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The Green Sheet Online Edition

April 11, 2016 • Issue 16:04:01

Street SmartsSM

Creating complex solutions for complex problems

By John Tucker
1st Capital Loans LLC

Editor's Note: With this article we welcome John Tucker as the new Street SmartsSM author for the coming year. He is enthusiastic, committed to enhancing the fortunes of the industry's feet on the street, and eager to share his ideas and learn from you, our readers. Please give him a warm welcome, and answer the questions he'll be posting regularly in GS Online's MLS Forum.

The great Roman philosopher Cicero said, "The higher we are placed, the more humbly we should walk." No greater words could be expressed to show the gratitude I have at the moment, to be selected as the next "quarterback" for one of the most respected educational columns in our industry: Street SmartsSM.

The Street SmartsSM tradition has spanned 13 years thus far, starting with the inaugural column in May of 2003 by the dynamic Ed Freedman. He founded Total Merchant Services, the 2012 ETA ISO of the Year and one of the fastest growing ISOs in the country. Freedman carried the column for two years before the column's annual rotation of authors began. Industry leaders who have penned the column include such luminaries as Michael Nardy, Chief Executive Officer of Electronic Payments Inc. Nardy started Electronic Payments in his college dorm room in 2000. Today, the ISO has over 800 agents, 70 in-house employees, and it processes over $6 billion a year in payment processing.

Others who have filled the Street SmartsSM shoes include Bill Pirtle, founder of C3ET, a man with experience in the industry dating back to 2004. He has helped to train both merchants and merchant level salespeople (MLSs) through the release of comprehensive training guides on various aspects of our industry.

My other notable predecessors include industry heavyweights Jeff Fortney, Dale S. Laszig, Kathy Harper, Amy Garvey, Ty Rosean, Steve Schwimmer, Dee Karawadra, Jason Felts, Kelley Felts, Jon Perry, Vanessa Lang, Ken Musante, Tom Waters, Ben Abel, and, most recently, Jeffrey I. Shavitz.

You might recognize me

Many of you will recognize me from The One Man Show series, which I began in The Green Sheet in 2015. The purpose of the series was to bring various issues to the forefront pertaining to what a man (or woman) would have to juggle both personally and professionally while building a career, portfolio and other value sets within our industry.

The series touched on such areas as strategic business planning, business-to-business sales, creative financing and market research, as well as juggling aspects of your personal life, including family relations, higher education, and handling emotional issues.

When Jeffrey I. Shavitz's time as "quarterback" of the column was coming to a close, I wanted to throw my hat on the table to continue Street SmartsSM for the next 12 months, addressing topics for the MLS that typically aren't covered in depth by our industry's media. For my 12-month venture in spearheading discussion among industry professionals, my focus will be on creating complex solutions for complex problems.

My background

I'm Managing Member of 1st Capital Loans LLC and have more than nine years of experience within our industry operating as a one-man sales office. The two primary products I have sold are payment processing to mainly medium- and high-risk merchants, as well as merchant cash advance and alternative business lending products to the small business market.

I battled from the bottom, dealing with bouts of being homeless, to working my way up solidly into the middle class. I did it all by being a one-man sales office, working on a 100 percent commission basis and juggling a variety of operational aspects solo, including:

  • Completing my own market research, creating business plans and ROI formulas
  • Coming up with innovative ways to finance my office
  • Managing agreements with partners, data suppliers and other vendors
  • Setting up my own direct and indirect marketing campaigns
  • Running through warm data calls of about 150 a day
  • Managing my sales pipeline, current deals in underwriting and renewal portfolio
  • Managing legal aspects such as contracts, keeping up on marketing laws, and tax related aspects
  • Managing retirement account aspects and insurance policies

I averaged $200,000 a month in merchant cash advance funding volume during my time of selling the product, which spanned a period of 70 months, while on the side I built a processing portfolio that is on track to reach $200 million in total volume processed.

While hitting these performance metrics, I also completed four college degrees on the side, which include an M.B.A along with bachelor's degrees in accounting, business management and communications. My alma maters includes one of the top research facilities in the world, The University of Michigan, as well as an innovative college in Salt Lake City called Western Governors University. The school was created by 19 U.S. Governors ­– including Republicans Mike Leavitt of Utah and Jim Geringer of Wyoming – to provide competency-based degrees to working adult/professional college students.

Decline of direct sales of merchant services

I believe the field of merchant services will not continue to be based on actually selling merchant services. Companies used to be able to hire 500 random people on 100 percent commission, throw them a couple brochures, show them how to do a rate analysis, and send them out to call randomly from the Yellow Pages or park their cars on streets picked arbitrarily and start knocking on doors to begin business conversations. The mantra was to get processing statements to save merchants on rates or offer them free terminals with a minimum monthly processing amount guarantee.

This strategy is now dead due, in part, to the long-standing low barrier to entry into our space, which has created significant overcrowding, as well as the Internet, which provides merchants easy access to information on interchange and the actual value of a terminal (which typically is $350 at best). The latter delimits the value of the MLS's "knowledge," an asset that was considered to be valuable due to its scarcity before the Internet's explosion.

As a result, I believe the future of the MLS will be to rebrand as something totally different. This will entail finding a way to integrate multiple areas of a merchant's business ­– such as marketing, payroll and payment processing – into whatever new solution the MLS will create to bring in multiple revenue streams. "Merchant services" will no longer be a direct lead-in for the sales process; instead, it will be part of the "value-added package" of whatever new solution or service you are selling.

Rebranding strategies

Here are two examples of rebranding:

  • For an example of already implemented rebranding efforts, we can look at the direct selling of POS systems or other operational management systems, which focus on managing the entire aspect of the merchant's business through a centralized computer station, along with remote access to such a station via the cloud. These systems integrate multiple areas of a merchant's business from payroll processing to marketing via big data analytics, to inventory management, to accounting and tax management, to, of course, payment processing. This should bring in multiple areas of revenue and in this case, the MLS is rebranded as a technology sales professional, as well as a payroll specialist, marketing professional, etc.
  • The second example includes the direct selling of merchant financing in the form of the merchant cash advance product, which for some structures, involves the conversion of the merchant's payment processing to the funder's chosen ISO for direct split funding holdback procedures. In this case, the MLS is rebranded as an alternative financing sales professional.

The next 12 months

Today's 21st century marketplace has created a ton of complex problems, issues and challenges that will require more complex solutions in the form of new, integrated, innovative services and products, as well as more specialized professionals to tackle said implementation.

Gone are the simple days of educating merchants on the benefits of accepting credit cards or giving merchants a rate analysis by just cutting closer to the "interchange bone" or giving merchants free terminals in exchange for a 36-month processing commitment. The sales process will now be more complex, requiring ISOs and MLSs to devise more solutions to resolve previously unaddressed problems. Simultaneously, this will create demand for more technical and analytical sales professionals, rather than routine/robotic order-takers.

This is what I want the next 12 months to cover. I hope you'll respond to questions I'll be posting under the Street SmartsSM moniker in GS Online's MLS Forum. I'll seek to meet you in other online hangouts as well. I expect all our discussions will revolve around this new level of complexity. Let's talk about these complex problems, how to create said complex solutions, and how today's MLSs will eventually be rebranded as something totally new to solve these new complex and operationally integrated problems of the 21st century's global marketplace. end of article

John Tucker is Managing Member of 1st Capital Loans LLC, as well as an M.B.A. graduate and holder of three bachelor's degrees in accounting, business management and journalism. Tucker has nearly nine years of professional experience in commercial finance and business development. You can contact him by email at tucker@1stcapitalloans.com or by telephone at 586-480-2140.

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