By Jon Perry and Vanessa Lang
In "Blackjack savvy applied to merchant acquiring," The Green Sheet, Aug. 24, 2009, issue 09:08:02, we wrote about Vanessa playing in an upcoming blackjack tournament. We approached the tournament just like we would any new business. As in blackjack, there are winners and losers in business. But why do some businesses succeed and others fail?
With corporations going bankrupt and shedding workforces, new sales representatives enter our industry every day. Some new reps will achieve their goals and gain financial independence. Others will last weeks, maybe months, before throwing in the towel.
But this constant turnover of businesses is not just in the merchant services industry; we see it among insurance companies, financial advisors and restaurants. So it's not the particular industry or business that is important, but rather how you do business that counts.
As a long-time sponsor of Project New in Fort Worth, we meet hopeful, starry-eyed business owners every week. Project New is part of the city's program to incubate new businesses in conjunction with the nonprofit Business Assistance Center Foundation. Project New was started to help first-time business owners, with no background in business, to build sales and marketing plans.
Many who participate in the program decide not to start a business once they realize all the parts and pieces it takes to make their chosen endeavor successful. But for those who choose to proceed, the business plan is the first building block to success.
Whether you are starting a company as an independent contractor or investing your life savings into your dream restaurant, it all begins with a business plan.
The business plan doesn't need to be a dissertation-length proposal. But you do need to consider important variables such as projected income and expenses.
If you are on the hiring side, you owe it to the new sales representative to be honest about the time, effort and skill sets required to be successful. The new sales rep has to do more than fog a mirror.
A term many of you are familiar with is a sales funnel. The funnel has a large opening on top that tapers down to a narrow one at the other end. Let's assume you can, over time, close one out of three merchants you meet. It takes an average of 15 prospects to get those three meetings.
If your goal was three new merchants per week, you would need to find 45 prospects per week. Based on your research, you know what the average merchant means to your top-line revenue. So, what if three new merchants per week were not enough for financial stability? How could you increase your deals per week?
The first way is to meet more contacts per day. If you could meet 30 contacts per day, that would mean 150 contacts per week or 10 deals per week. That is a lot of cold calling or knocking on doors.
Another way is to improve your sales process. There are a variety of ways to advance your closing ratios. If it only took 10 prospects to get three meetings to close one deal, you could take 150 contacts per week and turn them into 15 deals per week. Key areas of improving your closing ratio include:
When starting in this industry, people spout out numbers: You should be able to close one in four (or one in two); if you're not calling on at least 15 to 20 companies a day, you're not going to make your financial goals.
Where do these numbers come from? Most likely they come from the experience of the person or company feeding you those statistics. Your success depends on your willingness to get out there and meet people and the process you use to turn those contacts into lifelong customers.
It is very easy to lose track of how much we spend. Everything is (fortunately) set up for electronic payments today, so it is easy to spend with payment cards and forget how much things cost.
Also, without sales there is no chance of succeeding, so we focus heavily on sales, which often leads to financial bleeding in an organization if expenses are not properly managed. Having a budget that is tended to daily results in better cash management.
Once you have a budget in place that tracks all expenses and income projected out for the next 12 months (ideally), you can begin to forecast, feed that data into your sales funnel and have a great basis for your business plan. There are also key metrics that should be tracked with regard to expenses and profitability. Some that we track monthly include:
And these are just a few. Of course, good accounting software to help you reconcile regularly makes these figures a breeze to review. But beware: Don't get hung up on expenses if it causes your sales funnel to dwindle.
Most small businesses start because someone worked at a larger company and woke up one day and said, I'm doing all the heavy lifting. I'm making that company a good part of its income. I am going to start my own business. While these folk are likely good at what they do, they might not have the business background to analyze all the patent and hidden costs associated with running their own businesses.
Take our industry for example. The move from merchant level salesperson to ISO is much more than the initial $10,000 investment. You have to take phone calls, create applications, perhaps engage in risk management. All of these overhead services meant nothing to you when you worked for others; now they are part of running your company.
For new sales reps, becoming successful in servicing and selling merchant services requires more than simple knowledge of dial-up terminals. There's Internet protocol, POS systems, Payment Card Industry Data Security Standard compliance and so much more.
Sales techniques are changing. Be customer-centric, and avoid pat lines like: What is it going to take to get you into this terminal today? Let's do a side-by-side comparison. If I can save you money, you switch; if I can't, I'll pay you $500.
Ultimately part of your time management should include attending webinars, conventions, spending time reading industry publications like The Green Sheet and doing everything necessary to stay involved in the current business sphere.
OK, so what does this have to do with Vanessa's blackjack tournament? We think everything.
The rules are simple: Make as much money as you can in 18 hands. Tournament play has players splitting face cards and doubling down on a natural blackjack to increase their pot of chips. Knowing nothing about tournament play, Vanessa studied everything she could find on game theory and combat blackjack.
She studied the probability tables on when to hit, when to stand and when to double down her bet. This was her market analysis and business plan. We set aside a budget and time for this experiment, just like we would set aside resources in a business. We studied other players, their moves and potential outcomes, just like we would study our competition.
There were 96 players at the tribal casino tournament in Oklahoma, six at a table. The numbers would get whittled down, starting with the initial 96, then 48, 24, 12 and the final six. Those were the five rounds. When Vanessa played, I wrote down every bet she placed. I jotted notes about her power moves and when she let an opportunity slip past. After each round we debriefed, just like we'd debrief a project, discussing what worked well and what could be improved.
We recognized that in blackjack, as in business, luck is involved. That was a variable we couldn't control. But we could control the other environmental variables. One gentleman told Vanessa it was his fourth time trying to make it through the tournament. (Imagine. To qualify for the competition you had to play 20 contact hours. That means this man played a minimum of 80 contact hours. I could lose a lot of money over 80 table hours.)
Albert Einstein is cedited as having said, "The definition of insanity is doing the same thing over and over again and expecting different results." The man played Vanessa and lost. It was his fourth time with the same results.
Staying focused on the statistics and probability tables for blackjack, as well as our debriefing after every round, Vanessa ended the day number eight out of 96. Not bad for a novice playing against some very seasoned professionals.
Whether it is in blackjack or business, some variables you can't control. But if you can learn and understand your business better than your competition; if you can debrief when you win or lose a sale; if you have a playbook (sales and marketing plan), you can and will win.
On GS Online's MLS Forum we posed a series of questions regarding blackjack that would give insight into how different people approach situations. One question was, If you were sitting at a table playing against professional players in a blackjack tournament, what would be your strategy?
Playing in such a tournament is a balance of risk, reward and basic strategy. This was truly evident in the responses to the question. The risk takers, like beanstream, would bet "all of it. The view never changes if you are not the lead dog." Others calculated what their reward would be. Billpirtle said, "Depending on different factors, I'd either keep my blackjack or double down on the 11."
Everyone who commented had an idea of basic strategy. Thank you to all who contributed to our post. The sharing of ideas enriches us all. Vanessa could not have progressed so far in the tournament without asking for help from other players. Likewise, in business we would not be where we are today without the help of those who have relevant experience to share.
Jon Perry and Vanessa Lang are the owners of 888QuikRate.com, an ISO based in Ft. Worth, Texas, that was named Small Business of the Year by the local newspaper, The Star Telegram. For more information, tweet them at http://twitter.com/dfwcard, comment on their blog at http://merchantservices.cc or visit their profile at http://linkedin.com/in/jonperry or linkedin.com/in/vanessalang. Alternatively, you can contact Jon and Vanessa by phone at 817-857-3557 or by e-mail at email@example.com or firstname.lastname@example.org
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