Steady income from POS terminal sales and leasing now seems like the stuff of fairy tales, so many new merchant level salespeople (MLSs) strive to build residual streams rapidly by signing merchants who are easy to reach and can make quick decisions. Usually these are mom-and-pop stores or other small enterprises. Ultimately, however, diversification is necessary to create the strongest portfolio possible; this is especially important during a recession.
One way to diversify is to pursue prospects who, due to the size or complexity of their businesses, take months or years to make decisions about transaction processing. Luckily, ample opportunity exists for ISOs and MLSs who are willing to spend a portion of their time on relationships that may not be immediately gratifying but can prove lucrative in the long run.
For instance, coming transitions in the U.S. population and in the health-care profession herald new frontiers for ISOs and MLSs. The first of the baby boomers will reach age 65 in 2011, and the U.S. Census Bureau estimates the number of seniors will more than double from 40.2 million in 2010 to 88.5 million by 2050. The U.S. Bureau of Labor Statistics projects the number of physicians and surgeons will jump 22 percent to 805,500 by 2018, up from 661,400 in 2008.
Another segment that will continue to show strength is the petroleum industry. Though a more mature payment market than health care, it still holds promise for MLSs armed with knowledge and perseverance.
So how does an MLS penetrate these seemingly disparate markets? Several commonalities exist among health-care, petroleum and large-scale merchants. First, all share longer sales cycles than typical mom-and-pop merchants.
Rarely is a sale made upon first visit; most require months of diligent effort - years for major hospital accounts. Each operates differently, making it necessary to learn a given sector's nomenclature and hierarchy to gain the keys to admittance and eventual rewards.
A central issue many in the medical profession are facing is mounting pressure from government regulators to adopt electronic health record (EHR) systems. With the passage of the American Recovery and Reinvestment Act of 2009, eligible professionals, including medical doctors, dentists, podiatrists, chiropractors and optometrists, must adopt and meaningfully use EHRs by 2014 or face penalties starting in 2015.
"Health care really needs a tremendous amount of help, because while the rest of the payments business has advanced to very efficient processing, health care has remained fairly labor intensive and fairly manual," said Mary Dees, President and Chief Operating Officer of Preferred Health Technology Inc. "Right now health care is a wide open field in terms of encouragement for payment processes."
To illustrate the gravity of the situation, the Centers for Disease Control and Prevention reported that in 2009 only 6.3 percent of office-based physicians in the United States had adopted fully functional EHR software systems, while the majority had either installed partial systems or none at all. In terms of the payments industry, Dees expects demand to be especially strong for web-based health care products that handle eligibility, claims processing and payments.
Dee Karawadra, President and Chief Executive Officer of Impact PaySystem, offers health insurance eligibility services that verify information, such as whether a patient's insurance is valid, and can determine patient co-payment and deductible amounts, all in about 10 to 15 seconds. The service eliminates time-intensive calls to insurance companies; the typical phone wait time is 15 to 20 minutes, with a maximum allowance of three claims per phone call.
Improved revenue cycle management is a critical need for many medical offices, Dees stated. An automated system can escalate the speed of patient payments. With traditional billing methods executed by mail, the collection cycle can take anywhere from 90 days to six months, or the amount may be written off entirely. Industry insiders place the percentage of nonpaying patients at 35 to 40 percent, up from 15 percent just a few years ago.
Dees, whose company specializes in integrated, web-based solutions that automate collection of patient payments through the company's web portal, said, "For someone who wants to specialize in a vertical market and create a portfolio where they're not coming in and simply selling on price, our card services are the commodity.
"Our service is truly a value add because we are improving the financial picture for our customers regardless of what the discount rate is."
Some revenue cycle management programs charge the patient's credit card or bank account an estimate of the amount due at the time of visit, reconciling the difference later when the health-care provider has determined the actual amount. A more advanced system will authenticate the patient's authorized card or bank information on file and automatically debit the patient's account only after the actual amount due has been determined by the provider, Dees noted.
An effective revenue management system should also be capable of administering automatic payment plans for patients and offer collection services, if possible, Dees said. She added that ISOs truly have the power to transform the health-care industry from one that relies almost exclusively on paper checks to one that operates more efficiently and profitably using credit card, debit card or automated clearing house transactions.
Dees recommends that ISOs and MLSs align with reputable companies that offer systems with scalability, flexibility and security.
Before plunging into the health-care sphere, ISOs and MLSs should be aware that the size of the medical practice often dictates the length of the sales cycle as well as the number of points of contact an MLS needs to make within an organization to establish a relationship. Selling cycles for health-care accounts vary from three to six months for individual or group practices to as much as two or three years for multiple location or hospital accounts.
Data from the U.S. Bureau of Labor Statistics suggest that many physicians and surgeons are now choosing to work in group practices to more easily afford the costs associated with administration, operations, and the acquisition of new technology and equipment.
The data show that nearly 53 percent of this group was affiliated with a clinic or association in 2008, making consolidated medical group practices an excellent niche market for MLSs. The bureau's data also highlight other health-care segments: 19 percent of physicians and surgeons were employed by hospitals in 2008; 12 percent worked in private practices; and about 16 percent were in government, educational services and other outpatient care centers.
According to Dees, who frequently visits medical offices, the first step for an MLS is to get through the gatekeeper. Because front-office staff is generally protective of the health-care practice, it's important to have clear, quick messaging as to why the next person in the chain of command should speak with you.
Karawadra recommends calling on contacts provided by gatekeepers within a day or two of office visits to request 10 minutes to discuss the benefits of your services.
Dees noted that people often misjudge how decisions are made in health-care offices. "They assume the doctor is always the person who's going to be the big decider," she said. "Frequently, the doctor is purely the one who signs the contract. The office manager or practice administrator is generally the one who evaluates proposals. They're often the key influence for the decision maker. The doctor signs off on the paperwork because it's his practice."
Karawadra believes petroleum "is one of those things that most MLSs out there fear because they don't know what it's going to take to get the store or set it up. They don't know what to do to take the next step once they sign the application and are ready for a download, which discourages them from going after a very lucrative market. An average gas station does about $60,000 to $65,000 in monthly volume; larger stations average half a million dollars per month."
He noted that, for petroleum accounts, it can take from three to six months to establish contact and gain the confidence of those involved in making decisions. He feels the most direct approach is to locate the middlemen. Commonly referred to as "jobbers" or "petroleum marketers," they are responsible for purchasing products directly from refining companies and reselling them to gas stations or other industry-related businesses.
Jobbers typically franchise three or four different brands, which they resell to store owners, Karawadra said. From there, either the store owner owns the pump and shares a percentage of the revenue with the jobber or vice versa.
"A majority of the time, when a jobber owns the pump, he wants to do the credit card processing," Karawadra said. "The reason for that is simple. If a station orders a full tank of gas, which can run $30,000 to $35,000, between now and next week, he would have recouped the money from credit card sales because the deposits were posted directly to his account. Experiencing better cash flow, he's willing to pay the fees, and whatever balance is left over can be settled with the store owner."
MLSs interested in petroleum can locate jobbers through local gas station owners or by contacting one of the regional petroleum marketer associations listed online. After gaining a foothold in the petroleum industry, referrals from the jobber network eventually roll in, Karawadra reported. He said the income from signing two gas station accounts per month is nearly equivalent to that of signing 12 mom-and-pop, brick-and-mortar accounts.
So how does an MLS balance time between long-term and short-term sales cycle accounts? "Every day you want to put merchants in the flow and work it, so having, let's say, 30 percent of your sales time geared toward something bigger and 70 percent toward what's going to feed your family on Friday, makes sense," said Jason Felts, President and CEO of Advanced Merchant Services Inc.
Felts emphasized the importance of building value over time to gain trust. He recommended fostering relationships with members of industry trade associations to generate opportunities for selling to multiple merchants within a targeted industry.
He also pointed out that in larger organizations, such as hospitals, boards and committees are often involved in the decision process, which may require developing a personalized PowerPoint presentation or well-packaged company video.
"One of the keys to long-term sales is getting to know a lot of people within an organization," said Dave Crooks, President of Easy Pay Solutions Inc. He added that everyone, from the senior executive's secretary to computer programmers, can offer internal links; programmers in particular not only know the product well, but they also know the organization inside out. Crooks also syncs his BlackBerry to Microsoft Outlook to keep track of the contacts he's made, as well as his progress on each sale.
A firm believer in using social networking to make new connections when working on long-term sales programs, Crooks said, "I've actually used LinkedIn to get a connection. You can request an introduction on LinkedIn, and someone who knows that person will offer to make an introduction for you. You need to have two or three personal recommendations from existing customers in your profile to make the introduction."
Crooks also uses Google Alerts to keep abreast of industry news and learn about local events that might interest prospects.
Because consistent contact is essential to longer sales cycles, he recommends forwarding "industry news clippings about something in their industry, an idea or an item that has surfaced in the industry, perhaps some new development in PCI, just to add value. You've got to find a way to get your company name in front of them every single month."
Felts advised those going after accounts with long sales cycles to "just make sure that if you invest the time, you secure the deal. Of course, the payoff in the end is that either you're landing a large account that's going to be lucrative or you have an opportunity to sell a lot of accounts."
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