How to broker or facilitate Deals and succeed
How to broker or facilitate Deals and succeed ... and not to be a joker
Commodity Training and Trading
Have you been trying to close any deal for years? Tired of potentially great money making business that suddenly fall apart? Worst, closing the deal and no being paid your commissions?
If you have been through this for years without another source of income, you might be living in a car, a sofa, a basement, sleeping on a bench in a park and barely making it to eat and doing your laundry, taking care of your personal hygiene and paying your cell phone bill and internet.
Of course, for those who succeed, the story is different. In some business deals, it just take one closing and you can retire rich immediately. Other deals produce less profits but can be closed easily and once you close one, you can close many and create your own distribution channel.
My father, before becoming a wealthy recording artist, made his fortune brokering forest products. There was no internet, just phones and TELEX and you traveled to met the parties. Yes, there were tons of crooks and corrupted politicians and government employees, like today.
Onassis, made his fortune and rose from a poor kid to a very rich and famous guy, brokering a deal, without money, where he sold used ships to Argentina, many years ago. Hundreds of stories like this created this industry.
Now we have great communications and the internet, traveling is, in real terms, a lot cheaper. Why is so difficult to close even a routine deal? Hopefully, watching the banter between the two joker-brokers in the YouTube video at the beginning of the article gave you a hint.
This could be a very long article or a book, as the possibilities are almost infinite, but will take care about the most basics, the ones those wanting to be a broker and make a ton of money faces.
Many successful entrepreneurs and other great people faced struggle while creating, or before closing that big deal. Silicon valley has many of these stories. Look at the Whatsapp guys, who were living on food stamps or even people like Mark Cuban. President Obama, a son of a single mom started his adult life very poor, President Clinton was a son from a poor single mom living in the wrong side of the tracks. Many now celebrities and wealthy people, like Sir Richard Branson, were far from wealthy and in some cases, even destitute when starting.
Of course, no matter how romantic the crucible of struggle looks, it by itself, may not make you succeed or even be a good person, or support great ideas, it is amoral and idea neutral.
Adolf Hitler, failed to get admitted to university, spent seven years as a homeless person and had his break in the WW1, where he fought bravely. He went to jail for a coup attempt, where he wrote "My Struggle." He became a spy for the big interests inside the Unions and got into the high leadership. After killing the Unions high hierarchy, the army was sworn to him, personally, and in ten years he took Germany from a bankrupt country to the verge of conquering the world. Of course, at what price.
So, do not get addicted to the pain of the crucible of struggle. Stay thirsty my friends but, be aware that, being hungry and thirsty may help to put the mind to work, even if as an act of sheer survival, but it does not guarantee anything.
One does not have to be an expert in behavioral economics to know that everyone has a breaking point where one must cut losses, even if to take a break before coming back with a new vision and renewed energies (and capital). Sometimes one must loss a battle in order to win the war.
First, it could be instructive to give a look at this already famous video dealing with the banter between two joker brokers at the beginning of this article.
Although the job of facilitating or brokering deals can be neutral to the deal, still, one of the most important things an aspiring and, in fact, any facilitator should do, is to have enough understanding of the industry their deal is, or being willing to work very hard acquiring it in order to be effective in putting the deal together. Of course it can help to team with others who knows and share commissions, many times, the lion's share.
Most brokers who fills my inbox, tend to know very little about what they are dealing with. Most are good at cutting and pasting from one site or board into another and stating that "I have" this or that. And this not counting the purely procedural stuff, how to take the opportunity to the actual transaction.
The Whaler (the Penguin), the Scammer (the Ridler), the Romance Scammer (Catwoman) and THE JOKER BROKER (the Joker) The photo may bring good memories from the Batman series, but the people I represent with the characters in the photo are some of the worst time and money thieves you can encounter. Notice that the Joker broker is in the group... do not be one.
Most brokers do not have even legal advice and enter and propose all sorts of baseless deals with a ton of legal risks or questionable structures and/or procedures.
This is a good article to read:
Each deal has its own economics, legal aspects, logistics, financing, structure. Without knowing about these aspects, or having on board people who does, there is no way you can directly close anything. If you are in a group or a chain of brokers, the ones with more expertise shall close, or better, step down and let the principals close. Commissions should be allocated across with emphasis on the ones who bring the parties together and the ones that close the deal.
Others brokers are true experts in the folklore and legends running around and come with very sophisticated and arcane procedures most lawyers would not understand (and that those who do, throw the deals in the trash can).
Another issue is about fake deals and/or deals that were closed long time ago and are still floating around in the internet, sometimes, for years, making everyone waste time. In these cases I ask for a signed and notarized letter from the principal, in his or her own letterhead, with full verifiable coordinates (no P.O. Boxes) stating that he is 'resuming' the deal. This verify that there is a principal with a deal and the fact he is 'resuming' the deal, save our asses from non solicitation issues. Of course, we also verify economic capacity and other items. I still have to receive a letter...
Ad to this fake board profiles (even in LinkedIn there is a plague of fakes profiles, some using our military and others). The world is a mine field of scammers.
When I receive an e mail from someone in a high position in a big company, I call the company, verify that the person has that profile (and talk to the person) and send a copy of the message. This is very important, specially when the proposed deal does not fit with what the company or a person in such a high position would do as a business.
I also ask the question: Why me? Specially when there are institutions close by, that can easily close the deal.
I received messages from purported presidents of large companies and governments, generals, well, you name it. Almost all fakes. I report and delete.
I can write a big book on all the scams I received, how I dealt with them, including due diligence, rejection and referral to authorities. Probably I will include other people's material and make an encyclopedia. Here is one by, Bongani Siwela, CEO at Brainchild Advertising.
Currently, the scammer (s) is using the name of (Already reported to LinkedIn, rapidly becoming the cyber Nigeria, Abu Dhabi, Ghana, Sierre Leone, Ivory Coast and London of the internet):
Muhammad Al Azim
Offshore Executive Manager (UAE-UK)
International Petroleum Investment Company (IPIC)
Abu Dhabi, United Arab Emirates.
Being an intermediary, facilitator or broker, is not reading about a deal in a board and post it in another with the hope that somehow the deal will close and you make so much money you are set for life. It does not work like that.
Apart from knowing what you do, the next two things are to know the principal and verify the deal is still on. Never go into a deal until you know the principal and that the deal is still open and/or confirm and verify both. If there is a mandate, ask him for his contract and see if he has authority to deal and sign contracts in behalf of the principal. Verify. If the so called mandate refuses, drop the deal, do not waste your time.
Most deals have a buyer and seller and money is flowing from buyer to seller and product and/or service to the buyer. Make sure your seller has the product and the capacity to deliver it. Make sure your buyer has the economic capacity to pay. Again, verify. Never just rely on the word of anyone, verify. If you are not let to verify, is probably another broker, who did not verify, defending his turf, drop the deal, do not waste your time.
Now you must negotiate a price that allows for a margin that makes the deal not just make price rent-able but that cover all costs (carry, commissions, legal, logistics), taxes and currency risk when applicable. Within that viable price, there is the reason you are justified to get the deal, and, therefore, answer the question 'Why me?'
Your deal must have economic justification. although sometimes imperfect information can let bad deals to be closed, this could revert back to you. The deal could suddenly fail, you could be circumvented and/or your reputation can suffer. When a bad deal gets closed due entry barriers, it is an invitation to others to look for a solution to this, and if you do not use the opportunity to get that solution, even if your future deals are less immediately profitable, others will fill the void for you and the train may left without you. always ask 'Why me?'
Make sure your contracts have teeth. It can be a legal clause that can be enforced or better, a performance bond guaranteeing at least, your commissions and any other expenses. You will lose most of your deals, but, you know what? These were probably the bad deals that would have wasted your time or let you without commissions.
If you do not want circumvention, use Transferable LCs or a trusted third party, like a paymaster with escrow capabilities (we offer these services).
The following paragraphs are an excerpt from the message we send to all our new contacts.
If you are in the very difficult and though business of being a facilitator, intermediary or broker, yes, we accept to see your referrals (as long as these do not deviate much from what we do or the way our entities work), and we do appreciate your hard work and make sure you are paid your commissions, but we only accept deal flow that is ready for show time, and we only entertain dealing with people and/or organizations that can show proof of economic capacity, and this, via their principals, decision makers and/or signatories. We never negotiate an actual deal via non principals or non signatories.
Unless you are affluent enough to live on your wealth and provide for yourself and your family and keep up with the expenses of this business (including attorneys and other experts), do it part time or as a hobby and have a job that provides enough for yourself and your family and expenses. That big billionaire deal may be just around the corner but, for most, it will not close in their lifetime, smaller deals may be easier but still are very tough.
Most brokers, will never close a deal. Why? Because this is not just a legal and economic minefield, which already make things tough and risky. There are so many ignorant and naive believing that cross-posting something from one forum into another will make them rich, if someone pick the deal and do the real job for them.
Many deals are fake or has been closed a long time ago or retired from the market. Unless you know your principal, you will never really know. Even deals with real, ready, willing and able principals, fail often because the match is not perfect and/or the economics changed or is just not there. Add to this, the crooks, scammers, criminals, opportunists and dishonest people.
Generally, the more moving parts a deal have, the more propensity to be subject to economic forces beyond your control is, and this, not counting the chains of broker-jokers fighting for their commissions and acting like a principal without having the deal properly structured and with the Due Diligence and Compliance completed.
Is there is any hope to live on this line of business? Of course! Look at every manufacturer and distributor. Someone is selling, doing business development and closing deals for them. Many times, this is done by employees and many times via entrepreneurial independent parties, specially, in growing businesses, already with traction, but, still not enough revenues to pay the kind of expensive professionals a bigger firm can. Is a matter of hard, intelligent, professional grade work, real viable connections in each side of the deal, the law and economics.
Many successful brokers, buy large quantities, use the resulting economies of scale to get better pricing and sell to wholesalers, grey markets, retailers and sometimes via their own distribution channel. One of your main goals as an intermediary should be to build your own distribution channel. It could be retail or brokering and reselling bellow market whenever contractual agreements permit.
If you are an independent, as most facilitators are, keep it simple, but do your homework, research, use the professional services of attorneys and other experts, if things have potential, talk to the principals, do your prep work, do not cut corners. If you are in one side of the deal, make sure your counter-party is as thorough, otherwise, drop the deal. You will save time, possibly money, and more important, your reputation, is not good to be blacklisted because of other people's bullshit. Everyone will know you are serious and mean business, not another broker-joker.
If you have no money and/or are starting, share your deal with others with the resources and professional capacity. Do the best prep work you can. Offer the lion's share of your potential commissions. After a good contract, give them the deal. Observe and learn. You may not become rich, but you will make money. Imagine if you have 100 distributors and offer them 99 cents of a dollar of your potential commissions and keep just one. if everyone close a deal, ceteris paribus, all of them, individually, will make 99 cents on a dollar, after the dust settles, you will end with one full dollar. Got the idea? Work your own numbers and see by yourself. Many successful intermediaries live on this. Feeding real deal flow to successful facilitators, manufacturers and others.
Generally, avoid to get engaged in unpaid searches for jobs, getting clients, nor marketing research. Searches are costly in terms of time, effort and many times, travel, entertainment, experts, attorneys and one have to qualify each side of your deal and sell one party to the other, and, also, if the one asking you to do the dirty job does not measure up, you have the risk of screwing up relationships that took years to build, and this, while the one making you doing the dirty job might be shopping around. Avoid working for nothing. Act as a consultant and charge a small retainer, will lose most 'deals,' but you will not waste your time. Only accept contingency deals when you have all the information in both sides and you are sure the deals in likely to close and you will make money. Unless you want to make a favor, do not hold anyone's hand nor do the dirty job.
If already have the counter-parties in a deal, know them and you know they is ready, willing and able, then can afford a contingency deal, and still is iffy, the deal may not close.
From time to time you may do a favor to a friend and to someone in need and even volunteer to a cause of merit, but, generally, if you are to do the dirty job, is better work on a retainer-plus basis (a small retainer plus expenses, commissions or royalties, and mostly shares and/or stock options, sometimes, a seat in your board).
When offered a business deal, follow the spirit of the law in the USA FCC
Generally I do not open blind invitations for content nor respond messages on blind content, nor go to sites to open documents you can otherwise attach to an e mail or post (at least, until I know you). I do not entertain offers to 'invest in your country.' I always ask, 'Why me?' and expect you to explain to me why you choose me instead of the many options around.
Because of the non solicitation laws in many jurisdictions, I may require, from the principal, a sealed, notarized Invitation Letter (IL), in the principal letterhead, and a sealed and notarized Memorandum of Understanding (MOU), with color copy of passport. If the deal has been floating around for a while I will require a sealed and notarized letter from the principal, in his company letterhead stating that he or she is 'resuming' the deal. The word 'resuming' is very important as I cover my rear from potential non solicitation issues as the other party is 'resuming' the deal. Also, this tells me, that there is a accountable principal and that the deal is still open.
I shun loan offers that depart too much from the market, specially those mass sent with abnormally low interest costs for the potential risk undertaken, that requires me to buy, from the lender's company, a performance bond. This exposes me to pay money for the performance bond and not receive the loan proceeds (one have to be too naive to believe someone is exposing their capital at a low interest for the fee of a self generated performance bond, normally you distribute your risk using a well capitalized and solvent third party insurer who further re insures).
I never travel anywhere to move money, nor pay to transport boxes or become the 'next of kin.' If I sign a contract to manage your money, I will require you to transfer some minimal funds from the bank where the funds are, to start things legally (this also tells me if you really have title and control of the funds). More in an article I am writing about the subject for LinkedIn.
Again, although we accept referrals from brokers, intermediaries and facilitators, and do appreciate their hard work and make sure they are paid their commissions, we only entertain dealing with people and/or organizations, that can show proof of economic capacity (proof of funds and/or proof of product and/or capacity to manufacture and/or distribute, etc.), via their principals, decision makers and/or signatories.
Generally, I ask brokers to send a lawyer and principal endorsed SPA. A lawyer is a witness in behalf of the brokers and the principal endorsement means there is a decision maker in the other side. The deal may close or not, but at least I can connect my principal with the other side's principal and business can have a chance.
END OF EXCERPT
I retail, the mantra is LOCATION LOCATION LOCATION. If your get enough traffic, some people will enter your store and some will buy. Hopefully, your sales are enough to cover your expenses and leave you with a profit.
When you are brokering a deal, is almost like if you were in direct sales, knocking doors house to house or business to business. Then you have to evaluate and qualify and close.
If you are credible, you let others know you are into this and those interested will come, almost like in retail, in this case, LOCATION has been mostly substituted by credibility, marketing and enough deals to cause deal flow, unless your deal is one very appealing. Is a numbers game.
I am mostly in a highly regulated and difficult industry, with a reduced real market and tons of risk. So I have a sort of a retail store with a variety of difficult deals and some basic services that can be used by almost any broker.
Although many of us are self employed, the same behavioral rules that applies to every employed person, still applies to us. In a sense, our clients employ us. The following link gets you to another great article in this matter.
Five Habits That Could Get You Fired! Not only from a job but, from a deal!
Please, feel free to ad me to your networks. I use email@example.com as e mail address. Again, read carefully my LinkedIn profile, specially, if you are interested in doing business with me, or having me in your corner during a deal (usually as a silent partner in the background serving as a guide or a second head)..
I will ad significant material on the Fringe Finance Industry, where everyone wants to become a Trillionaire overnight. Will start with these articles:
Supplemental Material (COMMODITIES)
This comes as a great courtesy of Muhammad Bey
The Joker Broker Part 1
The Broker Joker Part 2
The Broker Joker Part 3