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Table of Contents

Lead Story

Securing a place for EMV in the USA

Patti Murphy
The Takoma Group


Industry Update

PCI seeks ISO nominations for advisory board

A new wave of mobility

Defying the dragons

Cyber security concerns


GS Advisory Board:
Game changers for 2011 - Part 1

The power of selling at the top

Research Rundown

Selling Prepaid

Prepaid in brief

A phone card opportunity calls

Jeffrey Shavitz
Charge Card Systems Inc.

Will gift cards no longer be sold in New Jersey?


What does a processor do?

Brandes Elitch
CrossCheck Inc.


Street SmartsSM:
Gaining wisdom from mistakes

Ken Musante
Eureka Payments LLC

Approaching Asia

Donna Sesto Neary

Leads, leads, leads - Part 1: Lead generation

Peggy Bekavac Olson
Strategic Marketing

PCI vendor selection

Tim Cranny
Panoptic Security Inc.

The risks of riding the gravy train

Jeff Fortney
Clearent LLC

Company Profile

USA ePay

New Products

Receipt paper takes on the rainbow

Colored receipt paper rolls
POS Supply Solutions


Thriving in a multicultural environment


10 Years ago in
The Green Sheet


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

February 14, 2011  •  Issue 11:02:01

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The risks of riding the gravy train

By Jeff Fortney

It was going to be a big weekend. Pete's (not his real name) goddaughter was getting married, and it was going to be a lavish affair. He had grown up with her father, Joe (also a pseudonym). They were roommates throughout college and had remained as close as brothers.

After various jobs, Pete started his own ISO. Joe joined his family's business to help revive it at about the same time. From that date forward, Pete provided processing services for Joe's business.

As Pete's ISO grew, so did his friend's business. After 20 years, both still operated thriving enterprises. It had been a healthy friendship and a productive business partnership, with Joe's business accounting for over 30 percent of the ISO's revenue.

An unexpected loss

The wedding was a celebration of the marriage and - as Pete saw it - a celebration of a long-term friendship.

The Monday following the wedding Pete received a call from Joe. They shared small talk about the wedding and their upcoming golf weekend, and then Joe told him he had some bad news.

It seems Joe's new son-in-law was in the payment business. Joe had a choice of upsetting his daughter by maintaining the status quo or giving his new son-in-law his processing business. Joe said, "I love you like a brother, but blood is thicker. I really have no choice."

After trying to come up with alternatives, Pete realized there was nothing either could do. Of course he understood the decision, and their friendship was strong enough to survive, but a 30 percent immediate loss in revenue was going to be tough to absorb.

A difficult lesson

Pete told me this story a year after it happened. His business had survived, but barely and only after a very hard year. He learned a valuable lesson: you have to be a meat-and-potatoes company and not just live off the gravy - no matter how secure your gravy accounts might seem to be.

Pete learned the risks of failing to maintain the foundation on which his business' survival rested: a continuing abundance of small to midsize merchants.

He depended too heavily on one large client (Joe's business) and was forced to rebuild his company when that one client left. With that lesson learned, Pete wasn't going to allow any single merchant - even a friend - to have that great of an effect on his portfolio in the future.

We all give lip service to this lesson, but do we really know if we're at risk? Do we really know if we can survive the loss of a key merchant? Do we really know who our gravy merchants are and what type of impact their departure might have on our revenue levels?

If you can't honestly say yes to all of the questions I just asked, now is the time to act. Answering them will both identify your risk and give you a game plan to help mitigate it. Remember, it pays to be proactive.

The right mix of merchants

Now, I have three more important questions for you:

The key to balance

If you find you've been living off the gravy, it's not too late to protect yourself. It takes planning and concentrated marketing efforts to dilute the impact of losing the gravy merchant, at least to an acceptable level. It's time to start concentrating on the meat-and-potatoes merchant segment.

For example, if you have determined you could survive a loss of 10 percent of your income, but find you have one merchant accounting for 20 percent, you must add multiple merchants to reduce that impact to less than 10 percent.

The key is multiple meat-and-potatoes merchants so that the loss of any one of those merchants doesn't handcuff your efforts.

Examine your new merchant target, and adjust it upward accordingly. Budget a greater part of your time to selling than you had originally planned, and follow that plan to the last detail.

A revenue bump

Don't forget: the goal of your additional sales efforts is to help prevent a dramatic negative impact on your bottom line if you lose one or more of your largest merchants. The best part is the significant upside you'll see.

Until you experience loss of a gravy merchant (which is likely to occur at some point), you'll see a nice bump in revenue - more than you anticipated.

Additionally, by diluting the impact of one or more gravy merchants on your revenue, you can improve the value of your portfolio. Both of these are major benefits.

Don't find yourself scrambling to recover, as my friend did. Execute a plan for your specific merchant base so you can survive on meat and potatoes, and the gravy will become just that, an added benefit instead of a staple. It will be much more filling and satisfying.

Jeff Fortney is Director of Business Development with Clearent LLC. He has more than 12 years' experience in the payments industry. Contact him at or 972-618-7340.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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