At an accounting and finance conference at the Javits Center in New York, Morris stopped at a payroll company's booth and asked a naive question. The owner had more than a thousand clients. Surely some of them needed funding?
The answer described a problem with no product attached to it. Long-standing clients regularly called before payroll and asked him to process it and wait a few days to be repaid. He could not refuse a customer of 15 years, so he fronted the money, sometimes $100,000, and carried two days of risk he had no appetite for. His request to Morris was simple: "So please come in and fund them."
That conversation became Payro Finance, which provides short-term, payroll-specific bridge funding to small businesses through payroll companies that earn a revenue share. The harder part came later. A real need does not guarantee a market willing to admit it. For years, Morris ran outreach to payroll owners who insisted their clients never needed money, and growth stayed slow.
The tension at the center of his story is one most founders of a new category face. When a market will not acknowledge a problem you know is real, is slow adoption a persuasion problem or a targeting problem? Morris's answer, earned over several years, is that it is a targeting problem. Who you are talking to matters more than what you say.
Before the targeting lesson came a product lesson. Morris started the payroll line as an add-on inside a merchant cash advance company his father had invested in, where Morris ran operations. His partner there owned sales and pushed back hard whenever Morris stepped in. A separate product line that did not touch the core business was the one space where he could build.
Cold LinkedIn outreach to payroll owners drew a single reply. It came from a tech-forward payroll CEO in New York who had long wanted a funding option for his clients. He became the partner who shaped the product, and Morris credits him directly: "Really, he guided me through it."
The first offer was a standard cash advance. It drew interest and converted nothing. The payroll CEO explained why. His clients ran payroll on Wednesday, needed the money Wednesday morning, and could not wait an hour for an answer. By the time an answer arrived, they had pulled from a personal account or pressed a customer who owed them.
The constraint was real. Lending requires due diligence, so funding on the spot was not an option. The fix moved the diligence earlier: "We'll approve your clients ahead of time when they don't need the money." Because the capital was his father's, the test needed his blessing and had to stay small, so they capped the first advance at $20,000. The program converted.
The decision logic is worth isolating. Demand was never the issue. The structure of the offer did not match the moment the need arrived. A CEO who reads non-conversion as weak demand may cut a viable product. Morris checked timing first and contained the downside while he tested the fix.
Once the payroll line worked, it exposed an uncomfortable comparison. The cash advance company was missing its projections. His father's investment kept growing without returns. The only vertical making money was the one Morris had started. He put the question to his father plainly: "why am I working on this to fill this company's hole?" His father agreed and told him to go on his own.
Morris spun the line out about six months before COVID. He built on borrowed infrastructure: his own Salesforce instance modeled on systems he already knew, a new bank account, his father's controller handling the books, and a loan application he designed himself in Word. He handled partner relationships, underwriting, and customer service alone, then hired one employee.
COVID arrived before the business was a year old, with "about four hundred thousand dollars of loans out there." Funding stopped entirely and repayments froze. He let his one employee go. Once borrowers repaid and the company was made whole, he restarted outreach in August. That is when the deeper obstacle came into view.
Payroll owners gave Morris the same answer again and again. Their clients did not need money, and any client who did would not be a client. Morris calls this the ostrich effect. Payroll companies carried the risk that a client might not cover payroll, and no solution existed. Ignoring that risk let them keep operating and, as he puts it, sleep at night. Accepting his product meant first admitting the risk was there.
A second objection compounded the first. Many owners in service businesses resisted earning money from their own clients on principle. Payro depends on payroll companies as gatekeepers, because the end borrower cannot be reached at scale without them. Morris was selling a solution to a problem the gatekeeper denied, on a revenue model some gatekeepers found distasteful.
For category creators, this pattern is common. The market's response looks like a verdict on the product when it is often a verdict on the buyer's incentives. Treating it as a messaging problem produces more outreach, sharper pitches, and the same result.
"It took time to realize who the ideal prospect was." Morris traces the shift to a talk by Simon Sinek on how new ideas spread through a population. A small group of innovators adopts first. Most of the market follows only once something is proven, and a portion never does. Morris realized he had been treating every payroll owner as a prospect to convert. His actual job was to find the small group of forward-thinking owners drawn to new ideas and stop spending time on everyone else.
In practice, the filter was blunt. When an owner said his clients did not need the product and that he had run his business for 30 years without an issue, Morris ended the conversation. He redirected outreach toward owners who were investing in technology.
The tradeoff has a cost. Narrowing the target shrinks the visible pipeline and feels like walking away from revenue. But the cost of pursuing owners who would never move was measured in years. One message shows both how slow the market was and how it eventually shifted. A payroll owner who ignored Morris's second outreach in 2021 wrote back recently: "Finally I'd love to get to know about your product. I have a customer who can use it."
Morris first leaned on proxies such as newer owners and tech-forward firms. He later corrected himself: "It really isn't age based. It's personality based." His first partners had been in the industry a long time. What set them apart was mindset. Some were looking to earn more from their existing clients. Others were focused on customer experience and saw that helping a client through a short cash gap would make them the partner who came through.
He could not always identify these owners before reaching out, but their responses revealed them quickly. An owner who asks questions and listens is a real prospect. An owner who says to reach back out later is often declining politely. Morris doubts this can be reduced to a fixed ideal customer profile. Part of it is judgment that builds over years inside an industry.
For a CEO, this changes what qualification measures. Firmographics narrow the field. Behavior in the first conversation decides it.
Finding the right prospects is half the discipline. Releasing the wrong ones is the other half, and Morris names it one of the hardest early challenges: "having that courage just to let go of what look like potential sales." Leads that will never close still feel like opportunity. Chasing them consumes the time that belongs to prospects who are actually engaging.
He traces the idea to a real estate developer he heard on a podcast. The developer said his decisive skill was learning to identify a real opportunity early, instead of reviewing decks all day without knowing where to commit. Morris applies the same test to his own business, where many things present as opportunities, including "shiny objects that look like this is the thing you need to focus on next."
The behavioral change is concrete. Years ago, Morris kept every conversation going and tried to convince skeptics. Now, when someone at a conference says the product is not for them, he smiles politely and moves on.
The discipline extends beyond sales. When AI became a priority across industries, Morris went looking for places to incorporate it, largely for its own sake. His conclusion: "A lot of AI really is still old school automation." With developers on staff, he directed the team to exhaust plain automation first, to raise underwriting speed, capacity, and scalability before adding AI.
He sees a role for AI at the point of judgment. The plan is to use it for preliminary recommendations, not decisions, to help the team prioritize which deals to review first. When a vendor pitched an AI underwriting tool, Morris found its core value was automating application intake. Payro takes applications digitally, so that bottleneck did not exist, and he passed.
The decision logic matches his approach to prospects: separate what looks valuable from what solves the problem in front of you.
Morris's path from solo operator to early-adopter traction was not a story of better messaging. It was a sequence of diagnoses. When interest did not convert, he checked timing before questioning demand and tested the fix at contained risk. When a profitable line was subsidizing a struggling company, he separated them. When the market denied the problem, he stopped arguing with it and went looking for buyers whose incentives let them see it.
Payro is now in what Morris calls the early-adopter stage, where sales run on trust by association and prospects ask who else is using it. Paychex now offers financing through Payro, alongside other partners. That position came from concentrating effort, not spreading it.
For a CEO whose growth is stuck despite constant outreach, the question is not how to say it better. It is whether you are talking to the people who can hear it, and whether you have the discipline to walk away from those who cannot.
Morris Reichman is the founder and CEO of Payro Finance, which provides short-term, payroll-specific bridge funding to small businesses through payroll company partners. Before launching Payro in 2019, he ran operations at a merchant cash advance company. He built the business from a one-person operation to early-adopter traction.
LinkedIn: https://www.linkedin.com/in/morris-reichman
__________
Jeff Holman is a CEO advisor, legal strategist, and founder of Intellectual Strategies. With years of experience guiding leaders through complex business and legal challenges, Jeff equips CEOs to scale with confidence by blending legal expertise with strategic foresight. Connect with him on LinkedIn.
Intellectual Strategies provides innovative legal solutions for CEOs and founders through its fractional legal team model. By offering proactive, integrated legal support at predictable costs, the firm helps leaders protect their businesses, manage risk, and focus on growth with confidence.
__________
The Breakout CEO podcast brings you inside the pivotal moments of scaling leaders. Each week, host Jeff Holman spotlights breakout stories of scaling CEOs—showing how resilience, insight, and strategy create pivotal inflection points and lasting growth.
Listen and subscribe on your favorite podcast platform:
__________
Want to be a guest—or know a scaling CEO with a breakout story to share? Apply directly at go.intellectualstrategies.com.
TRANSCRIPT SUMMARY:
00:00 Finding the Ideal Prospect
04:07 A Troubled Investment Opportunity
13:03 Discovering the Payroll Funding Gap
17:28 Designing a Faster Funding Solution
20:50 Launching Payroll Finance Independently
23:30 Surviving the COVID Shutdown
28:00 Finding Innovative Early Adopters
39:11 Letting Go of False Leads
44:05 When Payroll Financing Works
45:48 Underwriting the Person Behind Business
49:24 Automation Before Artificial Intelligence
55:22 Planning a Future Exit
FULL TRANSCRIPT:
Morris Reichman (00:00)
Nobody cared to respond to me. Absolutely nobody. Shiny objects that looked like, this is the thing you need to focus on next. It took time to realize who the ideal prospect was, having the courage just to let go of what looked like potential sales.
Jeff Holman (00:14)
Welcome back everybody to the Breakout CEO podcast. I'm your host, Jeff Holman, with Intellectual Strategies. I run a small law firm that is a fractional legal team for startups and scaling businesses. And we work with a lot of cool companies run by pretty cool CEOs. And we can't share their stories because those are confidential. So I'm doing this podcast to bring you stories and experiences and insights from other successful CEOs who are growing businesses. And I'm really excited to have Morris Reichman here with us today. Morris, welcome to the show.
Morris Reichman (00:43)
Thank you.
Jeff Holman (00:45)
Yeah, it's good to have you. Hey, we we talked a little bit and we're not gonna start here, but maybe we'll get to this at the end. Uh your goal with the show or with your business rather was when I asked you, you know, what where would you like to be? W uh retirement. So tell me n you don't tell me about retirement yet, but tell me about your philosophy behind uh the maybe the business that you've built or other things leading up to the business. What's your philosophy and your approach toward business just generally?
Morris Reichman (01:12)
Yeah, really business for me is only a means. It's it's not it's not a thing itself. So although business really encompasses the majority of our days,
Jeff Holman (01:22)
Mm-hmm.
Morris Reichman (01:23)
um and our life and our brain space.
Jeff Holman (01:26)
Most
Morris Reichman (01:27)
It's for me, it's when will I have enough money or not enough money, but a n a business set up in a way where I could back out, leave it to others, and spend time uh family in, you know, myself intellectually.
growing, investing more in um in my religious study, because my faith is a core part of my life. And that is really where I love to get to. A year a couple of years ago, when I first when I got my first job, uh which was the first, of course, I could tell you my father was uh is a successful entrepreneur and he gave me my first job and I wrote a list to myself what my goals are.
A little sticky note, and I still have it in my night table.
Jeff Holman (02:14)
How long ago was this list formed?
Morris Reichman (02:16)
This was written in two thousand fifteen. Oh years
Jeff Holman (02:18)
Okay. So about eleven years.
Morris Reichman (02:20)
ago. And yeah. And one of the things I have on there is is that my work is not me. And work is not my life. And something I I live to till today.
Jeff Holman (02:35)
Yeah. Is that c can I ask and if this is too personal, just t just tell me and we can move on. But can I ask because I I've got a father who's um very busy with his work, uh has been for forty five years. And uh and you mentioned your father's a s a successful entrepreneur. Is there where where does the the the f the concept of, you know, work is not me come from? Is that tied to watching family members work or
Morris Reichman (03:01)
Of course, of course, absolutely. Um, you know, I grew up, my father worked extremely hard. And he he was barely home. Of course, um I'm married and I have five children, ages two and a half to seventeen and a half and of course my commitment was that I want to be a family man.
Jeff Holman (03:22)
Well you you got the family. Five five kids, seventeen and a half to two and a half, you said, right?
Morris Reichman (03:28)
Yes, in the span of fifteen years.
Jeff Holman (03:30)
That's that's fantastic. Uh my my kids are I've got four, three daughters that are twenty-seven, twenty-three, and uh twenty-seven, twenty-four, and nineteen, and uh my son is sixteen, so full full family life going on here. So congratulations for that. Um well tell us a little bit how you got to to where you're at. You you know, we're gonna get into payroll and the company that you started, which is which is payroll financing, but called payroll with like payroll without the L's.
Just so everyone has a strike going in. But tell us tell us what led up to that before you started that company. What kind of things were you doing?
Morris Reichman (04:07)
We'll try to, you know, give you a quick version of what took place until we started paying finance. Okay. But in uh two thousand, I guess it was two thousand fifteen or two thousand sixteen, there was uh someone approached my father. This fellow had a merchant cash advance company. Um, if you're familiar with that. So issuing high risk fundings for businesses that high yields. And that person was looking for capital. It turns out, I remember being at the so I was in
younger, fifty eleven years younger than I'm now. And my father worried, you know, just concerned for his kids, trying to help get get them, you know, myself and my brothers, you know, a footing, have some um in their own livelihood. He saw this as an opportunity, no a great opportunity for, you know, little Morris. This guy needs some capital, he needs an investment. Let me see what it's all about. So he invited me to some meetings. And I won't forget the moment when I was in his conference room.
With this fellow from the company, my father, and my father's controller.
Jeff Holman (05:10)
Mm-hmm.
Morris Reichman (05:10)
And they're reviewing the business and my father's controller is asking about this piece in the fi financials and this and that. This fellow is selling his company saying, Hey, we're doing XYZ. We just need more capital so we can deploy more capital, we can make do more loans and make more money. And everything is sounding so wonderful. Just
Jeff Holman (05:28)
Just so I have this clear more, so the so the the MCA or merchant cash advance company, the owner or who uh whoever came from that company, was coming to your father not to not to give him a cash advance, but to for him to invest into into the business that they were running so they would have more cash to deploy more cash to you know
Morris Reichman (05:49)
Yeah,
really not even not to invest in the business, more looking for a loan, for you know, to de sort some a loan so he can deploy some capital.
Jeff Holman (05:56)
Because because they have very, very high I mean, I've got clients who do MCAs and many times they they go b they go backwards. They're they're t very tough tough terms. But so okay, so so he was looking for a loan at a better rate so he could loan it out at a higher rate and get or
Morris Reichman (06:12)
Just yeah, more more money. But he wasn't looking for an investor, he wasn't looking for any partners, he wasn't looking to give up any ownership, any percentage. And then as we're sitting in the meeting, I I remember seeing the moment my father's controller tells this fellow, he says, Do you know you are X million dollars in debt? And the guy's like, No. Well, let me tell you how much. The guy fainted. Yeah, literally fainted. Well he didn't no, not literally, but he was he turned white.
This owner of the the owner of the company can't
Jeff Holman (06:43)
A financial company giving loads people didn't know his own looks.
Morris Reichman (06:48)
He's a no. He had no idea. He had a CFO, but I guess apparently there wasn't a lot of transparency between there. And he was not a CFO type of guy. He was a sales guy. He was selling his company and sitting with someone he's trying to get money from, only to discover, not in his own office, not in his own turf by somebody else, that he is deep in debt and has no way to pay back. Oh.
Jeff Holman (07:13)
Wow. Wow.
Morris Reichman (07:14)
So that was a crazy bubble then.
Jeff Holman (07:16)
And so you're sitting there watching this all unfold kind of a little
Morris Reichman (07:19)
And I'm watching the sidelines.
Jeff Holman (07:20)
bit.
Morris Reichman (07:21)
Yeah, and I would just you know, like a fly on the wall listening to this meeting. And I've I've probably never even looked at enough, you know, any financials in my life yet at that point in time. So that took an interesting turn. So that went from okay, I was like, let's try to go out for dinner, just recover from this shock. And then the next step was my father's like, All right, well, there's no opportunity here. That led to another stage of simple, you know, some
Just some compassion for this fellow and wanting to help him. My father said, Let me look into this again. Maybe there's some opportunity here.
Jeff Holman (07:55)
Yeah.
Morris Reichman (07:56)
And he saw some opportunity. The cash flints industry was quite new still in 2015. And we hired some consultants to investigate to look into the business. And eventually we came to the conclusion that the industry is a good industry. The business is a good business, but some bad past decisions brought into a hole.
And if we can only cut that off and start with a clean slate again, this guy has a good company, has some good infrastructure, we can make a lot of money.
Jeff Holman (08:23)
So the so the bones were there but the but the current status was was n not the best.
Morris Reichman (08:28)
Exactly.
It's the you know, the the previous debt that he was paying debt with more debt because he was paying those investors interest every single month when he wasn't making the money and he was ponding himself. So at that point I remember my father presented him an idea. I'm happy willing to invest it to you, but you gotta figure out what you'll do with the p past debt. He figured it out. He went to all those investors and he told us he told them, Listen, there's no money and I can't pay you back and your only chance to get any money back is if I could get this investor in and rebuild the company. So
They all agreed to subordinate their positions and uh my father invested in the company. Okay. And the condition was that I and will be get a p have a a position in the company. And that'll you know, potential was that'll be my future. You know, if we can build up the company, I'll have a I'll have a partnership in the company. That was my father's idea. okay. Well, great, beautiful idea. And we went to so I I joined the company, it was a company in California. I live in New Jersey.
At that point I had three kids and they were under seven years old, I think, under eight years old. And I would travel to California Mondays and come back on Thursdays to be in that company till eventually I felt comfortable enough and I opened an office in New Jersey, trying to summon the operations to uh locally. And that's where I learnt, you know, that's my f that was the first job getting involved in the business. I learned a lot over there. Just
Jeff Holman (09:51)
Just
a quick note about our guests. I host the Breakout CEO podcast to share behind the scenes insights from scaling businesses. As an attorney, I see the real challenges leaders face long before success becomes public. But clients' stories have to stay confidential. So we invite guest CEOs to share their own moments of struggle and success. I'm so grateful to our guests and my team at Intellectual Strategies for making this show possible.
Let's get back to the show. What was your what was your role at that company? I mean, do you have a title or what were you
Morris Reichman (10:27)
Yeah, well was yeah, everything operations. So I manage our CRMs, I manage our accounting office, collections and the systems, sort of overseeing the operations of the company and the accounting and finance and finan and financials of the company.
Jeff Holman (10:42)
So you had kind of your father and his and his financial team or or people to to help back you with that. You weren't running you weren't running that solo, right?
Morris Reichman (10:51)
I had some of his assistance, but eventually I hired our own controller in-house and we set that up and own collections. But yeah, I had some resources to piggyback off. And then here's the interesting thing, we are pivoted to how we started pay-rofinance. So the company was doing okay, but it wasn't doing well enough. Right? And then of course, we weren't meeting the projections that this fellow said it would produce. Yeah. Sales weren't weren't happening enough. And
My father is investing in company more than he anticipated before seeing a return. And the investment was starting to get bigger, the returns were not there. And it looks like we're gonna start losing money. So we it it started becoming stressful. And I'm not in the sales capacity because this person my father, you know, was trusted is in the sales position. But this is my future. My father told me, Listen, this if this company's successful, you'll have, you know, a percent in the company. So I was uptight because it wasn't going where it had to go. And I was building a family.
So whenever I want they get so I would try to gauge engage in sales. Whenever I did, a partner would not be happy with it. Like Morris,
Jeff Holman (11:58)
Well
Morris Reichman (11:59)
you're in operations, you run the company, I do sales. We can't just you're run we can't run over each other.
Jeff Holman (12:04)
Yeah.
Morris Reichman (12:05)
But that but that's that was a constant struggle. I didn't just touch sales, we got along. If I got into sales, there were fireworks. So
Jeff Holman (12:13)
But sales was the issue, it sounds like. I mean could because uh a merchant cash advanced company, y like margins can be extremely good, I would expect. I'm not sure what failure rates on on the loans are and and a lot of the the agreements I've seen get really weird sometimes. It's it's almost like it's you know, it's really meant to I don't want to say to, you know, incentivize failure of the loan.
And and increasing fees and but but there's a a lot of people who that as a practical matter, that's what happens with them, right? And so the the fees and penalties and repayment goes way up, but the the failure rates probably go way up, right? W was it really a sales issue or were there other things in that business that you were
Morris Reichman (13:03)
Yeah, I say I don't wanna get if you're off into that conversation. It's mostly sales, like every industry. You have to know what you're doing. If you're an ammo if you're selling an Amazon, you have to know that industry as well. So you have to know the industry. But it was mostly sales. We just didn't have enough sales. And then I'll try to get in there. One time there was a conference in New York in the Javit Center, an accounting and finance conference, somehow it came across that conference. I'm like, all right, I'm gonna go over there. You know, I'm not bothering my partner if I just take a drive down to New York City and yeah, attend the conference.
Maybe I could find some opportunity. So I did that. And I get to the conference, and there were all types of you know accounting companies, and there were many payroll companies there who had booths from ADP and paychecks to local payroll companies. So I stopped by the booths, and I'm stopping by one guy, and he's telling me all about his payroll company. And I'm asking him what he does, payroll, what what does that mean exactly? I'm learning about the industry.
And he's telling me he has over a thousand customers. So, naturally and naively, I said, Well, I'm sure something needs some funding, right? So why don't you just why don't we have a partnership? Just send to us, we'll pay you a commission. You can make a ton of commission. And the guy's like, You know something? That's really important. I have this every single week. I'll have customers who call me up and like, Hey Jake, can you process my payroll and I'll pay you back on Monday?
And these are customers who are as customers for ten, fifteen, twenty years. You can't tell them no because their business is on the line, you know. And you can't tell them I don't trust you. I'm I'm your customer for fifteen years. So I'm compelled to lay out their payroll, which could be hundred thousand dollars, and get and they'll pay me two days later, but for those two days I can't sleep. So please come in and fund them.
Jeff Holman (14:55)
So so the payroll company was really acting was was extending credit to to their customers.
Morris Reichman (15:01)
And he wasn't even making money on it. He was barely making any money on it. And he couldn't sleep. Now imagine someone running payroll is not the personality of someone who's giving out loans. They don't have those types of guts. they're a service provider, everything needs to be organized, there's no risk involved.
Jeff Holman (15:16)
Different risk profile for sure. Right.
Morris Reichman (15:18)
Completely. That's when the idea started growing. Okay, there is a need for funding around payroll, but very specifically.
Anyway, nothing ever happened with this individual because he was just too busy running his payroll company and we didn't do anything together. But that's when the idea struck. So I started reaching out on LinkedIn to owners of payroll companies. I never knew there was a payroll company besides paychecks. I didn't know the industry existed. Well, I knew it was paychecks and ADP. But as I started researching, I started finding apparel companies. And I started sending messages to one after the other. Nobody cared to respond to me. Absolutely nobody. my message must have been very naive.
And it must have sounded I must have you know
Jeff Holman (16:01)
Was nobody else payroll
financing at this time?
Morris Reichman (16:04)
No such thing. You know, merchant cash advance companies would advertise, and they still do payroll funding. They'll advertise loans of payroll because payroll is a common pain point. Yeah. It's a time when you need to have funds urgently and immediately you can't wait. But any payroll any program designed specifically for payroll didn't exist. And even today it doesn't exist besides uh for what we do. So I reached out. There was one company who responded to me, one guy in New York, and he said, Hey, I was always interested in f in a funding solution.
I never knew where to turn, so thanks for reaching out. Come let's meet. Great.
Jeff Holman (16:37)
Okay.
Morris Reichman (16:38)
So I went down to his office. He met in his office. He liked the idea. And he was a very techie guy. He had his his background was in technology. He built his own software. He was sort of in complete control of his payroll engine. And he said, Let's do this. Really, he guided me through it. I give him a lot of credit. I'm very grateful to him. He knew what he knew what his customers needed.
He just needed a for somebody who was willing to put money out and be the funder. And that was me. And this is why I'm at this cash advance company. But now I created a new line. This
Jeff Holman (17:12)
Yeah.
Morris Reichman (17:12)
is at this company, but since it wasn't interfering with a regular cash advance, you know, it was a sort of an add-on. So it was okay. You know, it wasn't interfering with the day to day business of run getting more cash advanced business. Because it was gonna be a little bit of different product. So
Jeff Holman (17:26)
Yeah.
Morris Reichman (17:28)
He sort of my partner sort allowed me to run with it. Like in Morris, okay, you want to try this? You can try this. You know? Let let's see if that works. Yeah. So I'm running with this. And at first we were just offering cash advance and nothing converted. We had interest, but nothing converted. So I go I travel another hour to this to the office of the CEO and we're brainstorming. And he's like, Morris, let me tell you why they don't work. Because my customers ran payroll on Wednesday. They needed money Wednesday morning and you couldn't give them an answer in an hour.
And in an hour they didn't have an answer, they found money somewhere else. They had to run payroll. They couldn't wait for you.
Jeff Holman (18:01)
Yeah,
Morris Reichman (18:04)
Exactly. Or they w or they went and just knocked down the door of somebody who owed them money and said, I need money for payroll, the best pressure tactic, and the guy pays them and whatever it is. You're just not quick enough. We need to find a quicker solution. I'm like, well, what is the quicker solution? We have to do a due diligence. We can't just do whatever we want. we need to be careful. And it's a back and forth we decided, and this is coming with the blessing of my father who was really putting the money uh money for this. We said, Let's try something. We'll try a a pre approval.
Will approve your clients ahead of time when they don't need the money. And we'll start with a twenty thousand dollar advance. So it's a small risk. We set a certain credit criteria. So let's test it. Let's see if we issue small loans with a much shorter due diligence, and it's not timely, it's not at the moment. So we could have done due to due diligence two months ago, and based on that approval, I'll give them a loan in two months. So that was part of the tricky part of it.
And these are cash advanced types of underwritings. And we launched that program and it turned out to be very successful.
Jeff Holman (19:07)
So you had to grow this from scratch, right? Because nobody else in the indust there wasn't an industry for this. So you're the company you're at wasn't this
Morris Reichman (19:14)
There's no precedent for this. This is a l line of credit, but we're not underwriting like a bank. And it's neither is it operating like a cash advance. It didn't have those mechanisms to manage that risk factor of a cash defense. But the people we're giving money to were sort of the same risk box as someone getting a cash defense. And but our rates were much lower. We couldn't try we weren't charging cash advance rates because that too was not appealing enough for the people that needed a short term bridge. So we're really trying out something to see how it works out.
It turns out what we discovered was that there's uh there are a ton of business owners who fit a certain criteria, they wouldn't take cash advance only in the worst case scenario, but they need money for a short term, really. I need money from today until tomorrow, from today until next week. And they don't have it. They don't have the line of credit with the bank. They don't have the family to fall on. They don't have the customer to pay them because they need their customers so they're always treating them with kickoffs. And they need the money today, and it's extremely stressful.
So with no other choice, they might take a cash advance, pay a crazy rate for six months when all they need really is a bridge for one week.
Jeff Holman (20:20)
Yeah.
Morris Reichman (20:21)
And that community is so large and the need is so great. That's what we discovered together with this payroll company as you're building this out. And then as we had success, as we had success our initial success, is when um I told my father, this company, Matt, is not performing. There is one vertical company that isn't making money now.
And that's the one I started. So why am I paying why am I working on this to fill this company's hole?
Jeff Holman (20:48)
Yeah.
Morris Reichman (20:50)
And he was like, You're right. Go on your own. And I did. And with this with this concept, I went on my own with his blessing. And then about six months later, COVID came, which was a perfect storm to shut down the other cash events company. And that's when they shut it down. And my father got out of there and just took the loss, whatever it was. And there on I started building uh my company, Payroll Finance.
Jeff Holman (21:14)
Very interesting. well I'm I I want to hear more about building payroll uh payroll finance. Um when you were building this though at the first company you were at and there wasn't really an infrastructure, what were a couple of the things that you had to figure out in order to make this an actual business product instead of just a you know w one off transaction here and there?
Morris Reichman (21:39)
Well, to begin with, I was piggybacking off the infrastructure at that original company. So in terms of banking, you know, uh money movement capabilities, the CRMs, I was using everything from the company. Okay. Once again, my father invested in it, he owned it, right? He was a seventy percent partner at this point. Okay. Even when I went off on my own, I was still using that system. And I knew how to replicate. So I started my own Salesforce instance, knew how to I knew what has to get done, opened up a bank account in my own banking.
And it was all me. I knew the tools and I was still using some of the tools at that company for underwriting, some of the background checking tools and different tools. Um, I shared my father's controller and he did the the the bookkeeping and just managed the money that was coming in out of the bank. Otherwise, it was just myself. I was fetching new relationships with payroll companies and I was the underwriter and I was a custom service person and I was doing everything on my own and um
The best I can. We need an application today. So I created an application in Word, the best I can with my graphics and made an application. We need this, we need that. Whatever it was I was doing. Uh shortly after after a couple of months, I hired my first helper, let's call it, hired one employee to help me with everything. Yeah. And it didn't take long, and then COVID hit. And this is my business, not even a year old, and COVID is COVID hit.
And we have about four hundred thousand dollars of loans out there. And now nobody knows what's happening. So of course we stopped funding, stopped cold turkey, not putting any money out. Right. But neither were we getting paid. So everything was just frozen. Still. No one's paying. There's no new loans being originated. And we didn't know what's gonna happen. I let that one employee go, and I was trying to figure out maybe I'll do some PPP stuff. You know?
Jeff Holman (23:28)
Yeah.
Morris Reichman (23:30)
Like everybody else trying to do that. Eventually
we got back, you know, the all the paycheck, yeah, what's called the the PPP loans came in. So and whoever owed us money paid us back. We were made whole, thank God. And in August of the year we started cranking up new business. We started reaching out to more payroll companies, trying to get some more partners on board. Uh it's been very slow. People didn't really believe in it. you know, I'm out there trying to convince owners of payroll companies of a need that they never provided. A need they never really paid attention to.
Jeff Holman (24:04)
And a and convince them in advance, right? Because you were you were trying to go out there before they need it so that you could be timely when they do need it.
Morris Reichman (24:12)
Exactly. So I'd reach out to apparel company and say, no, your customer needs money. They're like, No, they don't. What do you mean they don't need money? Yeah. How many customers do you have? A few hundred. well no. My customers don't need money. If they w if they did, they wouldn't be my customer. I only have good customers. And this this story repeats itself again and again and again. I mean cumulatively. We're talking about tens of thousands of businesses and everybody believes every owner of a paral company believes that their clientele is just
Jeff Holman (24:36)
They're well funded.
Morris Reichman (24:38)
All of them. I'm like, so why don't you invest with all of them if that's the case?
And uh they wouldn't believe. It's really what they call the ostrich effect. Have you heard about the ostrich effect?
Jeff Holman (24:48)
I've heard I've heard the word and I've seen it play out with a with a few clients before too.
Morris Reichman (24:52)
Yeah, the idea, right? So put your head in the sand like an ostrich and imagine the the risk doesn't exist. That's how the payroll industry operated because there was no solution. So you're always at the risk of your customer might not have might not have enough money. You might pull their the funds of payroll and there might not be enough money in the bank, but there's nothing I can really do about it if I want to be in a payroll. If I to be in payroll, I want payroll. Yeah. So you might as well just ignore it and imagine it doesn't exist and convince yourself that it doesn't exist so you can sleep at night.
Jeff Holman (25:21)
I was gonna say we ran into that with a a client. This was probably seventeen years ago now. But uh they they took a they took a technology to uh a healthcare provider hospital system and they said, Hey, we want to build this for you, and the and the hospital said, No, we don't need that. But we have this doctor who's come up with this really cool invention in the lab and he's using it with the NICU babies, and we'd like to see it commercialized. And then when once you commercialize it, we'll buy it back from you. Well, so they the
The team went through all this stuff. They got patents. They got trademarks. They got they set up a whole uh quality assurance system that you need to produce these types of things. And and then they got got everything ready, started making product, and went back to the hospital, the same hospital that invited them to commercialize it for them and said, Hey, we're ready to sell this to you. And and this product was uh essentially a synthetic or a, you know, a solution for for keeping the throat moist when someone's intubated.
And in the NICU, you know, if you if you're not intubated right and you use you typically use a saline solution, it's got the wrong pH, or you use no solution and bacteria comes in. So we go back to them and we say, hey, we're ready to ready to sell this back to you now. And and their purchasing department said, Oh, we're not buying that. We don't have any pr any any NICU babies that that die from that type of thing or that have complications from that type of uh situation. We just don't have that. And we're like
Wait a second. This came from you guys and now you're saying you don't have that issue? Well, it turns out that when you do uh I don't know what they call it, but you know, medical reporting, you don't report stuff as uh as a problem that you caused in your hospital. Of course there's all these other complications you can blame it on. And so from a reporting standpoint, they didn't report that as a problem, so they didn't need the solution. Even though the solution was developed
by their own people internally. I I think that was I don't know, a good example of the ostrich effect and and it happens across different industries. Uh it's some some imbalance between the problem exists, but we don't need the solution because we're not gonna acknowledge the problem.
Morris Reichman (27:31)
Exactly. So those were some of the g some of the first challenges. Uh getting over that. That took a very, very, very long time.
Jeff Holman (27:37)
What was the key to to uh to start finding customers um who would acknowledge the problem or acknowledge a need for s for the solution? How did you go about uh I don't know, investigating that and trying different approaches d to to find one that works?
Morris Reichman (27:55)
In the beginning it's really throwing you know, just throwing myself in and seeing where it sticks. What
Jeff Holman (28:00)
Yeah.
Morris Reichman (28:00)
it was. I was reaching out to everybody. It took time to realise who the ideal prospect was. I remember the moment when uh eventually I realized who I need to go after. I think there was a I think it was a podcast or something I listened to from Simon Sinek. he was talking about the percentages of how society picks up a new innovations. How you have
The less than 1% or two are the innovators. And then the 1% of society who picks up on those new innovations before they become popular. Then you have the next 5% of people who start seeing there's something there. And okay, we need to pick up on this. Then you have 20% of early adopters. And then the rest of society, until 80% now picks up on it because it was proven and everyone has to do this.
Then you're still left with twenty percent of society who refuses to acknowledge and adopt to new great ideas. We just want to stick with the old. And I was thinking of that and I realized, okay, so I'm right now I'm that less than one percent to thought of an idea, and I need to only find those one percenters who are forward taking people, the innovators, who will gravitate to a new idea and be willing to try it. People who are stuck in the ways of old are just not gonna be the right people for me. So if I'll reach out to the owner of a payroll company,
The owner just tells me, you know, no, my customers don't need it, and I'm running this for thirty years, never had an issue. Right. Says, All right, well then goodbye. You know, you're this for thirty years and you can't see anything different, then we are not a peer.
Jeff Holman (29:36)
Yeah.
Morris Reichman (29:36)
I started reaching out to more younger owners and those who are a bit more investing in technology, so they were more tech advanced.
Jeff Holman (29:46)
That's it's an interesting concept. go ahead.
Morris Reichman (29:49)
Yeah, then eventually it changed. Uh last week I got a message from somebody on LinkedIn. And the the the previous message, the one before his message to me was in Octo was in 2021. It was a message I sent to him. And it was it was my second message sent him trying to reach out to him and I didn't get a response. Now he now he sends me a message. A message is Hi Morse. Finally I'd love to get to know about your product. I have a customer who can use it.
Jeff Holman (30:20)
That's a long sales cycle right there. That's
Morris Reichman (30:23)
Quite long, yeah. Five years later.
Jeff Holman (30:26)
Yeah, who wrote the book? 'Cause I I've seen the chart, I've seen I've seen the seen the terminology, read the book. I I'm forgetting the author's name, but Crossing the Chasm, uh Jeffrey something, I if I'm not mistaken.
Morris Reichman (30:36)
I
never came across that book. Ah. Never
Jeff Holman (30:40)
We've got it here somewhere, maybe. Well, I know I've got it here. I just don't know exactly where it's at. Crossing the chasm. It's a book, forgetting the author's name. And he he talks about the same curve, the adoption curve with the innovators and the I think there's another another term like you're like you mentioned. The innovators, somebody, early adopters, late adopters, and the laggards, he calls them. And and there's this curve that right. But there's such a small such a small portion of the of the community who will actually you know, the innovators who will actually adopt a new product.
early, early on, before it's proven, before the industry accepts it. And as you're s as you're describing that.
Morris Reichman (31:15)
No, that that's that was one of the toughest parts. You know, now I can I can go to a conference and um people come by and ask what we're doing and we tell them, and if somebody's like, Oh, not for me, I just smile politely and let it move on. Yeah. there are enough people who understand it. Years ago, I would try just keep the keep the conversation going, try to convince them otherwise.
Jeff Holman (31:38)
No, but but but yeah.
Morris Reichman (31:40)
Exactly.
Jeff Holman (31:42)
Well so so I love that you're I love that you're bringing this up because for new innovative companies, uh everyone runs into this. And until you have scale, which kind of means that y you've maybe gotten past the innovator stage already, until you have scale, you don't really know exactly what works and what doesn't work and you've got to try a bunch of stuff. What what strikes me though is that um the way you're describing it really kind of lands in the sense that you're not
trying to get people to buy your product. Your problem is trying to identify who an innovator is and who an innovator isn't. And if you can do that, it it the sale is secondary to to understanding the type of person you're talking to. Am I saying that in alignment with what you're saying?
Morris Reichman (32:30)
That was then a change today, uh mainly because of scale and volume. Yeah. And by now now sales operates more by association, trust by association is a big one. It's who else is using it? Who else works with paper finance?
Jeff Holman (32:43)
Because you're you're because you're further into the curve, right? With the innovators what what what stage would you say the business is at now in that adoption curve? Is it the the early adopters, the late adopters, the laggards?
Morris Reichman (32:57)
No, uh, where we with that? we're st we're still it's still not common practice. It's not common. It's not a given. So we're in the early adapter stage. That's cool. We we got over the hump of the innovators. And now it's um you don't you don't need to be such an innovator to s acknowledge and appreciate what we do and want to work with us.
Jeff Holman (33:19)
It's more streamlined, but not everywhere yet.
Morris Reichman (33:22)
Yeah, no well, today it's not about so much if people don't r acknowledge or realize the value we bring. Uh it's more um does a payroll company see the importance? Is it important enough for them to offer us to their customers? It's how they see themselves, how the business is doing. Uh they can they can see the value, but just not important enough for me to offer my customers a payroll funding solution.
Jeff Holman (33:46)
Yeah. Yeah, because you've got kind of a t a two tier a two tier market, if you will, right? You got the your it your the end users are the are the companies who need the payroll financing. The but the gatekeepers in a sense or the referral partners or whatever you want to call them are are really the the payroll companies servicing the companies. So That's right. Yeah, a lot of a lot of these uh a lot of and and so I I assume too that the that the revenue stream
doesn't come from the payroll payroll companies, it comes from the the end user companies accessing the payroll financing. Is that right?
Morris Reichman (34:23)
That's right. The per the peril companies get a revenue share. They're making money with us.
Jeff Holman (34:27)
They're incentivized. Yeah. Yeah. And even with an incentive, a lot of them probably were not because you the not only do you need the companies to be early adopt innovators who are willing to do it, in your case you needed to find payroll companies who were also innovative to sell to their innovator. Yeah.
Morris Reichman (34:45)
So here's an interesting thing. Yeah, I see here's an interesting thing. So we're talking about innovators. Now, why does somebody want to innovate? It's because if you're running a company, you're innovating to make money. So a common objection early on was, uh, and this is very common amongst the types of personalities of people running apparel companies or in the service industry, people who are offering a you know legitimate business service. I'm not here to make money off my clients.
People would come with this type of, you know, uh self-promoting, you know, integrity. No, I I don't need to make money off my clients. So they had this but they had this blockage of accepting, you know, payment for the service. So the innovators are people who thought let they they were thinking about how am I gonna innovate my payroll company to generate more revenue out of my existing clientele. That's what it meant to be an innovator. Those are the ones who we could engage. And then you had other types who were very much
customer service focused and they're also very innovative. How will I make my customer experience better? Either because they'll stay with me, I'll get more business that way, but they're very focused on their customer experience. So they will if they were able to appreciate what we do and relate and understand, well some customers do have an hard do have will face some short term cash flow issues a couple of times a year. And if we could help them, we can be the we can be their savior. Well we want to be we want to be that position. Yeah. So those two are innovators because it wasn't
The common way to run a business.
Jeff Holman (36:14)
Well, so I think what I've heard you say then um the two categories maybe 'cause I'm really curious about what the filters are that you use to identify the innovators. So it sounds like one of those is it the more the the more focused a payroll company is on their customer experience, the more likely they are to be accepting of innovation and and things that might bring more value to their customers. That's the one thing. And the other was maybe I don't I don't want to say this the wrong way, but
because it's not not strictly age based, right? But but maybe people who were more um more grounded in the in the industry uh were less likely to be innovative because they'd just been doing it longer. They were kind of in their patterns and uh whereas people who were who had been in the industry less time were looking for ways to get into the industry and and open innovation. Is that right?
Morris Reichman (37:06)
No, I'm not sure. And I must I must agree with you, it's not it's not age based. It really isn't age based. It's it's personality based. my first companies were not youngsters. My first partners, really not. they were all in the industry for a long time. It's really a mindset. Uh, you see it every day with people running businesses. You have the people that think big, they're growing, they're always looking for better solutions to make the business better. And you have those that like to run it the way it is and just don't like to change because it it comb it discombobulates them.
They get confused. It's a personality. And I couldn't always find them before reaching out. But when you reach out to them and you see how they respond, you know right about who you're talking to. You see somebody who is inquiring about what you're doing and is listening, and you hear and then you see the guy you're talking to, and you're like, no, no, no, no, no, no, no, before you even say anything. So so you you just see who you're talking to.
Jeff Holman (37:58)
That's funny. You know, I was just at an event last week and um a guy named uh here local, I'm in Utah, and there's a company here with a a guy that named Woody Woodward, I believe was his name. He and another guy wrote a book. I've I've actually got it sitting on my on my they gave out the book last week and I grabbed a copy because I it sounded very intriguing. It's called drive sales system, and I'm not here to promote the book, but the concept behind drive sales system was to was that each letter of the of the word drive, D-R-I-B-E,
relates to kind of I'm gonna call it a personality, right? A a a type of buyer. And the first thing you need to do is I think what you're describing where you need to figure out is your is your buyer, you know, using Woody's system, is your buyer a D, an R, an I, a V, or an E? And that that stands for like director and relator and some other words. So so you're really trying to assess the personality or the the buying style of your of your of your
customer or in your case your partner, what kind of things did you do? Did you have like did you kind of refine the list of questions that you could ask somebody to see if they were really an innovator and likely to buy? Or was it more of a vibe that you got as you talked? How did you do that?
Morris Reichman (39:11)
Yeah, it was a vibe. You know, you can see right away if the person's committed or not. You can see when someone tells you, um, reach back out to me and you know, they're just kindly pushing you off because they feel bad to tell you no. And you can see when someone's really sold on it and they want to engage. It's just um you can't hide it. Very simple. And then for me and for many business owners in that stage, one of the biggest challenges is is having the courage to let go of those
Who you know in your gut are not going to do anything for you. You know that they're not going to come on. But you think maybe yeah. So you spend only time running after them and you're burning precious time and you can which can be used somewhere else. That is probably one of the biggest challenges early on is having the courage just to let go of what look like potential sales and potential leads.
Jeff Holman (40:03)
reminds me of a story when I I talked with a friend of mine as an attorney. I'm friends with a bunch of other attorneys, for better or for worse. And uh one attorney at a larger law firm was talking about a client that he he couldn't quite land. They didn't they weren't the right fit and he and I said, Hey, send them my way. Like it sounds like he'd be a great fit for w the way we practice. And although I'm gr good friends with this attorney, he said, No, I'm not I'm not sending him your way. He might hire you. And I'm like, Well, isn't that the point? Like if I'm a good fit, he should hire me.
I I s I said, it sounds like you're not a fit. he said, Yeah, but I'd rather what did he say? Something to the effect of I'd rather um have the potential that maybe he'll come back and buy from me someday than to send him somewhere else where he's a better fit. And it it it that's kind of what you're describing, right? This attorney wanted to keep this guy in his pipeline in a i in effect. Yeah.
Morris Reichman (40:56)
Yeah. That's challenging. They say, you know, they say buying the lottery is buying the right to dream. People people want to have the right to dream and wanna have the new opportunity lined up and people always, you know, counting their pipeline and seeing how much opportunity they have. It's a distraction very very often.
Jeff Holman (41:14)
Where did you so was it just this experience where you said to yourself, Okay, I need to I need to filter out the people who aren't truly in in, you know, ready to buy my product right now? Or does that come from somewhere else in your life where you've uh let me ask a different way. Is it easy for you to to say no to things that some other people have a hard time saying no to?
Morris Reichman (41:34)
I don't know. I think it's I think that's something I learned over time in the business. And I I always listen to different, you know, podcasts, hearing ideas, reading books. So the idea came somewhere. Um actually I I I know I can I I could trace it back to where I got the idea from and I don't remember who said it. But I remember listening to some some business owner, some successful real estate developer. And he said w
The biggest skills he learned that made him successful was when he learned how to identify early on what's a real opportunity. Otherwise he can be looking at decks all day long, not knowing where to put his money.
Jeff Holman (42:14)
Yeah.
Morris Reichman (42:14)
When he learned to identify the opportunity, that's when he learned that's when he became successful.
Jeff Holman (42:20)
Okay.
Morris Reichman (42:21)
And that was true for me too. It's the same thing we're talking about now, is identifying the opportunity. You go out there, there's many things that look like opportunities. occasionally there are
shiny objects that look like, this is the thing you need to focus on next. But being able to discern and know what is a real opportunity is a key to success. And I don't think you can always just write it down and make you know your ICP or write up exact parameters and ask questions to figure it out. Yeah. there's a gut feeling that comes with it. You're in the industry, the things that you know become part of your DNA that you know and that you sc you can only acquire by just doing it long enough.
Jeff Holman (42:59)
Do you th yeah, d do you think that people can develop that skill? Is it about being in the industry long enough to develop the skill or is part of it not a learnable skill?
Morris Reichman (43:09)
I don't know, maybe that's what differentiates those who run own businesses, th and those who work for others who own businesses. Maybe part of um that's probably one part of the personality. Anyone running a business could become an expert, eventually gets to know the ins and outs of the business in a way that you can't even necessarily describe or write a book about it.
Jeff Holman (43:31)
Yeah.
I wanna take this a little bit different direction now. I I feel like there's a lot more to be had a lot more discussion to be had on that topic. But I so I don't wanna do it a disservice by jumping, but but I wanna hear a little bit more about the payroll financing side of it. Um just so that our audience, in case they're the type of people who are saying, Wait a second, I need to know about payroll payroll financing. I've had a few tight I've had a few tight payroll cycles in the past and I don't wanna to to do that in the future.
What what would somebody need to know about payroll financing the way that you do it?
Morris Reichman (44:05)
what you what you need know is that if you have if anyone has a short term cash flow, let's call it uh struggle, that only affects them short term, but the solution gets fixed soon, even if it happens repeatedly throughout the year, we can help with that solution. So if someone's looking for a loan to cover for a breach for cover mu uh payout for one week, because you know you're getting money a week from now, but you're you're a contractor, you know you have a huge invoice being paid, you're in healthcare, you know that the reimbursement comes in
within the first week of the month. Or, you know, you're you're you're an attorney who build that a certain day and you know when billing's gonna come in. So you know there's money coming in but you're tight now, we can bridge that. But if you're running a pizza shop and and you need ten thousand dollars to buy a new pizza oven, you don't have the revenue to pay for that, then you need you know, then you need a loan for a year, we're not gonna help we can't help you with that. If your truck broke down and you need to buy a new one, there's no way we can help you. And here's another important thing. If revenue is simply not keeping up,
With expenses, we also can't help you. You know, in that case, maybe you need a long term loan so you continue running your business and investing in it. Where a bridge for cash flow issues, specifically to ensure payroll can be covered.
Jeff Holman (45:16)
Would you say you work off of volume then? It sounds to me like at least in the example where you said that, you know, we'll just we'll kind of pre-approve people, do whatever diligence you do and give them start out with small loans, twenty thousand dollars or whatever it is these days. Um, is that the same process you use? And and how do you how do you do enough diligence to get comfortable giving people money that uh, you know, you haven't been in their business long term and and maybe at that you know, at that amount you're not able to
To do a really deep dive into what they've done. What's the balance there?
Morris Reichman (45:48)
So volume is a factor, but it's not the only factor. We'll do loans as as small as $5,000, uh up to $500,000 payrolls. It's quite a wide range. And so volume, of course, a business that's you know stoomed to $25,000 in monthly revenue could get approved for $5,000. Volume isn't that great over there. we do a lot of we invest a lot in the background checks before looking at the business financials and uh determining under sort of
Making our own estimation of the individual behind the business. Okay. We do spend a lot of time. Early on, one of the things I learned when I was the underwriter making decisions and I made some bad ones because it was part of the cost of starting a business, was discovering that I started looking up social media. We had one person who defaulted on us and then they became hostile to us. So then I looked them up on social media
Just to see that this person is somebody I would never go close to with a ten foot pole. And then I learned, okay, now we need to know the person we're we're lending to. And that's a very important factor. We use we use the credit scores and background checks to determine that. We take age into account and their social media as well, to see what's uh what they're excited about in their life.
Jeff Holman (47:08)
Yeah, what do you what do you find when you look at social media? I I've got some guesses, but I'd love to hear the things that you've seen that are maybe pros or or cons that might show up
Morris Reichman (47:18)
The basic thing is the basic thing is, you know, is violent stuff. You know, aggressive you know, um behaviour is what you'd see on there.
Jeff Holman (47:28)
What does that look like in social media? I g I guess I'm I may not be in on Facebook or Instagram or whatever enough to know what a violent person looks like. I I'm trying to think if I
Morris Reichman (47:37)
Yeah. Um it's
Jeff Holman (47:40)
I've got I've got four kids in
Morris Reichman (47:42)
a gut it's a gut it's a gut feeling.
Jeff Holman (47:44)
Okay. Okay. I thought you were gonna say something more time.
Morris Reichman (47:46)
Well,
it's one of the it's one of the soft skills you have to acquire as an underwriter.
Jeff Holman (47:51)
Well, I'm you got me super intrigued now 'cause I was thinking you were gonna say stuff like, Well, we go on there and they don't post much about their business, but they post about like lavish vacations or expensive cars and you know, but they're but but you know behind the scenes their f their finances aren't great or
Morris Reichman (48:06)
That too. You can see if someone's a family person and has a family and that's what the pictures are about, then you have a better feeling for them. But if they're uh like you say just busy um broadcasting their lavish lifestyle, you get a worse feeling for them. Yeah. you can see people are complainers online. You can see they're busy bad mouthing other businesses and they don't get happy about something. You can see they're negative, uh, you can see they're positive. You can see how they're running a business. If uh even today, if people won't work with us
in payrol partners. I can think of right now a someone who runs a payroll company and I don't intentionally didn't reach out to him because his whole sales his whole demeanor on LinkedIn is about mocking other payroll companies. I'm like, I I don't want to deal with you.
Jeff Holman (48:50)
Yeah. Interesting.
Morris Reichman (48:52)
So you can see the person the personality comes out of many ways. But most often it's because there is no bad things.
Jeff Holman (48:59)
Okay. Sorry, I almost sneezed there. We're going have to cut that p part
Morris Reichman (49:02)
All right.
Jeff Holman (49:02)
out there. But well so how is how is AI Morris, how is AI uh impacting this part of the business for you? Is it are you finding that there are ways to utilize AI to make your due diligence more effective or more accurate? Or or is it does it give you a false sense of hope? How does that work?
Morris Reichman (49:24)
So I g I g so I guess, you know, I can get I can have also I can have my chance to broadcast some my ideas about AI to everyone has what to say about it. In my experience, as soon as, you know, when this let's give it a year ago, when there was so much hype about AI, there still is, but like getting very popular. I was like, Okay, I got I have to incorporate AI in my business. We must incorporate it, we must incorporate it. I've been definitely looking where to incorporate for the sake of incorporating it. Only to discover over time that
A lot of AI really is still old school automation. And if I have no, I have um developers on my team, we can create those automations, not everything is AI. For the regular person who doesn't have the ability to aut to create a to write a code or just automate something, they're using AI to do anything which is really in automation. So we want to differentiate what's in automation and what is women utilizing AI.
And then at the moment actually, we're we keep on improving and increasing the speed we can underwrite. Okay. And my team is focused. First we're gonna exhaust all old school automation, then we'll get to AI. Because so many things you want to accomplish with AI is simply just an automation. I don't need any AI tool for that. You just write the code, do this and do the next step and do the next step. So we're actually we be backed off from AI and we're simply completing automations to increase capacity and scalability and speed.
The area we see today, AI playing a role, which you want to get there, is in issuing a credit decision to at the point where it requires a judgment call. At that point is where you can see we can we can see you know utilizing AI. And we have actually a little goal right now. We have a we have uh little timeline set up for that. But once we complete certain automations, then we're gonna start trading AI.
to give us preliminary not decisions, but recommendations. And we can use those recommendations to help us prioritize which deals to look into first.
Jeff Holman (51:31)
That makes sense. Yeah. I I could see there being a a ton of probably like in the legal field a a lot of uh data processing and kind of asset risk assessment at a high level, at least preliminary risk assessments happening so that you can at least um rank or or or organize what you need to do as uh you know as a company with the clients. That makes sense.
Morris Reichman (51:54)
Yeah, you know, I spoke to someone who has reached out to us on LinkedIn. They were they created some AI tool for underwriting for lenders. And after they gave us the whole spiel, it boiled down to all they were doing really well is automating the entire application intake process. So you get a PDF application, parceling out that information, putting it to your CRM. So replacing people that had uh they use, you know, overseas outsource work, having a system do it for them.
Like so, this is not AI. Why did this company spend fifty thousand dollars for an AI expert? This is simple Old Swell automation, extracting information from a PDF and putting it into sales for whichever CRM you're using. Now, us in particular don't have that issue. All our leads come in digitally. We don't have PDFs, we don't accept those. So we didn't have that bottleneck. We didn't need to automate that. And the majority of this tool was all about compiling data in a clean way, and we didn't need that.
we wanted underwriting decision making and it's not what he provided. So we didn't go with it. And I'll tell you another interesting thing about AI, we discovered we did we tried it a couple of times testing it to make decisions. And we uploaded the same file, the information, the whackground of a business, all the information we used to make a decision. Uh we did it with Claude, we did it with ChatGPT, and we asked it for its recommendation.
We took the same file and uploaded it three times and got three different recommendations.
So uh creating AI meant okay, no longer just trusting AI, it meant really creating what they call the agents and creating really almost running your own code within AI and utilizing the system. So the the task became more complex. That's when we realized, hey, let's scale back a bit and let's take out let's separate what's true AI, what's a capability of AI, what is sim what is a simple automation.
Jeff Holman (53:49)
Maybe AI is gonna help you build that automation, but in the end the tool that you need is the automation.
Morris Reichman (53:53)
Do
use it. Yeah. We it does and we're able to do mu so much more so much quicker because we just simply put into AI, I wanna do this, write the code for me. And we copy paste. Yeah. We're accomplishing much quicker.
Jeff Holman (54:03)
Yeah. So it's helpful there. But the but the tool that you're using is the tool you're using in your in your uh client assessment is not AI, but maybe the maybe the automation built from AI. I'm I'm curious I'm curious to know more. How how does your um do you still go to your dad or is your dad still involved in any way in your business? Because it seems like that's a resource that even though you've got other business coaches probably and and peers that you turn to
You know, how does having your dad and all of his experience uh continue to impact your business?
Morris Reichman (54:38)
he's not involved. Um, he's still very involved, engaged in business. He's not a youngster, but is uh is actively uh involved in business in general. No, when my interaction by business is you know, I'll share with him good updates. Um if there's usually some bad things and we'll he'll share some stories with of himself, his early years, how he got through things, really on that level. Uh not on a um I don't rely on him for advice or lean on him really, just
You know, like a friend. But an an older friend who had a lot of good stories, some his young years building a business. That's right.
Jeff Holman (55:17)
That makes sense. That makes sense. Where do you see the business heading in the next uh call it three to five years?
Morris Reichman (55:22)
where's the heading? Um well my goal was that within the next three to five years I start planning getting set up for an exit. Hopefully we get there and we reach our goals to set that up. Um so that ticked you to my you know, long term goal. It's that the business is not my life, it's only a means.
Jeff Holman (55:43)
Back back to the retirement. What is what does a business like this need to have in place in order to have an exit type transaction? Is it a certain threshold of customers? Is it profitability? Is it you know repeat you know, low churn?
Morris Reichman (55:58)
I don't know yet. I don't know yet a hundred percent. I'm discovering it. Uh for starters obviously it's volume. It's a certain um let's call it um a a certain level of a certain footprint
Jeff Holman (56:11)
Yeah.
Morris Reichman (56:12)
to start with. Um another key factor is the the software part of the the tech part of the company. So that has to be at a certain level.
Jeff Holman (56:25)
sense. And do you see the industry progressing in in a sense that other people are coming into the space, that the industry overall is is like leveling up and increasing kind of the baseline services? Is is that happening around you or is that yet to happen?
Morris Reichman (56:41)
It is absolutely happening and well we're we're embracing it. Like I said, when we started, nobody wanted to hear about us. the biggest struggles were in the early years, you know, after the initial start, after the initial success comes the initial, you know, hard time when you can't get to the next level. Yeah. Now now it's now it's not such a hard sell to sell our product, the idea. Companies like Gusto, Gusto currently is offering funding for customers, not through us.
to a competitor. So you have a competitor. And as Gusto does it, Paychecks today offers financing um th through us and other partners. Okay. So as these larger companies are doing so, um, they're starting to set a trend. Other companies are still refusing to acknowledge this. Um I mean I'm there are other large companies I've been engaged with touches recently and they don't want to hear about it yet. So also take some time.
But as a larger companies are starting to do this, it's starting to become more acceptable and others are realizing we should offer funding.
Jeff Holman (57:48)
Well, it'll be interesting to see where where that all goes, both for your business and for the industry. Uh Morris, it's it's been great having you on the show. Uh thank you so much for coming to share your experiences and insights. If somebody wanted to connect with you, uh what's a good place to do that?
Morris Reichman (58:02)
LinkedIn. You can find me on LinkedIn. There aren't that many Morris Reichmans on there. You can find me.
Jeff Holman (58:07)
Okay. Okay. Well, we'll we'll we'll get a a link set up so that people can see that on the show notes. And thanks so much, Morris, for coming on the show.
Morris Reichman (58:15)
You're very welcome. Thank you very much for having me. Have a great day.
Jeff Holman (58:19)
It's been great. And thank you to all of our audience members who are who joined us again on another episode of the Breakout CEO. Be sure to follow or subscribe on your favorite podcast platform. And if you enjoy the show, a rating or a review goes a long way. Our mission is to promote the stories of breakout CEOs in scaling SaaS, e-commerce, and tech companies to equip peer CEOs with valuable perspectives and confidence.
Thanks again for joining us on this episode of the Breakout CEO. I'm Jeff Holman, and I'll see you next time.
