Anytime I see one of those websites that say “We succeed when you succeed” makes me want to laugh. Commission-only fees ignore operational costs and are not reflective overall of financial institutions on Wall Street or especially PR firms on Park Ave. (the latter charges by the month or year). It is also not reflective of compensation for IR practitioners in the 32 nationwide chapters of http://www.NIRI.org.
Furthermore, “Success fees” are a >deceptive lie< that attempt smoke and mirrors in categorizing everyone as a “broker”. The attempt is to pay someone an abstract fee presumably on the performance of multiple tasks rendered by the worker(s). But when it comes to fund raising, the unescapable fact is the burden of success always relies on the borrower to meet funding approval criteria. And yet, angel investor groups routinely reject 95% of national deal-flow business plans on the grounds of being incoherent, conceptual, deceptive, or just plain no “skin in game”.
Billionaire Mark Cuban agrees that most of the funding requests out there are just conceptual “great ideas”. Here is his reply to such assumptions; http://SinCityFinancier.wordpress.com/2012/02/13/if-you-want-an-immediate-NO-start-an-investor
The desperate acts of borrowers to compose fake documents to meet funding approval criteria explains why at least 1 lender reports the biggest increase in finance fraud is borrower fraud; http://SinCityFinancier.wordpress.com/2012/10/29/ABL-funder-bay-view-ceo-warns-of-increasing-o. There are plenty of examples of such borrowers on the TV show called “American Greed” viewable on http://www.hulu.com.
Many try to cling to their belief that everyone in marketing or financial services is a “broker” and “success-fee” commissions are the only fee or operational cost. This is utterly false. Telemarketing & penny stock promoters and analysts & financial advisors are a few examples of tasks tangentially-related to raising capital and yet don’t work solely on commission (if at all). Here is a long list of further examples of non-broker tasks; http://SinCityFinancier.wordpress.com/2012/04/02/recapping-termination-fees-and-other-non-adva
Wells Fargo and Raymond James are on the list of national financial institutions that are diminishing or eliminating commissions as part of fee structures; http://SinCityFinancier.wordpress.com/2012/12/31/old-las-vegas-saying-commissions-are-like-tip. International Barclays Capital also debunks the myths about construed advance fees here; http://SinCityFinancier.wordpress.com/2010/08/04/reality-of-industry-sop-explained-by-barclays
Something else to consider is; what is the percentage of borrower clients that when offered a term sheet from lenders, funders, or investors wind up “rejecting” it or just “vanish”? Actually, Wall Street Journal reports that percentage is 90%; http://SinCityFinancier.wordpress.com/2015/10/13/90-polled-say-they-would-not-accept-funding-even-though-more-funding-options-are-available-then-ever-before/.
How many times can you do telemarketing, advertising or otherwise “shop around” for such a client before you realize they are not just wasting every ones time and resources but costing you BIG money? If 20% of your client base pulls that excuse then isn’t that 100% of your firm’s profit?
Our IR media firm offers optional “success-fee” for quick-turn around ABL funding referral requests where the client has proof of funds or assets. http://SinCityFinancier.wordpress.com/2013/07/16/defining-the-narrow-niche-of-capital-categories-that-qualify-as-a-success-fee-only-referral-broker-task/.
Such a fee is based on the internationally recognized Lehman Formula sliding-scale to transactional value from 1%. This is far cheaper than success fee telemarketing “boiler rooms” that routinely charge 50%+ of funds raised. http://SinCityFinancier.wordpress.com/2013/01/23/the-reason-why-55b-in-funding-sources-are-lis#.
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