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“Don’t put your eggs in one basket” was the message driven home by Chris Thomas, NAB’s executive, commercial broker and equipment finance sales.
Commercial and finance broking can be unpredictable. It pays to have a backup plan when things don’t go as expected.
Thomas sat down with Broker Daily and outlined how brokers can manage the low times and capitalise on the fruitful ones.
He described commercial and finance broking as a game of cricket.
“The basics of cricket is that 2020, everyone wants to see everyone hit the ball over the fence. Every batsman wants to be the batsman that hits the fours and the sixes. Commercial’s a bit like that. You get those bigger deals; they’re like fours and sixes. But the opportunity to do that doesn’t come along every ball,” said Thomas.
“So, the good batsmen will hit the balls that are there to be hit. But in the meantime, we’ll be pushing around the ones and the twos. Home loan, equipment finance, until the big commercial lands.”
This is important as even when things are going smoothly, it can change in an instant.
Thomas recalled times when commercial deals that had been worked on for up to a year fell through at the last minute.
“Mortgages are regular, steady. Commercial lending, you can do lots of work and the deal could fall over. The customer decides that rather than go after that acquisition and borrow a large sum of money, they’d rather just sell their business to a private equity firm and then have no need for debt,” Thomas said.
“I’ve seen instances where brokers have worked on deals for 12 months and then at the eleventh hour, something like that has occurred, and they got no payment. That's not uncommon.”
Despite the need to have a backup plan, Thomas believes brokers should “play where they feel their passion lies.”
There’s no right or wrong way to approach broking, he said. Whether focusing solely on mortgages, commercial, or asset finance, each can be lucrative.
Just be prepared for when it doesn’t go to plan.
“It’s like a bit of risk management 101. Don’t put all your eggs in one basket. Have a good diversified revenue stream,” he said.
“And that’s the same thing, as a business bank, we talk to our clients about. You say to them, what underpins the success of your business? ‘I’ve got three major clients.’ What happens if you lose one of them? ‘I lose 30 per cent of my revenue.’ Okay, that’s a big problem.
“It’s the same with any business. You’ve got to have multiple options, multiple revenue streams, but you’ve still got to be true to what you do well and stay the course on that.”
[Related: Commercial broking: Misunderstood yet vital, says NAB]
