The Green Sheet Online Edition
January 25, 2010 • Issue 10:01:02
Don't break the bank
We started our business when the company we worked for went bankrupt. Businesses fail for many reasons, but the root of the problems is typically a lack of top-line revenue or poor bottom-line performance. Addressing these deficiencies essentially boils down to signing more customers and not spending more than you make.
It is easier said than done - no doubt. You have to spend money to make money, right? Fortunately, we are in an industry where the barriers to entry are low. Blessed by an industry in which overhead is low and income potential is high, how can we ensure financial stability in our business?
Top-line revenue performance is directly related to the number of customers and the volume of dollars they process. Sure, many other factors are involved, but for this article we will focus on ideas to increase the number of customers you sign each month.
You could just be starting in payments or going into your 10th year. The concepts are the same.
How do you increase the size of your portfolio? Many struggle to either get started or take it to the next level. Looking back through posts on GS Online's MLS Forum over 2009, we find great insights into what others were doing and thinking.
Jdeckard shared his thoughts on growing his business: "Have been debating ... bringing on a support person ... bringing on a telemarketer ... or bringing on some reps; each seems to have its own merits ... and its own pitfalls."
Coach Bob, a seasoned professional in our industry, stated, "Hire some reps. But don't over complicate it."
One of our industry mentors, Ken Musante of Moneris Solutions Inc., told us that we are our best salespeople; outsourcing everything that is not value-added frees up our time to focus on boarding new customers.
This advice rang true. Regarding Coach Bob's point that new sales reps can complicate your business, it depends on timing and where you are at in your own professional development. If you are just starting in the industry, there is no point in bringing on new sales professionals if you cannot mentor and educate them.
If you have been at it awhile and are hitting a ceiling on the number of deals you write per month, consider outsourcing non-value-added functions (like mowing your lawn). If your budget allows you to turn your focus away from sales, you are at a point to begin looking into telemarketing or adding employees or 1099 contractors.
One thing any merchant level salesperson (MLS) can do is look for underserved, niche markets. Doing this has served us very well over the past five years. Since cold calling, telemarketing and hiring are specialized skills, evaluating your personal skill sets to understand areas where you excel, and can thus capitalize on your strengths, can be a potent differentiator in the marketplace.
Since we are a purely referral-based organization, we have been successful in focusing on referrals from existing customers, agent banks and businesspeople who desire highly technical solutions.
Approximately 34 percent of our new customers are referred by existing clients.
While at a Western States Acquirers' Association meeting, we were reminded not to forget to ask a potential new client if he or she might know others who could use the same level of service. It is a common-sense query but often overlooked during the sales process.
One tip is to use the reference section of your merchant application and ask your new customer if it would be OK to call the references (referrals) in the application to see if they would be interested in a new merchant service provider. Taking this extra step can increase your number of prospects to three times the number of new clients you ask about calling their references.
Work the banks
Agent banks are rich in potential but can be tough to acquire. One way to get in front of a prospective bank is to use your local chamber of commerce to develop relationships with bank representatives. While chambers can take a good amount of time to develop, they are rich in agent bank opportunities.
Focusing first on community banks, credit unions (as long as they open business accounts) and regional banks allows you to get your feet wet and work out the optimal process - from sales, marketing and co-branding to revenue sharing. We average one referral per branch per bank each month. Adding an agent bank with 10 locations, properly cared for, can result in a dramatic increase in your client base each month.
Ber on the MLS Forum said, "My goal is to build a relationship with the credit union where I sell to all of their existing base of businesses customers, as well as all of their new business customers."
Ber makes an important point that all MLSs should keep in mind when approaching agent banks. The key is to let banks tell you what they need; many are not going to focus heavily on revenue sharing as much as increasing their deposits and the retention rates of their clients.
Reciprocity has been a recurring theme among banks. They want to know whether their existing merchant service providers are bringing new clients to them. Often the focus comes down to service.
Community and regional banks tend to outsource their bankcard services to larger processors. They lose track of how their referrals are cared for, and they lack insight into service levels. Creating a feedback loop of successes and failures fosters a continuously improving environment and results in increased business for MLSs and agent banks.
Follow a budget
Increasing the number of accounts acquired is one part of the equation. It is probably the most important because, regardless of cost, if there are no new accounts, paying the monthly bills can be challenging, no matter how well expenses are managed. While the majority of Americans tend to live paycheck to paycheck, we are fortunate to be in control of how to make that paycheck bigger. But as the paycheck grows, expenses grow.
Regardless of the size of your organization, having a written budget that is reviewed consistently can prevent unnecessary bleeding of money. A basic budget will list all of your income and expenses. If you get residuals from various sources, list them individually, as well as all of your expenses (electricity, phone, credit card terminals, payroll, taxes, accountant, lawyer, Visa Inc. and MasterCard Worldwide registration et cetera).
A written budget should forecast out for at least 12 months. This will give you an indicator of how successful your business is operating. It will allow you to make strategic decisions about where your dollars are best spent. At a high level, does income exceed expenses? This concept applies to personal as well as business expenses.
We recommend one budget per bank account. On a daily basis we update our budget based on what the current account balances are and what expenses we have posted or are coming due.
This allows us to operate efficiently. Intangibles of this process include being a good payee, as well as making sure that our expected income growth is on track. If you added 10 new clients last month and residuals went down, this tells you to stop and take a deeper look at your residual report.
As you build your budget you can see how much you can invest in acquiring new accounts. At the beginning you might not be able to offer a free terminal to a prospective client but, as your income begins to exceed expenses, the opportunities to expand marketing and offerings to attract new clients becomes a reality.
Another intangible factor is that simply seeing everything lined up by income and expenses will make you work harder at optimizing either your income or expenses. If in this process you realize that expenses are too high, you can turn up your sales or spend time bringing your costs down to earth.
The key is to stay debt free and not over-leverage yourself, which causes stress and leads to poor performance. Knowing your finances are in order will result in increased sales.
Step on it
Knowing step by step and day by day how your top line and bottom line are performing will help to ensure that your business is financially stable. It will allow you to guide your strategic decisions in a reasonable and achievable direction. Over the years we have worked with friends, family and customers who struggle to make ends meet. Often just knowing the basics of what is coming in and what is going out gives you the power to solve the issues.
Take some time - if you don't already - and put your budget on paper or on an electronic spreadsheet. This will make sure that you are not breaking the bank in 2010.
Jon Perry and Vanessa Lang are the owners of 888QuikRate.com, an ISO based in Ft. Worth, Texas, that was named Small Business of the Year by the local newspaper, The Star Telegram. For more information, tweet them at http://twitter.com/dfwcard, comment on their blog at http://merchantservices.cc or visit their profile at http://linkedin.com/in/jonperry or http://linkedin.com/in/vanessalang. Alternatively, you can contact Jon and Vanessa by phone at 817-857-3557 or by e-mail at firstname.lastname@example.org or email@example.com.
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