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Kit Menkin is on vacation. One
of the most popular "Meet the Leasing News Maker" was Mark McQuitty. He
appeared in San Diego at the United Association of Equipment Leasing Top
Gun Salesmanagers workshops. His ex-salesmen from Sierra Cities, Republic
Leasing of Anaheim, and Balboa Capital were glad to see. His story is
tragic on how the sale of the company that he and Jim Raeder founded lost
him millions of dollars It was like “old home week” as many ex-Republic Leasing of Anaheim salesman logged in to talk to their old boss. During the two hours, over 125 entered the chat room to speak with Mark McQuitty, co-founder of Republic Group, Inc., who we commonly call Republic Leasing of Anaheim. He and Jim Raeder formed Capitalwerks, then took over the assets of Preferred Leasing, moving their company from Anaheim to the “snow” country. “I hope you are doing well, how have the debt sources received you and Capitalwerks? “ [ Mark McQuitty ANSWERS ] “I
remember some of you boys from the old chat board...good to hear from
you...tough year, but There were other personal questions, too, about his soccer team, beer at Fritz’s, and McQuitty recognized many of the internet log on names, seeming to enjoy hearing from them. There were also a lot of other questions, such as: I have seen our old friends at Amex buy some real dirt lately. Do you think this will bite them later on? [ Mark McQuitty ANSWERS ] It already is...what does a travel services company know about equipment leasing?...Rockford?.
Most of the questions were about business today, although it started with the top of the three part series. Here is an abridged copy of the “Meet the Leasing News Maker” transcript: “Given your experience at SierraCities, do you feel that a roll up strategy can actually work? You seem to advocate a decentralized approach but can you control costs and write-offs this way? “ [ Mark McQuitty ANSWERS ] It
does work....1998 saw retail origination at FSF generate net income of
$20mm....that was “What and why did the First Sierra Financial melt down happen?”“ “It clearly spelled out in Kit's article.... basically what went for mgmt got away from fundamentals.” “Given your experience at SierraCities, do you feel that a roll up strategy can actually work? You seem to advocate a decentralized approach but can you control costs and write-offs this way? “ [ Mark McQuitty ANSWERS ] “It
does work....1998 saw retail origination at First Sierra Financial generate
net income “What
is your view of small ticket leasing--long term in light of the significant
departure of major “How has the leasing industry changed since you got into the business in the early 1990's? “ “The basics haven't...but with credit scoring there isn't any story 'd credit that a gullible credit officer will buy...credit evolved to more of a science, which is good for our industry.” “What about the regional and community banks wanting to fund leases? Do you see that trend? “ “They're popping up all over the country.... one of my reps just secured a $1mm application from a bank in the Midwest I've never heard of....this is a common occurrence now, again, they just want good credits.” Mark, do you remember a time where so many in the industry have been laid off? NEVER....the
first company to realize the valuable reps with all their relationships
and gets first to “We've seen things picking up since mid-Dec, though we force pounding the phone the old school way. Have you found the market improving as of late as well? “ “Yes....the market place will always reward hard work....this is not a marathon, it's the Iditarod...whole teams of dogs still have to fail” “ ‘Iditarod.’, what is that? “The grueling cross country race in Alaska with dog teams.” “Do you see the market coming back soon, or do you think the leasing industry is in a slump for the long haul?” “It's coming back now...institutional memory is short...the multiples will be back and the market will again respect bottom line generators of NI...stick to the fundamentals.” “I appreciate your optimism about our market, but have you ever personally seen credit windows this bad?” “It's all relative...this is an awesome market compared to when Jim and I started in 92...our buy rates were 18$ to 22$ and app only was $35m at Denrich...thanks Wing! “ ( Mike Wing, director of FSF, formerly Denrich. ) “The year has definitely gotten off to a rough start. With the economic stimulus (low rates). How long do you think it will take until we see significant improvements in our industry “ “It's happening right now.... credit drives marketing...all our competition has gone...quality credits can't get bank funding...pick up the phone!! “ “How do you compare the middle market to the small ticket? What makes small ticket better...if so? “More deals; less aggravation; less groveling to MBA'S with titles; higher margins.” “How many sales folks does Capitalwerks/Preferred have now? are they hiring? 62currently...we are aggressively hiring and looking for elite reps.” ] “ Do you work exclusively through vendors...or end users? 60 % vendors; 20 % marketing out of the preferred database.... the rest miscellaneous...we get the vendors through the "transactional" deal.” ] “How much revenue do you expect annually from each of your reps?” “I
train my reps not to limit themselves....I've got some that do (gross
margin) $10,000/mo and “AMEX is forcing the reps to be vendor flow specialists...this is not for everyone...I couldn't work like that...my commitment to my reps is that we will try to find a home for every credit worthy deal.” “What would you advise a new salesman entering the leasing business today? ..come and learn the business from the best...I'm currently hiring!! “ “Mark with the margins compressing and focus from debt sources being shifted to vendor driven business, is capital werks shifted focus from "Structured Finance" to vendor originations.” “There's certainly some truth to your observation, but as I said we find our vendors by focusing on the individual transaction....every time I fund a vendor, the next question is can you set a program up for me.” “Is GE a serious competitor in small ticket? “ “If they hook up with Capitalwerks they will be...seriously though, GE stands for "got everything", but fortunately they have never really had a small ticket retail presence...it's too expensive...and that's where we brokers can get them the business without the "high touch" headaches that invariably is part of the small ticket landscape. “ “What do you say to these Lessees who think that anything over 7-8$ apr is a bad deal? “ “I assume I've lost the deal and adopt the role of a financial consultant to ensure they're not getting taken up the garden path.... and you know they are, so invariably they always come back and thank me for my 15$. “ “What happened to Jim Raeder? “ “He's an integral part of the CapitalWerks front office working on Treasury functions et al. “ “Another Rumor, Republic was in a desperate situation and Depping came in and gave you enough cash to make payroll and that is why you took all stock. “ “Incorrect, we had $2.5mm in cash in the bank and a line of credit with Sanwa for $5mm....FSF sold us on the low cost of funds and all the technology we could use.... it never happened! “ “Did you look into an IPO prior to selling to FS? “ “No....we wanted a strategic partner and had 3 offers on the table.” “What happened to the old owners FSF stock they had when Sierra Cities sold to AMEX? “ “Most of the branches cashed out and were cash deals. We were one of the few that took a stock deal. We really wanted to become partners. “ “What did you and Jim do between FSF and CapitalWerks? “May 31st '98 was my last day at FSF.... June 1st, I began writing a business plan...there was no in-between.” “Tell us what it was like to go from 210 salesmen to 70 to 10? And you could do nothing about it? “This was devastating to me and to all the reps who had been on a leasing E ticket ride for several years...for us to watch mgmt fall under the "techno-spell" and start gambling was really tragic...what could have been???” “Did many of the sales force that FSF told you to fire believe that you were letting them down by letting them go?” “In the end they were disgusted and quit before I even had a chance to fire them...they walked across town to all the competitors shops.” There were three interrupted sessions as the internet connection between Mark McQuitty was lost, and he had to log in perhaps four separate times, losing many of the questions, having to start over again. There was one session where Kit Menkin was reading the questions from one session, McQuitty was answering over the telephone, and Menkin typing out the answers for the chat room. If questions were not answered, it was because of the technical difficulties on the internet from the CapitalWerks server. Perhaps an indication of of why the Newsmaker was not fond of new technocracy. Over two hours and 32 remained on line, but Mark McQuitty said: “Time to get back to work.” Mark McQuitty MMcQuitty@preferredlease.com Here is the original three past series:
www.leasingnews.org/articles.doc/newsletterMcQuitty.htm
For those interested in a full biography on Mark, how he got into the leasing business, please go here: www.leasingnews.org/articles.doc/Mcquitty_bio.htm ----------------------------------------------------------------------------------------------
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