The Green Sheet Online Edition
February 25, 2013 • Issue 13:02:02
How ISOs can work more effectively with MLSs
Among the many challenges ISOs face in the day-to-day operation of their companies is managing independent sales contractors, known in the payments business as merchant level salespeople (MLSs).
A number of ISO executives come from traditional W-2 corporate employers like First Data Corp. or Chase Paymentech Solutions, where they hired, trained and managed employees who reported directly to them, and who had clear goals and objectives they were required to achieve to remain employed.
Executives in the W-2 world develop a set of tools that serve them well for managing employees. But in the ISO world, where MLSs are overwhelmingly independent contractors whose earnings are reported on 1099, not W-2 forms, executives can find their old management tools are largely ineffective. Why?
The biggest reason is that ISOs lack leverage over MLSs. MLSs approach their work as they see fit; their day-to-day activities and environment are not under an ISO's control. But the best ISOs find creative ways to build leverage with their MLSs, which in turn helps to drive productivity and reduce the guesswork involved in working with them.
Five proven strategies
Here are five strategies ISOs can use to develop long-lasting, mutually beneficial relationships with their MLSs:
- Treat them as partners, not employees. You're probably not offering base salaries and benefits to your MLSs. You're providing them a mechanism to help them board new merchant accounts. They want what you want: to board accounts efficiently so they can begin profiting from them, and to service those merchants effectively so they continue to process with you.
If they're successful, you're successful. If they fail, so do you. They're not your employees; they're your business partners. Tell them as much, and then treat them accordingly.
- Align their interests with yours. This one sounds obvious, but ISOs often fail to consider it. Structure your compensation deals with MLSs so that your interests are fully aligned with theirs. This allows you to give your reps more autonomy in signing deals and making sound business decisions.
If your interests are not fully aligned, you might worry about reps cutting deals that help them but hurt your business. Here's an example: Let's say an MLS wants to sign a merchant, and the merchant is insisting on free equipment.
If your interests and those of your rep's are aligned - that you both share in the cost of free equipment - then you can be reasonably comfortable that the decision he or she makes - whether to give the merchant the equipment or not - is reasonably based.
Even if the rep isn't sure whether to agree to the terms, the two of you can have a rational conversation regarding the costs and benefits of striking it.
- Create leverage. Competition for merchant accounts (and MLSs who can deliver them) is intense. MLSs are used to jumping from ISO to ISO and shopping their best deals to see where they can maximize their return. ISOs, it seems, have very little leverage in dealing with productive, performing MLSs.
Top MLSs shop around for the lowest buy rates and the highest percentage splits, and many ISOs are quick to comply. But what if you helped remove some obstacles that stood in the way of their success? To that end, you could:
- Help get their deals quickly approved through underwriting
- Develop creative contests with desirable prizes
- Assist them with analyzing statements
- Prepare or improve paperwork
- Develop and hold practical and useful webinars or teleconferences about industry updates
- Devote an internal service person to tend to their service needs
If they don't get that sort of care and attention from other ISOs, they might be more inclined to send deals to your ISO over another.
- Devote more resources to the thoroughbreds. Every employee costs you overhead, so it makes sense to give them all lots of attention. But most MLSs cost you little or nothing in overhead. If they deliver profitable deals, you will profit.
You have little or no "sunk" costs in your reps. Invest in your best. Offer incentive-laden draws, dangle the prospect of equity in front of them and give them more of your valuable time.
An ounce invested in your stars is likely to yield a greater return than an ounce invested in those who underperform. Sometimes lackluster reps can be such a drain on your valuable resources - they often have the most questions, the most complaints and the greatest monetary needs - that you fail to properly invest in your stars.
- Develop a relationship with them. MLSs, by their nature, like to roam free and are constantly looking for - and getting notified about - better buy rates and percentage splits. While these are undoubtedly important to any independent contractor looking to maximize income, few things are more valuable than a trusted ISO relationship.
So, do the following:
- Make time to see them.
- Take them to lunch.
- Send them a random gift card.
- Walk them through their commission statement so their questions are answered in full and transparency is assured.
- Reach out and solicit their input on making your ISO's processes better.
In short, make it easier for your MLSs to send deals your way. Create opportunities for meaningful, open relationships that extend far beyond dollars and cents; they'll become mutually beneficial relationships that are based on trust and respect. If you're serious about growing your base of producers, what better form of advertisement is there than MLSs telling their peers about the wonderful relationships they have with you?
ISOs often make the mistake of managing independent contractors the same way they once managed employees. Treat your MLSs as partners. Cement those relationships. And keep your eyes peeled. You're going to see some exceptional results.
Christopher Briller is Chief Executive Officer of MerchantPro Express LLC. Prior to that, he was a sales executive with TransFirst LLC and First Data Corp. He can be reached at firstname.lastname@example.org. Sean O'Neil is Chief Operating Officer of MerchantPro Express. He is a sales and management training expert with clients that include First Data, Chase Paymentech Solutions LLC and WorldPay. Sean also co-authored the book Bare Knuckle People Management: Creating Success with the Team You Have - Winners, Losers, Misfits and All. Contact him at email@example.com. For more information about MerchantPro Express, visit www.merchantproexpress.com.
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