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The Green Sheet Online Edition

February 08, 2016 • Issue 16:02:01

Make 2016 the year of the profit

By Jeff Fortney
Clearent LLC

There are basic truths about business, and the payments world is no exception to them. We hear and see many of them often: you have to spend money to make money or there is no shortcut to success, for example. They have become truisms, slogans that get repeated again and again.

However, in the payments business, we often forget one such statement: this is a for-profit industry. Sure, everyone agrees that we want to make money, but all too often we end up sabotaging out profits. Have you ever thought, said or even paraphrased any of these simple statements?

  • I really need to sign this merchant, no matter how low I have to go.
  • This business is really big and will never consider the price I want to offer.
  • This merchant knows scores of others and can refer me a lot of business, so I need to offer a very small price to get that business.
  • I need to look out for the merchants first. That way they will stay with me. This means I have to consider their demands and drop my price.
  • A dollar earned is better than nothing.

Regaining control

In rare instances these may be valid concerns. The key word, however, is "rare." In reality, the statements above represent mental blocks that impede the sales process. The minute these and similar thoughts arise, your control of your profit is compromised. In fact, you have given your profit control away.

Profit is not a dirty word. Selling payment services is hard, and you should be rewarded with a reasonable return for your efforts. And you can take steps to make sure you never give up control again.

It all starts with ethics

Protecting your profit margin does not require you to sacrifice your ethics. In truth, it requires you to be more ethical, as the longer you retain a merchant the better your return. And ethics do not require you to cut your price.

It begins by demonstrating pricing transparency by clearly showing your charges. This means you can't pad expenses that are normally pass-through expenses. Be honest and clear. Now I should note there could be times when this is out of your control. Your chosen ISO partner may be adding to what many define as pass-through expenses. If you are uncertain about this, ask your ISO. This has as much of an affect on your profit as merchants' demands.

Your prospect runs a for profit business

I would wager that almost all the merchants you call on are for-profit businesses. They stay that way by looking out for their best interests. Sure, as their trusted adviser, you want to look out for their best interests as well, but that doesn't mean you have to give away the farm. Keep in mind that unless you offer merchants something they find truly compelling, the only thing they will absorb from your presentation is your price. And if that is all they remember, they will fight to reduce your price.

Change the narrative by asking questions first. Find out a given merchant's needs and concerns before you even mention price. The more questions you ask, the more likely you are to truly understand the merchant's pain points and can tailor your offering accordingly.

You must know your competition

This may seem obvious, but it is critical to understand how your competitors price their deals and to know what their strengths and weaknesses are. First, identify who your primary competitors are. These are sales offices, as well as their ISO partners. Your goal is to identify not just how they price, but also any unique aspects of their pricing, including fees that are not clearly defined.

But this is often easier said than done. A good source of information is your ISO partner or mentor. In an ideal situation, these are one and the same. Some will even share information as they obtain it, and this shared knowledge can go a long way toward boosting your sales efforts.

Set your price and stick to it

There is no "one price fits all" approach when it comes to payment processing. Setting a cost to process must be unique to each merchant. This means you must be flexible in price and structure. You can't say you will quote 20 basis points and 20 cents on every merchant and then expect to maximize your profitability.

Take into consideration all the information you have gained from the merchant, including the average ticket, and then factor in your costs and your intel about the merchant's current processor. Don't be afraid to be exact. Every penny and every basis point count toward your profits.

Remember that saving the merchant money is not necessary for a successful sale, although after full analysis, there may be cost savings. Your goal should be to address your merchant prospects' needs, educate them on their unique situations and explain how you came up with the costs you are quoting.

Know that merchants will likely push back on the price, but if you have explained your process clearly, it should be easy to defend your quote. You have taken the time to prepare your best price. The minute you move away from it you have given up control, and you will likely be pressured to reduce your price even further.

Walk away if need be

When negotiating, don't be afraid to say that this is your best price. If you have done your job identifying and addressing the merchant's needs, setting a fair and equitable cost should be a small component of the sales process. That's when you need to step back and restate how and why you arrived at the costs you set, and ultimately be prepared to walk away if the merchant continues to push for a lower cost.

By following these steps you can take back control of your profits. It will also help you reduce the effects of margin compression so you can make 2016 the year of the profit.

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.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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