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The Green Sheet Online Edition

November 26, 2012 • Issue 12:11:02

Smart ISO-MLS relationships

By Jeff Brodsly
Chosen Payments

I have recently seen issues arise that may damage relationships between ISOs and merchant level salespeople (MLSs). I hope the advice I offer in this article will assist both ISOs and MLSs in securing mutually respectful and profitable relationships long into the future.

The driver behind every individual ISO will affect the way in which not only the ISO is run day to day, but also the ISO-MLS relationship itself. I see two distinct business models affecting this dynamic:

  • The ISO headed by someone who started cold calling on merchants and built a base of merchants on his or her own
  • The ISO run by a person who had enough money to jump in and purchase residuals without ever knowing the ins and outs of the business

If you are an MLS, ask yourself where the chief executive officer, president or principal of your ISO started in this business and what that person's involvement is in your life. If you're an ISO, ask yourself where you started in the business, what led you to the driver's seat of your ISO, and how you maintain your status not only as a CEO, but also as an approachable person - someone your MLSs can connect with.

Considering ISO origins

I believe the person who started cold calling will be a far greater leader, motivator and empathetic individual than the individual who did not.

The one who started because he or she had some money to back the business had to put in hard work to survive in this cutthroat business, but lack of industry experience can lead such an individual to inadvertently form an ISO that does not fully understand the ins and outs of each aspect of the industry, something essential to a successful ISO-MLS relationship.

As we all know, money can solve many issues. If you have enough, you can hire experienced people to run your operations and sales teams. However, you may then find yourself in a position of being naïve compared with your own employees.

This creates an environment that, in my opinion, does not drive success, but rather creates uneasy battles between an ISO who doesn't want to get his or her hands dirty, yet doesn't want to let go of control so the shop can run the way it should.

As an ISO, what do you do now to interact with the people on staff, whether they be your technical support employees, administrative staff, in-house salespeople or outside MLSs? Do you know their names? Do you reach out to them on their birthdays? Have you ever gotten on a personal level with them? Or do you leave that to your vice president of sales or recruiting?

Being directly involved

I have found it best to keep the playing field level. Let your employees and MLSs know you are simply a walk across the office or a phone call away. This fosters loyalty, understanding and passion in each individual comprising your organization. I have direct contact with each of my MLSs and staff. There is not one person working in-house for my company that I did not interview myself, nor is there one outside MLS with whom I did not have lengthy conversations.

In my conversations with both ISOs and MLSs, I frequently find that no direct relationship exists between them. Naturally, with a super ISO, it can be difficult for the CEO to know each MLS who works for the company, but it is not impossible. As with any large corporation, a structure and a chain of command must be followed; however, without happy agents, what is your large corporation worth?

To the MLS, what is your reach within your ISO relationship? Do you take an aggressive approach with your ISO to ensure you feel comfortable with who is running the show? Believe it or not, one change in an ISO's heart can dramatically change each individual MLS working with that ISO in the blink of an eye. What have you done as an MLS to give yourself comfort and to personally get to know who is cutting your checks?

Avoiding disputes

It is fair to say that not all ISO-MLS relationships will work out. But it is also fair to say that those that don't work out do not have to end up in a dispute. I have been closely involved with several MLSs in the last year who are in disputes with their ISOs. As both an MLS years ago and a successful ISO today, I cannot wrap my mind around the concept of the most common dispute.

In my opinion, nine times out of 10 the dispute can be solved if the ISO simply does the right thing and continues to pay MLSs whether or not they are exclusive to the ISO, stop sending to the ISO business, or trigger any other loophole we ISOs all put in our agent agreements to protect ourselves. Outside of the MLS causing damage to the ISO, it makes no sense to stop paying MLSs for deals they referred.

ISOs should remember that the MLS is the one who holds the relationship with the merchant. Merchants can choose to leave your company simply because their reps are gone. I have found that most merchants will, in fact, chase down their reps and even push them very hard to sign them up at the MLSs new companies.

So what happens next? Most likely the ISO will go after the MLS, which will cost money (not only revenue but also exorbitant legal fees) and take time away from growing the ISO's business.

More often than not, the MLS will continue to board merchants that come to him or her (not through any sort of solicitation on the part of the agent), and the ISO will continue to lose revenue. Sending letters and entering litigation is no fun for anyone, and at the end of the day, a simple ISO-MLS separation really is not worth it for either party.

If you are an MLS, do nothing that would cause damage to your former ISO. Don't solicit merchants, don't slander the ISO, don't steal employees or do anything else that would put you in a position to lose a case if it went to trial. And if you are an ISO, realize the relationship did not work out and simply continue to pay the agent on the deals he or she brought to you.

Splitting up amicably

Also, an ISO and MLS ending their active business relationship should directly discuss the transition. The MLS should explain the reasons for wanting to move on. Both parties should agree to not cause damage to one another.

And the ISO should pay residuals due to the MLS so long as the MLS does not cause damages. A simple document can be drawn up to ensure everyone moves on in ways that honor their agreement.

This is the healthiest scenario because the MLS will have no reason to move merchants, and the ISO will continue to generate revenue from those merchants. If two business people can sit down professionally and solve this right away, the parties can spend their time growing their respective businesses and not become embroiled in he said/she said litigation. If, as an MLS, you make these promises, don't think you are going to pull a fast one on your ISO. The minute the ISO starts losing deals referred by you and finds out you are soliciting merchants and moving their accounts, the ISO will cut off your residuals.

You must do the right thing even if you think your new ISO can offer you 80 percent, and your old ISO is only giving you 60 percent. Don't get greedy, honor your commitment and move on in an amicable way. An ISO who understands the ISO-MLS relationship, knows how to relate to MLSs and respects the needs of all parties to an ISO-MLS contract will create loyal, long-term, flourishing business relationships.

An MLS searching for an ISO home should investigate the individuals behind the show in each company researched, become informed of their backgrounds and learn what other MLSs have to say about them. This will better ensure the MLS will be the master of his or her own destiny - and have an executable exit plan in mind. end of article

Jeff Brodsly is the President and Chief Executive Officer of Chosen Payments, a company created with the industry's feet on the street in mind. Through his multilayered experience as an agent for a top ISO as well as a partner/owner under a top ISO, Jeff developed an organization that remains true to its agents. He can be reached at 805-910-1445 or jeffb@chosenpayments.com.

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