By Bill Pirtle
MPCT Publishing Co.
The idea for this article came from "Credit Card Processing Information for Business Owners" by Jared Sparr of Java Payment Services, which Sparr posted on my LinkedIn group. He discussed how the new IRS reporting requirements might catch businesses that engage in factoring.
I responded, "I would expect that hair salon owners who lease chairs to independents will be prime targets for audits because it will appear as though they are grossly under-reporting income."
Merchant level salespeople (MLSs) prospecting hair salons now can use two related approaches. If a hair salon uses a single merchant account, the business owner might want to know he or she may be audited for reporting lower sales than those reflected in the processor's 1099 reporting.
Another potential result from an audit provides MLSs ammunition for signing more accounts. This is because the IRS could determine a salon's "independent operators" or "lessees" are, in fact, salon employees.
This would likely be a hardship for the salon, as fees and penalties could be severe. To help avoid this determination, an MLS could sign each independent operator to his or her own account, separate the banking and instruct them to write checks for the lease.
MLS Forum member JOHN GALT? posted that he uses the Durbin Amendment as a sales tool. He asks merchants, "'Have you heard about the Durbin Amendment in the Financial Reform Bill that may lower IC [interchange] on debit by more than half? Yes, it will cut IC on debit drastically. ... Are you on an IC plus or a flat/tiered rate? If you have your statement, I can tell.' The trick is not to give too much detail so they don't just run to their current ISO and ask to switch to IC plus. Also, you still have to sell value and trust in yourself. This won't close deals, but it will open doors."
Value and trust are big selling points for ISOs and MLSs. One of the worst tools to use is one of the most common: the practice of reducing rates or fees upon the first objection.
There is a scene from Touchstone Picture's 1986 movie, Ruthless People, which I, as a salesperson, enjoy watching. Danny DeVito's character, Sam Stone, is discussing his business values with a policeman and says, "A bad salesman will automatically drop his price. Bad salesmen make me sick."
Right on cue, Judge Reinhold's character, Ken Kessler, calls and offers a reduced ransom, asking, "Well, what about ... less?" Stone lowers the phone, covering the mouthpiece long enough to say, "You make me sick." He then gets the original $1 million ransom reduced to $10,000.
Stone's objection was never about the price. He was glad his wife was kidnapped and had no intention of paying anything for her release. Ultimately, Kessler developed a plan to extract every dollar Stone could produce, leaving Stone broke by the end of the movie.
This plot drives home what happens when you think merchants want your product and their objections center on price. In the movie, Stone's refusal to pay ransom for his wife was thought to be due to a lack of funds. By dropping the price he was willing to accept, Kessler was exposed as an amateur.
However, once Kessler realized Stone didn't want his wife returned and was now under investigation for his wife's disappearance, Kessler changed tactics. Being under police scrutiny, Stone was more willing to pay the ransom.
So Kessler worked with Mrs. Stone to find Stone's complete net worth, maximizing the ransom amount because Kessler knew he would have no problem getting it from Stone.
The lesson is that MLSs need to find ways to discern the causes of merchant objections without dropping prices.
Agents who simply walk in the door and offer rock-bottom rates should heed this: lowest costs will not generate loyalty. By boasting that you offer the lowest costs, you are inviting merchants to switch to the first MLS who beats your rate.
No matter how little you charge, someone will be willing to take less. If you only tout your rates, how do you expect to retain merchants when a competitor offers a lower one?
Like most MLSs, I do not want to gouge merchants; I only want to offer great products and service for a fair cost. One thing I need to improve upon is the use of other tools, like gift cards. Last week, my insurance agent contacted me about a business in which he is a minority partner. I decided to open my discussion with information on gift cards.
I had an idea of what this new business (a coffeehouse and purveyor of gourmet chocolate) was spending before even opening its doors, and I wanted to present a product that could help. For a package that includes 1,000 gift cards, one of my partners offers six hours of design time to create the cards.
The package also includes two large posters with the same design, which is ideal for the large windows in this storefront. To seal the deal, I offered a suggestion for the gift cards' use: on opening day, have a bowl with 100 cards of random value that purchasers may select from at checkout.
Later, while volunteering at a client's seminar, I met Jean Chapdelaine, who specializes in direct marketing at Ready Set Mail. She suggested dropping off the new business's gift cards at surrounding stores. She also suggested holding drawings on opening day every 30 minutes to an hour for higher-value gift cards to build loyalty cards into the mix.
Also, with drawings comes a growing customer database, which allows for further contact with customers. The merchant will be able to send email or text messages to customers who are in the vicinity (with customer permission) of the shop, offering coupons and special deals to draw in clients when sales are slow.
Chapdelaine also suggested using "cause marketing," which consists of the business finding a powerful local cause and creating a plan to incorporate it in its marketing to access members of that cause.
A good example would be to partner a brand new business with a local food bank. The food bank sends the word out to contributors, and the business gets free media coverage. For instance, the food bank is offered 5 percent of sales on opening day, customers also donate food and receive gift cards in return, and the business gets off to a strong start.
All MLSs seek new clients, but where do you find them? Many agents walk down Main Street, visiting every retailer; some cultivate relationships with referral partners. How about targeting business types that other MLSs overlook? The real estate industry, for example, has several segments underserved by our industry: office complexes, apartments, rental homes, real estate appraisers and ReMax brokers.
Office and apartment complexes and landlords with several rental homes have a need to accept credit cards to keep renters paying on time. A yardstick I use is to suggest they only offer renters who pay more than $1,000 per month the ability to pay with credit cards because they would be more likely to use rewards cards and pay the balances off each month.
For lower-priced rentals it's best to continue taking cash rather than cause renters to run up balances that may result in forced eviction. Owners of multiple complexes need to decide which complexes get the credit card option, since within a complex you cannot offer the option to some renters and not others.
Many appraisers do not accept credit cards. Imagine the extra business the ones that do offer card acceptance get. Suggest to appraisers you sign that they mark up their prices $35 to $50 to increase their profit and cover the processing fees. The hook to landing appraisers is a service called a "drive by" appraisal, which is usually requested by out-of-state clients.
The practice involves multiple phone calls and invoicing the clients. When the appraiser utilizes a website with a gateway, out-of-state clients can place orders and prepay with credit cards, greatly reducing work and increasing sales by making his or her service easier to use than his competitors'.
When I was first approached several years ago by a ReMax broker, I wondered how card processing could be done. Real estate deposits done with credit cards would be insane, and they represent a huge chargeback risk. But I learned that ReMax brokers differ from other real estate offices. ReMax office owners (the brokers) charge rents of close to $1,000 a month to agents who occupy space in their offices.
Brokers can raise office fees by 5 percent and have agents pay rent by entering their own credit card numbers through a website using a gateway that allows customer entry of recurring fees. Brokers are thus spared time wasted chasing down agents for rent. Further, agents could use a single rewards card for all business expenses to simplify quarterly taxes and earn miles or points for vacations. As you can see, real estate makes a nice vertical market for MLSs.
Some feet on the street choose to specialize in helping auto repair and towing companies. I encounter a lot of authors, speakers and crafters. Most speakers offer books and CDs at their events, and many take checks or accept payment forms that violate brand rules (retaining the CVV2) and create Payment Card Industry Data Security Standard compliance nightmares, not to mention that they have no way to verify cards before they hand their products to customers
Crafters also need a technology boost. A device that connects with an iPhone, which has a scanner attached with inventory software, could greatly help crafters and give you a chance to sell two accounts: one for sales in the field and one for an online store.
Find one crafter to use your system, and others will notice and ask your client who set him or her up. One device I have found that will do this is USA ePay's PaySaber, which can be equipped with an optional bar code scanner. (In a future article, I hope to discuss participating MLS Forum members' thoughts about equipment.)
JDECKARD posted a more general sales tip on the forum. "[T]he best 'sales tips' I ever got have served me well for over 30 years. Here they are: 1. Talk less; 2. Listen more; 3. Ask for the sale. Master those three, and you can be successful selling just about anything." It is amazing how many salespeople forget to ask for the sale.
CLEARENT also provided some good pointers for MLSs: "Don't spill your candy," he posted. "You are not an unpaid consultant - so don't work for free. Be prepared to walk away before you even walk in. If you feel desperate, you will appear desperate. Merchants can smell desperation. If they don't talk 60 percent of the time or more, you're talking too much. Don't [consider] a 'no' as a failure. A decision is success. You can't make them buy; you can only make them make a decision. A 'no' is a decision."
For general sales tips, excellent books by sales experts are available. I've read books by Zig Ziglar and Brian Tracy and highly recommend them. Authors Stephan Schiffman and Jeffrey Gitomer, whose books are available on Amazon, have also been recommended to me as prime resources.
If you have ever tried a business networking group and were unsuccessful, or if you are just looking for new ideas, please take a look at my next article. I will be interviewing the founder of BNI and The Referral Institute, Dr. Ivan Misner, who will explore ways for MLSs to be more successful with networking groups.
What you do today determines your tomorrow.
Bill Pirtle is the President of MPCT Publishing Co. and author of Navigating Through the Risks of Credit Card Processing. He is also a merchant level salesperson for Clearent LLC, Electronic Payments Inc. and Electronic Merchant Systems Inc. Bill's website is www.creditcardprocessingbook.com, and his email address is email@example.com. He welcomes all connections on Facebook and LinkedIn.
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