By Natasa Cvijanovic
This article's title is the extent of my political discourse. It is not an homage to any former president, but rather a colleague's humor-laced optimism at its peak. Now, on with the second installment of my Street SmartsSM series on contract negotiations.
One of the most important decisions you'll have to make as a merchant level salesperson (MLS) is selecting the right processing partner to help you build your portfolio. First and foremost, a great partner will provide you with a competitive compensation plan, agent agreement terms that are mutually beneficial, an unrivaled product suite, continuous industry and product training, and a team that is dedicated to your success.
After completing your research and determining that you have found the ideal business partner, the next step is to negotiate a great agreement. What makes an agreement great?
I'm not a lawyer, so I wouldn't expect you to take my word for it, but I did reach out to one of the best industry attorneys, Jill Miller of Bodman PLC. She has been advising clients in the payments industry on contractual matters, mergers and acquisitions for over 17 years. Miller's clients include agents, ISVs and ISOs, major credit card brands, hardware providers, payment gateways, and financial institutions. She was gracious enough to provide insights, feedback and her top list of must-have and must-not-have provisions for any MLS or ISO agreement.
I'll begin with the obvious, which is your Schedule A. But before I go any further, it makes sense to clarify the role and meaning of a Schedule A in the payments industry. Anyone who has sold merchant services for more than a week should be familiar with the importance of the information set forth on a Schedule A. Many may gloss over this fundamental concept, but a portion of new MLSs have no idea what Schedule A is.
Schedule A is one of the most important documents in our industry, and some have even referred to it as the Holy Grail of merchant services. Schedule A typically sets forth your revenue share, interchange pass-through fees, transaction fees, BIN sponsorship fee, authorization and settlement fees, batch fee, monthly/statement or on file fee, AVS fees, PCI fees, wireless fees, chargeback and retrieval fees, etc.
Your merchants pay these fees, generating revenue for your business as a result. Your Schedule A is used to calculate your processor/ISO's costs, which are deducted from the revenue collected from the merchant. The resulting profit is shared with you in accordance with your residual split. In a nutshell, Schedule A dictates how MLSs get paid.
Is your Schedule A clear and concise? Do you have reservations about any of the line items? You must have a thorough understanding of your Schedule A because the quickest way to devalue your portfolio and dilute your residual income stream is to misunderstand or, worse, not know what's in your Schedule A.
Is your Schedule A frequently changing? Because it determines your compensation, any changes to it will have an impact on your profitability. Are you responsible for providing initial customer and technical support? Another way to eliminate a potential reason for changes in the revenue share or Schedule A is to understand your responsibilities and expectations.
When asked about Schedule A, Miller advised that, aside from negotiating competitive pricing, if there is legal language on Schedule A, be sure your attorney reviews that language. Although some changes are unavoidable, such as pass-through fees and third-party increases, Miller recommends that you speak with your processor about how to manage other price increases, so you are not singled out with a price increase that can make an MLS less competitive in the marketplace.
She also addresses minimums by urging MLSs to ensure that all fees paid by merchants are included in minimums calculations and by expressing concern over escalating minimums. A great year for an MLS can be followed by a pandemic the following year, placing one in a precarious position in the case of escalating minimums.
While a competitive Schedule A is extremely important, it is not the only factor to consider. A larger revenue share is not always indicative of a stronger partnership, greater residuals or a better overall deal.
Our industry's main appeal, and the driving force behind many careers, is residual income, the asset that must be protected. Do you have lifetime residuals, residual survivability, and third-party sell rights? In the next article, I will explore Miller's top list of items every MLS should carefully review in their agent agreement.
Stay tuned, because the upcoming information is of immense value. Contact me if you wish to contact Jill Miller directly.
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 firstname.lastname@example.org.
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