By Bill Pirtle
C3ET Credit Card Consortia for Education & Training Inc.
I vetted a processing agent, at the request of an association president and colleague. The agent had called the association, claiming to own a processor and requesting the opportunity to present an "exceptional" rate. This association, like many merchants or organizations, receives at least one of these calls daily, and some receive quite a few more. I was brought in to evaluate the presentation and report back.
It turned out that the man was an agent (and a new one at that) for a processor and needed to have his manager at the meeting. When I arrived at the coffee shop, we began to chat, and he told me the reasons why his company was the "best," while trying to explain how credit card processing works. Once the manager arrived, he stated the name of the association's current processor and pointed out some issues with it.
The upshot of the meeting was that the agent, also known as a merchant level salesperson (MLS), made errors that doomed the presentation before it even began.
Many MLSs say they "own their processor" when they actually mean they have created a company to work with the processor. Looking at LinkedIn profiles, you can find hundreds of agents who list themselves as presidents or owners of larger processors. This happens quite often, even though it makes agents look foolish.
A few lessons can be learned from my meeting.
Imagine walking into a sports store to get your daughter set up for soccer season. If you only say to the attendant that you are looking to get child's gear and the attendant doesn't ask for details, you may be shown a rack of athletic protectors, or uniforms and shoes that are the wrong size.
Knowing first what merchants know about processing will allow you to educate them without talking down to them. Talking over a prospect's head or oversimplifying things both lead to no sale. Always start by asking questions. To solve merchants' problems, you need to learn what they are. Never assume.
During the presentation at my coffee shop meeting, the manager began discussing what he thought were the association's processor and issues with that processor. The problem was the association executive he was addressing did not do business with that processor. The MLS had apparently called multiple organizations and confused the heads of the associations.
The agent's mistake put his manager into a hole. The manager was led to research the wrong company before the meeting. The confusion was further compounded because the other organization's focus was grocery stores only, while the one I work with focuses on grocery, convenience and liquor stores, along with gas stations and auto repair shops, but actually accepts any business type as well.
At the coffee shop meeting, I was assigned to listen to the presentation, so the presenter's initial errors did not end the meeting. However, for many MLSs, these errors would have done just that.
One thing perplexed me about the agent - although I know all MLSs (yes, myself included) have done it. Why do newbies spend so much time and energy hunting elephants? Why do companies encourage agents to call large membership organizations when most MLSs will not even get in the door?
When I sold Aflac insurance, the training specifically encouraged agents to hunt "meal-sized" accounts. The philosophy was that it was much easier to land a small account with one call than to bring down the "elephant" that required management's help and multiple presentations, with low odds of ever closing the sale.
Different agents have different targets when they enter the industry. About the easiest accounts to sign are startups. There is no current processor to replace, a little expertise can bring good value for both the agent and the prospect, and there is a sense of urgency on the part of the merchant to sign because they want to accept cards. With a monthly minimum, decent statement fee and gateway or terminal sales, an agent can make a little money.
Some MLSs like to focus on vertical markets and find a specific industry to specialize in. The benefit for agents is they become experts on those verticals. Becoming the "go-to" person for an industry means you can charge for your experience. (If you ever get the opportunity to hear Mary Winningham of Mirror Consulting Inc. discuss the topic of verticals, take it.)
Many new MLSs come to the GS Online MLS Forum to find information on verticals. Excerpts from one such inquiry appeared on page 5 of The Green Sheet, Jan. 23, 2012, issue 12:01:02, and is expanded here.
BIGRED_DAVE replied, "Generally, they're small volume, multimerchant accounts. High-end salons are good but many are tied to POS and appointment software. I tend to leave them alone."
UBCSC agreed, stating, "Go after saloons and forget about salons." On the other hand, APEXBSINC said, "Many salons have multiple independent contractors, where the owner leases out the additional chairs in the salon. They may be good accounts for loyalty and gift cards."
"As long as the account is profitable, all accounts are good accounts," replied MARINESTEBAN. "All the verticals have their challenges and this vertical challenge is the turnover (if they have multi MIDs). In my experience, they are profitable and I will take them all day long."
MBRUNO instructed, "I tend to look at these accounts as one merchant regardless of the number of stylists. If there are five stylists doing $5,000 each, that's $25,000 total volume.
"If you can make it worth your while there, then it's worth it. They can be a pain, but usually only when stylists move around (that is, leave/sign new agreement), which can happen monthly, just once a year or anywhere between.
"I'd go for them, especially if you're still getting your feet wet in the industry. Such an account is actually multiple merchant accounts so there's good opportunity for some training on various points including programming terminals (again and again and again...), troubleshooting basic issues, dealing with customer service problems, etc." Just make sure you are compensated for your time, whether it is covered in your rate or with some kind of startup fee for adding accounts to existing terminals.
MBRUNO went on to say: "One piece of advice - not all salons are the same - and even stylists at the same salon can be very different. Sometimes you'll make most of your money through volume fees, other times through monthly fees. Watch out for blanket pricing that may not always cover costs (that is, waiving monthly fees)."
EMPIRE advised, "If you just outline the expectations from the get-go, they are fine businesses.
"Many salons have 5-10 stylists, all using the same machine. You should definitely explain that this type of set-up requires an update to the machine to be able to remove old and add new stylists, which is done over the phone with tech support. Many salons see the first set-up and don't realize the work involved in removing old and adding new stylists.
"So, as you begin that relationship, define the expectations so that everyone is on the same page. In recent memory, an ISO had a salon of 20 accounts and told the salon owner that new ones could only be added or removed on the 10th of the month or whatever day they settled on.
"So each month he got paperwork and cancellation forms during the first week and he went back a day or so later to update the terminal. That way, the agent was not going there 10 times a month doing downloads."
One tip for closing more salons would be to educate owners on the new Internal Revenue Service reporting requirements. Many salon owners are content to have a single processing account while leasing space to independent contractors and settling through the card processing.
However, what will result is an audit in which the 1099-K indicates the owner is earning everything going through the terminal and failing to report it. This can also result in fines from the IRS over whether the other stylists are employees of the salon or independent contractors. Separate merchant accounts and properly prepared leasing contracts will go a long way toward proving that there are no employee relationships.
The Orion 4Access was a remarkable terminal that housed up to 20 separate merchant identification numbers (MIDs), but 4Access Communications closed shop in January 2011. Research with your ISO or terminal supplier to determine the number of separate MIDs you can place on terminals.
New MLSs hear advice from all sides, and much of it conflicts. Different ways will work for different agents, and some have found success using methods that did not work for me. One method many new agents fail to use works better than you may think.
It was reinforced when I landed some sought-after contributors for my upcoming book, Credit Card Processing for Sales Agents. I simply asked them to participate. It is that simple. Don't create reasons not to ask.
The only way to give merchants the opportunity to sign with you is to ask them to. A no makes you no worse off than if you don't ask. Failing to ask guarantees not getting a contract; asking gives you the opportunity. Hockey star Wayne Gretzky said, "You miss 100 percent of shots you never take." So ask yourself, "What is the worst that can happen?"
What you do today determines your tomorrow.
Bill Pirtle is the President of C3ET Credit Card Consortia for Education & Training Inc., a joint venture with Theodore Svoronos of Merchant University. Created to establish a comprehensive training program for ISOs and merchant level salespeople, C3ET is working with industry experts to produce a training guide to be published in early 2012. Bill's email address is firstname.lastname@example.org. He welcomes all connections on Facebook and LinkedIn.
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