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The Green Sheet Online Edition

November 12, 2012 • Issue 12:11:01

Street SmartsSM

Make large merchants your gravy

By Jeff Fortney
Clearent LLC

A few years ago, one of my friends in the payments business shared the worst thing that had happened to him during his career. It involved his best friend, with whom he'd been close since the third grade. They were college roommates, best man at their respective weddings, and godparents to each other's children.

After college, my friend entered the payments business; his friend joined his father's company and soon became one of my friend's first merchant accounts. Both businesses flourished. Years passed, and it came time for the merchant's daughter to get married. It was a beautiful wedding.

"The call" came the day after the wedding. "I have bad news," my friend's friend said. "My new son-in-law is in the payment processing business, and I'm going to have to move my processing to him. I hope you understand. It's either move the processing to him or support them in other ways."

Imagine my friend's shock, especially since 40 percent of his revenue came from this account. He had three choices.

  • He could play hardball and not let his friend leave.
  • He could charge the early termination fee.
  • He could simply respect his friend's decision.

He chose the latter and said if he were in his friend's shoes, he'd do the same thing. Both men decided their friendship was too important for this to come between them. However, it took my friend a couple years to recover even a portion of the business he'd lost.

A shared experience

I asked fellow members of GS Online's MLS Forum whether they had ever been in a similar situation. I hit a nerve: I received more responses on this topic than any other.

"My old college roommate went to work for this B2B corporation as its COO," JC7310 posted. "He asked me if I could handle something this large and, of course, I said yes.

"Their local bank was handling the processing and charging them an arm and a leg. They were thrilled that I was able to save them more than $1,000 a month. I then helped them bring on a client worth over $1.5 million in sales simply by proving that they were PCI compliant.

"Then along came a huge prospect for them, worth upwards of $4.5 million in sales. They asked if I could handle this influx in business, and I darn near fainted. All was good.

"The higher ups in the company loved the fact that I would drop whatever I was doing to tend to their needs. ... It turned out that they needed to get a substantial credit line to handle the increase in inventory they needed for this huge prospect.

"Their bank said they could have the credit line, but insisted on the processing. My Golden Goose was cooked. I still have not recovered financially, but enjoyed the ride while I was on it."

CCNJ's loss related to family. "I had a private school who was processing tuition payments and was generating about $700 a month in profit for me. While my ex and I were together, everything was fine, and I did what I could to keep the account happy.

"Once my ex and I split, my former mother-in-law, who happened to sit right near the comptroller of the school and executive director, saw to it that I lost the account."

Forum members provided several other examples. JOHNMCKEE summed them up well. "It hurts to lose a big customer, especially when a friendship is involved. When I asked a friend why he switched he said, 'John, I like you a lot. You're a good friend, a great golfing buddy and you're always there when I need you. But I happen to like my money better.'"

These stories share several common threads:

  1. Each represented a significant portion of the rep's overall residual revenue.
  2. Each merchant received exceptional service - at the expense of selling to new customers.
  3. Each rep is still trying to fully recover from the loss.
  4. Each merchant left for reasons outside the payment rep's control.

Stories like these abound in almost every industry. In some cases, the companies didn't survive. However, you can take steps to avoid catastrophe, ease the impact to your income and make the overall loss less painful. Just follow the IDOL acronym: Identify, Dilute, Overcome and Lead.


It's important to recognize the potential risks involved in signing a larger merchant. As time goes by, it's easy to take large merchant customers for granted. You'll no doubt provide above-average service; remember to look at how time spent on these merchants will affect your overall income.

It is critical that, as a sales rep, you comprehend which merchants impact your residuals the most and quantify the effects. Set thresholds so you can mitigate the impact that any one merchant can have on your income.

Start by calculating the percentage of your residuals you could lose and still survive if a large merchant switched service providers.

Notice I said survive, not thrive. That percentage may be as little as 10 percent or as high as 25 percent. Next, weigh every merchant as a percentage of your total residuals. If any one or two merchants exceed your survival percentage, their loss could be fatal to your long-term success.

Take note whenever you sign a merchant who will generate residuals that exceed your threshold. Until you address the next step, don't consider this added income as long-term revenue.


This is the most critical step to help you survive the loss of large merchants. Dilute the impact these merchants have on your residuals. The way to do this is to offset the account's revenue with merchants that better match the description of your "average merchant."

Once you have identified these large merchants, determine what your average merchant generates in residuals. Divide that average into the residuals generated by your large merchants. This reflects the number of average merchants you need to sign to ease the impact of the larger merchant.

Then sign this number of average merchants as quickly as possible. You must manage your time to accomplish this task. This may be the most difficult step. You have to maintain your level of customer support while increasing your marketing efforts. This requires dedication and time management because these merchants are above and beyond what you need to sign during a given a time period.

KLINCKPHILIP affirmed the importance of this concept: "The only way I know to fix a loss like this is to sell more accounts. When I sign a big merchant, I feel pressure to immediately cover that amount of residual with new accounts in case they leave."

It's OK to celebrate a large signing and its added revenue; it's more important to recognize the importance of diluting that impact on your overall residuals.


Even if you fully dilute the impact of a large-residual merchant, losing one is painful. However, you can take steps that will help you overcome that pain.

Start by identifying why the merchant left. Is it because of something you did or because of factors that are outside of your control? Was there a communication breakdown? Was there a software or product need you could not support?

If the reason is due to something you could have controlled, implement steps to prevent it from harming your residuals in the future. If the reason is software or product driven, talk with your ISO partner about how to address this need; determine whether it was unique to this merchant or merchant type.

If the reason the merchant left is out of your control, keep the lines of communication open because the merchant may want to come back. Even if that's not the case, the merchant can still be a good source of referrals for future business.

Also, remain calm. If you panic or react negatively, it can and will impact your relationship with the merchant, as well as potentially damage your reputation. You can say that you're sad to see the merchant go, but be professional.

If the relationship has always been positive, chances are the merchant is not happy to let you go. Leverage this by asking at the end of the call if the merchant knows of any company or companies that can use your service.


It has been said that leaders lead while managers manage. When a major merchant leaves, even if you have taken all the proper steps to mitigate the impact, you must become a leader. Being a leader doesn't necessarily mean you're "leading others."

Even if you are a one-person office, examine your long- and short-term goals; adjust them as needed to address the lost residuals.

Leaders know hurdles will arise, even during the best of times, so they have action steps prepared to address them. For example, examine your current attrition rate to determine steps you can take to reduce it. Reducing attrition will help shorten the time necessary to recover from a big loss. You can also increase your sales time by eliminating activities that are not sales related.

Remember, leaders look forward, not backward. Leaders know they can't change the past, so their energy is devoted to the future. As MAKETELINC said, "Anytime you sign a large merchant, be happy while it lasts. But know that it is only a smile for a while."

No one wants to lose a large merchant. It's a damaging event, both monetarily and emotionally, and if not immediately addressed can result in even greater losses. Follow IDOL to minimize the impact of such losses.

And if you follow IDOL all the time, the large merchants in your portfolio will be akin to gravy on mashed potatoes. Gravy is nice, but you won't starve without it. end of article

Jeff Fortney is Vice President, ISO Channel Management with Clearent LLC. He has more than 17 years' experience in the payments industry. Contact him at jeff@clearent.com or 972-618-7340. To learn about how Clearent can help you grow faster and go further, visit www.clearent.com.

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