Step 2: Qualify Your Prospects (BEFORE You Begin)
If step 1 is starting with the right list then step 2 is scrubbing that list. The best way I know how to explain this is with a story.
It was at the beginning of my career and I’d done the first part right, I had my list.
There was this one bank that I just knew was the perfect prospect for me.
Because they had non-performing construction loans and construction REO up the wazoo (yeah I said that).
My investor and buyer list and the people I was cozy with in the industry loved busted construction projects. The developers and construction guys that I knew who didn’t lose their shirts in the crash had sold just in time and they were flush with cash and ready for a project.
This bank had unfinished projects. Everywhere. A match made in heaven.
I spent a couple of months calling because it was the motherlode. I called REO managers, special assets officers, I called on the CFO, then I called on a new VP in special assets and we had lunch. This VP also happened to be the president and founder’s son-in-law (yeah that’s how little banks work).
Before the food was set down in front of us he informed me that he wasn’t sure if they were going to be in business the next week. As a matter of fact regulators had taken over the cubicle next to him and they were reviewing all his files!
They were on the ropes and they couldn’t afford the hit on their balance sheet of selling at a discount (I explain all of this inside the training in The Academy).
So why meet with me?
A Bankers job first and foremost is to stay in business and keep his job.
They had to look like they were doing everything they could, taking every angle to liquidate and recover as much as they could from all the construction loans that went bad. But could they sell? No. They couldn’t sell at the prices that the market would be willing to pay because it was too steep a discount and it would put them in jeopardy of being closed.What I didn’t understand at the time were “Capital Adequacy Ratios”.
Had I understood this simple thing I would have saved myself months of prospecting, hope, and banging my head against the wall because it was plain as day that this bank was on the brink of failure.
You see its all in the numbers. Its not even a secret. Its public.
- Is the bank healthy enough to sell?
- Have they prepared their balance sheets for discounted sales?
- Which assets are they prepared (or preparing) to sell?
- Have they sold non-accrual loans in the past or are they a foreclose-and-sell-the-REO bank?
There are lots of things you can see, plain as day, if you know what you’re looking at. So what I propose to you is this…
Step 2: Scrub your prospect list so you’re only focused on real sellers
When you spend a little time up front and scrub your list of the institutions that aren’t real sellers then you can focus all of your energy and efforts ONLY on your best prospects. There’s not enough time in LIFE to chase down every lead. Focus only on your best prospects and do that by approaching your list intelligently.