your Confidential Member’s Manual to learn how to do that), ‘But in essence there is no reason why you shouldn’t be able to commander 20-50% of the resulting revenue or adjusted profit after you recoup all your costs. What could this look like? It could be quite interesting, ‘This is only a guesstimate and there is no absolute proof this will work for you. If you get a fraction of the yield | have just shared with you, it could be very exciting, Let's say that in the city, the marketor the industry where you decide you want to concentrate your venture marketing financing activities, you can identify 10,000 prospects. By the way, this is not limited to accounting practices or medical practices. It can be equally applicable to many professions and businesses, but it works very well in accounting, medicine or dentistry because itis very straightforward and plays the law of averages. Ifyou try this concept, it presupposes one very important thing: that the people for whom you get these leads close deals for you, If you can’t find a practice or business broker who is good at closing, you may be able to create one or you could try to buy an existing brokerage firm for $I and a percentage of the sales and do it for yourself. But the first thing I would do is go to an aggressive brokerage firm that can demonstrate to you that it has high integrity, is aggressive, and has the proven capability to tun qualified buyer and seller prospects into sales. ‘You can get a good idea of the broker's abilities by interviewing them and interviewing their past customers, ie. the people who bought through them and the people ‘who sold through them in the past, Assure and verify for yourself that if you entrust your opportunity and your capital in these people, it will generate a great pay-off. Having said that, what would happen if you received a 1/2% response? Let's take alook. Ifyou mail 10,000 people and you receive a .5% response, you will get $0 respondents on the selling side. If you mail again and get .5%, you get 50 on the buying side. Let’s say your broker was only able to put together and close ten transactions. Let's assume the average practice sells for $200,000. ‘That may be average or it may be low, depending on the market. You have to run the numbers, get the facts, verify what the average selling prices are in the industry and the market you decide to concentrate on. For the sake of illustration, let’s use the $200,000 and 10 transactions. That's $2 million of transactions and let’s say the fee is 3%, 3% of $2 million is $60,000. The cost to mail 20,000 letters is approximately $10,000. Once sales started to close, the first $10,000 would come back to you. On the remaining $50,000, if you get 20%, that comes to $10,000 more. If you get 50%, you would get $25,000 more. The deals will probably close over a period of three to 12 months, so annualized it would be a great return, and it would be something you could repeat every year or maybe twice a year, Even if this ‘example is way off, the concept still has pretty interesting dynamics ‘Once again, there is no guarantee this will even work. However, I do know it worked for one person and that’s encouraging, Head/Trial Strategy What [ recommend you do is first of all try to identify two or three different industries you want to specialize in. Second, as I always tell you (refer to the section in your Confidential Member's Manual for clarity on this), I strongly urge you to negotiatethe deal long-term before you ever do your test. These “Money Reports” are going 10 repeat the reason for this time and time again, but let’s review it once more. If you uncover breakthrough opportunities, as hopefully you will do through your membership in this Society, but you do not tie them up before you prove to the other party that they work, the other side will have very little motivation to give away newfound riches to you for something you have already proven to them without adequately protecting your rights. So my advice is tie up the deal first, then do the most conservative test possible to validate. For example, if you nail down a deal with an accounting broker, a law broker, a dental practice broker, and maybe a specialist in some kind of industry or retail business because you want to be well-hedged, I would then go and get a list of 1,000 names in each category. I would try a letter or postcard. You can test to those 1,000 people in each industry/professional category. If you're trying one profession you are going to have 2,000 letters at 50¢ each (a letter looking for buyers and letter looking for sellers). That’s $1,000 per industry you test. If you test three industries, you would be down $3,000. If you test two, you will be down $2,000. Then do nothing but wait and see the outcome, Test the seller's letter, the follow- up letter looking for buyers, the broker’s closure ability and the viability of each of those industries. You can bail out at any stage. Make sure your agreement with the broker obligates you to generate leads only when and as you please, When you test it, don’t be afraid to spend some time or have a designate of yours check up, verify, oversee and perform due diligence on the broker firm to make sure they do their part This appears to be a very promising area that you can expand all over the world, all over the country, and in many different fieids of endeavor. Permut A permutation of this is to make a deal with the brokerage firm where you fund everything, but you become the endorsed, recommended broker for a trade or industry association or a trade magazine or a trade newsletter where you get the equivalent of endorsement and affinity working to your advantage. Picture yourself as the official, recommended practice broker of the “Oregon State Medical Association” or “Oregon Doctor” magazine (or wherever you live). Inmy experience, an endorsement like this can boost the response on most mail offers 100% to 400%. **NOTE: Check in your market and check in your target industry whether or not you have to be licensed as a real estate (or other) broker in order to do this. Ifso, consider taking the test you need to become licensed because the pay-off this could hold for you could be massive. Also don’t be afraid to have the brokers indemnify you against lawsuits or other legal hassles on any transaction you engage in because you are presupposing that they will conduct themselves in a fastidiously professional, ethical and proper manner in allpurchase or selling representations they do, Neither I nor the Venture Marketing Society is an attorney. We don’t give legal advice. Consequently, you have to consult with a g00d attorney for verification. If you don’t have one, call the bar association in your community.