A Thing
The Green SheetGreen Sheet

The Green Sheet Online Edition

September 12, 2022 • Issue 22:09:01

Street SmartsSM

Contract negotiations - Part 1
Choose the right partner, negotiate the right terms

By Natasa Cvijanovic
Tesla Payments

Following are several line items often found in processor and ISO advertisements targeting merchant level salespeople (MLS): large signing bonuses, 95 percent residual splits, free credit card terminals, 10-minute auto approval, lead generation and no minimums.

If you are considering signing up with a company that advertises all of the benefits mentioned above, you should run! I recognize we are all entitled to our fiction, but you must not believe that you can receive all of the above and get paid as promised. If it sounds too good to be true ...

If you look through industry publications, you will certainly not come across an advertisement that reads: "We are, at best, a mediocre processing company. Join our team so we can pay you accurately ... on occasion." 

Companies seeking MLS partners typically present themselves as the absolute best, the cream of the crop, with each program being superior to the last. So, how do you determine which offer is best for you and your merchants?

In this first article in a series, I'll provide a high-level look at choosing the right partner and negotiating the best terms. In the second installment, I'll delve into the details.

Know your portfolio

Before starting negotiations, it is necessary to assess both your needs and those of your merchants. Consider your portfolio and the daily transactions processed by your merchants.  Is the majority of their business done in-person or online?

Consider the liability you are willing to assume. Do you focus on a merchant industry where merchants will likely face a high volume of chargebacks? If this is the case, you'll need to find a processor who specializes in working with companies in your industry. With a clear understanding of your needs, you can eliminate unviable relationships and focus on finding the best deal.

Walk away from high-pressure tactics

Attempting to get a potential customer, or in this case, a potential partner (you), to "think beyond the sale" is a commonly used sales tactic that you are likely familiar with. This approach assumes you will sign a contract after you are led to talk about what other types of merchants you will be able to write after signing it or how successful you will be. This may make you feel obligated to sign or feel guilty if you don't, which means that a sales representative is most likely working you. 

If you feel rushed to make a decision without having enough time to consider alternatives, pause the discussions. Give yourself time to consider your options and make an informed decision.

Sales gimmicks and signing bonuses

Sales managers and their marketing teams in charge of getting new agents and ISOs to sign up have more than just pressure tactics up their sleeves.

In exchange for agreeing to an unfair contract, you might be given a short-term benefit, like a signing bonus. It's not exactly a bait-and-switch, but it can lead you to make a bad choice.

Consider the entire package

Although a competitive Schedule A is important, it should not be your only consideration. Consider the value you receive for your money. A processor or an ISO may provide the best Schedule A but have subpar customer support teams, insufficient or inaccurate reporting tools, or require exclusivity, among other things.

Although assigning a dollar value to these features may be difficult, you may be able to estimate the amount of money you'd spend attempting to save a customer from a poor customer or technical support.

Consider how much time you will save by not having to jump through hoops, reconcile multiple reports, or use numerous software programs to learn about your merchants and their businesses. Worse, a contract might stipulate that you cannot send your business elsewhere.

Shopping around

The ability to compare different quotes is a powerful and effective negotiating tool. Before making a final decision, you speak with representatives from at least three other prospective partners. Doing so will help you gain understanding, confidence and a more competitive Schedule A. Also keep in mind that one size does not fit all.

Do not settle for a subpar processing partner. Although there is no such thing as a perfect credit card processor and/or ISO, you should be able to find one that meets your needs and those of your merchants at a competitive price. While you should advocate for your best interests, you also need to be realistic. Having said that, you should try to get the best overall terms and fees possible.

Although MLSs negotiate contracts daily with their merchants, many struggle when it comes time to negotiate their agreement terms with processors and ISOs. But what makes a great deal great? In part 2 of this series, I'll explore the following questions pertaining to contract negotiations:

  • Do you have a relationship manager you can contact directly rather than an impersonal group that leaves you waiting on hold?
  • Is your Schedule A clear and concise, or does it contain unwelcome surprises?
  • Do you have lifetime residuals, residual survivability, third-party sell rights, etc.?
  • Do you have consistent communication and educational opportunities, or do you have to seek your own educational sources outside of your processing partner, such as social media contacts?

You should look for a partner whose commitment to service does not end with signing a contract but instead marks the beginning of a collaborative, long-term and successful partnership. end of article

Natasa Cvijanovic, co-founder and CEO of Tesla Payments, has a proven track record within the payment industry of cultivating successful relationships with ISOs, MLSs and strategic partners. In developing national sales channels, she provides training and coaching to sales partners to enable them to become better business partners and advocates for their merchants, and to assist them in building portfolios producing steady residual streams. She is also dedicated to consistently delivering high levels of professionalism, integrity, dependability and trustworthiness. Contact her at natasa@teslapayments.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.

Prev Next
A Thing