By Jeffrey I. Shavitz
Charge Card Systems
Editor's Note: With this inaugural article, we welcome Jeffrey I. Shavitz as the next author of Street SmartsSM. In addition to being a long-time, supporter of The Green Sheet, he is an astute businessman who is both personable and generous. We look forward to a dynamic year with him holding the reins of this column.
After having spent approximately 14 years in the payments industry, I am delighted to be authoring the Street SmartsSM articles for the next 24 issues. I have always enjoyed my involvement with The Green Sheet, while serving on the Advisory Board for the past 11 years, writing numerous articles, and building relationships with fellow ISOs, merchant level salespeople (MLSs) and other executives in the payments space.
Given the Street SmartsSM twice-monthly publication schedule, I've never been under the gun to produce thought-provoking material with such regularity, but I look forward to the challenge. And I wholeheartedly welcome your emails and calls that highlight topics you'd like me to address for our mutual collaboration. After all, The Green Sheet is our trade publication, and we are all here to learn from each other.
I do feel my role in Street SmartsSM is to bring to life the different voices and views of professionals in our industry. This includes the ISO, MLS, acquiring bank, issuing bank, processor and, of course, the merchant, which is our ultimate focus and source of prosperity. Everybody uses credit cards for purchases and we, acting as the conduit for those purchases, are a closed fraternity and sorority.
My first article should prove to be the easiest, as The Green Sheet asked me to write about my background, entrance into the payments industry, and anything else that might help introduce me to you, the publication's readers.
I graduated from Tufts University with a degree in economics during which time I spent half a year at the London School of Economics. I began my career in the Investment Banking Division at Lehman Brothers, primarily involved in real estate corporate finance and mergers and acquisitions.
In interviews at the major banks during my senior year of college, each managing director would ask, "Are you really ready to work 80 to 100 hours per week?" I, of course, said yes; however, I didn't fully understand what working 15 to 17 hours per day – and both weekend days – really meant. For the next four years, I worked, ate and slept in my new home: my windowless office at Lehman.
It wasn't the greatest job for a 21-year-old single guy living in New York City to meet young women. Every date I had was duly cancelled, usually at the last minute, because I had to meet deadlines or put together some report required by senior management. However, I did have one shining moment at Lehman, and that was successfully selling Rockefeller Center in New York City. Upon completion of the deal, I was presented with a Mont Blanc Pen (value of $200 that I subsequently lost) while my boss earned a $10 million bonus. That should give you a good idea of where I was in the hierarchy of my department.
The experience at Lehman Brothers provided me with an amazing financial background in profit and loss statements, balance sheets, and EBIDTA (earnings before interest, taxes, depreciation and amortization). However, in time, while I reflected on the invaluable training I'd received, I knew I was ready to be an entrepreneur. I wanted to be successful on my own while shaping my own destiny (working 100+ hours a week for myself was surely a better deal in my mind).
During this time of soul searching and trying to determine what type of business to start, an opportunity was presented to me. My dad's close friend had been a founder of a regional bank, which ultimately grew to 52 branches in southern Florida. The bank was subsequently sold to Wachovia and, as part of the transaction, the bank's credit card portfolio had amassed real financial and shareholder value (much more value than most of the board members realized as they were growing the bank). This is when my dad's friend introduced me to the world of credit card processing, and the three of us enthusiastically formed Charge Card Systems.
This was my entrance into the merchant services industry. We hired a highly experienced consultant, did extensive due diligence, spoke to numerous merchants and salespeople, and ultimately got our ISO off the ground. It seemed relatively easy during our vetting stage. I thought, "How hard could it be to lower a merchant's rate, press some numbers into a Tranz 330, and have the merchant start processing with us and, subsequently, we earn residual income for life? – What a great business model!"
Unfortunately, that was a bit naïve. My first true experience proved it. Shortly after opening CCS, I approached the owner of one of the busiest bagel/deli stores in New Jersey, as I thought this would be a perfect merchant for me to try my hand at (this is the bagel store that everybody visits on the weekends and is the local hangout from 7 a.m. to noon).
I carefully did a cost comparison and showed him his monthly savings on an Excel spreadsheet. He was convinced and ready to switch – my first client and a good one at that. I explained to him that the conversion process would be seamless and wouldn't interrupt any of his day-to-day operations, etc. … I arrived at the bagel store at 5:45 a.m. and felt totally confident about my first terminal conversion and excited to start earning money that day.
What started as a great Saturday morning turned into a nightmare: 5:45 a.m. became 6:45 a.m., and the owner kept asking, "Almost done, as we're opening now?" I don't do yoga but started thinking about yoga breathing as I became more and more nervous, because I couldn't get the terminal to work.
Apparently, I hadn't done my homework properly and was unaware of the different processing platforms at First Data (that is, Omaha, Nashville, North). We had set up the bagel store on Nashville's platform, and I had been calling the Omaha customer service help desk. Bottom line: by 11:30 a.m., the merchant was processing. I'm sure many of you have shared a similar experience during your career in merchant services.
Fortunately, I learned a valuable lesson from that first minor mishap, and our business began to grow as hundreds of agents and thousands of merchants began using CCS as their processing partner. During this time, CCS began two other operating companies. Alternative Merchant Processing Inc., a company devoted to working with high-risk merchants who do not fit the traditional underwriting model of most conventional processors, and Charge Card Funding, which focuses on providing working capital and cash advances to small to midsize merchants.
In March 2012, CCS sold its business to CardConnect, owned by FTV Capital, a private equity firm rolling up merchant processing companies. CCS was the largest acquisition to date, and I continue to serve as a consultant to the business, writing conventional deals for CardConnect, and am a stockholder in the parent company. CardConnect has made a major commitment to technology, which is critical in the evolution of the payments industry.
In addition, I am also serving as a consultant and Managing Director of Affinity Solutions, focusing on the go-to-market activities for Affinity's Navigator product. To my mind, as merchant services becomes more commoditized, services like Navigator continue to add value to our prospective merchants.
Navigator enables small business merchants to easily set up, with just a few clicks of a mouse, precision-targeted campaigns that distribute promotional offers to local consumers most likely to become loyal shoppers in their stores. By leveraging transaction information that Affinity sees for 60 million U.S. consumers (as a result of its relationships with over 4,000 banks), Navigator will consequently provide and create promotional offers to a subset of local consumers, driving new consumer traffic to our merchants.
There are many things I love about payments, and a few that I don't care for, as our industry evolves. The positives: our industry is growing very fast with so many advanced technologies, which, in turn, puts it front and center, particularly with the emergence of Apple Pay and other technologies. I'm also a big proponent of interaction with the business owner in the SMB (small to midsize business) marketplace, while hearing their stories about how to build their companies. And I truly enjoy and value the interaction with our salespeople and other industry professionals.
Unfortunately, what I frown upon is the commoditization of our industry, causing traditional credit card processing to become more and more competitive with transparency of interchange fees. And, sadly, certain sales practices of some agents are less than professional. And, let's not forget that attrition is and has become a major problem we are all experiencing. In future Street SmartsSM articles, I will describe, from my own perspective, how to continue to make our careers rewarding both financially and otherwise with well-thought-out strategic initiatives.
Needless to say, I am a huge fan of the entrepreneurial spirit and have always wanted to explore the DNA of the business owners and find out exactly what makes them thrive. Whether you're an ISO or a MLS, their leadership qualities are traits that can truly drive you to the next level in business … and ideally, ultimate success.
I became so consumed with understanding the mindset of entrepreneurs that I am in the process of writing my first book, Size Doesn't Matter – Why Small Business is Big Business - Profit NOW from the Small Business Boom!, to be released June 1, 2015. Having worked with tens of thousands of merchants throughout my career, I've chronicled therein various real-life situations of small business entrepreneurs. I just hope that somebody in addition to my wife will actually read it.
In addition to work, I love my family: my wife, two daughters, one son, and Molly, our Cockapoo dog. Skiing, golf, basketball and tennis are my hobbies. My golf goal is to one day play the top 100 courses in the United States. I am committed to many philanthropic, civic and business activities; love coaching my children in their respective sports; and am involved with my Young President's Organization business group. Recently, my love of dogs led me to become an advisory board member of Doggy&Co., an online dog business based in London.
I feel fortunate to be involved in the payments industry. I look forward to the next year of authoring StreetSmartsSM, and I sincerely encourage you to contact me with any ideas of interest you may have. I want to learn from you and share stories so that we can take this journey of growing our businesses together.
Jeffrey I. Shavitz is the founder of Charge Card Systems Inc. that was sold in 2012 to Card Connect. Prior to CCS, he was an investment banker at Lehman Brother working in the mergers and acquisitions department. In the past, he served on the First Data ISO Advisory Board and currently is active with The Green Sheet Advisory Board. In addition to his involvement in the conventional payments space, he is currently consulting as Managing Director of Affinity Solutions and its Navigator product. For more information, he can be contacted at firstname.lastname@example.org or 800-878-4100.
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