By Jon Perry and Vanessa Lang
Merchant Services Inc., Fort Worth, Texas
One of the hardest things to do is walk away, whether from a fight or from a merchant who demands more than you are willing to give. When writing a merchant services deal it is important that the situation be win-win-win. All three parties - agent, client and processor - must gain something from every deal written.
A great relationship with your processor can enable you, as an ISO or merchant level salesperson (MLS), to provide almost anything clients demand, but knowing when to give and when to pull back can be instrumental in determining whether you ultimately succeed or fail.
Recently our company was referred to a well-know business in Fort Worth. When we met with the company's Chief Financial Officer, she stated that if we would provide next-day funding and waive the requirement for a personal guarantee, we could move forward with signing the contracts.
Red flags started waiving. After reviewing the company's financials, we realized neither request was possible. It might have been a win for the customer, but it would have placed a risky account with the processor - something we work to avoid.
The merchant was not pleased with our denial of the requests and indicated we had plenty of competitors who would be happy to provide everything the CFO had requested. We politely reiterated our reasons for denying the account and left the door open should they have a change of heart.
The next day the merchant called, ready to move forward. The deal breakers went away because the company wanted to eliminate the pain it was experiencing with its current processor. Often the best deals are the ones that we initially walk away from.
It is difficult for new MLSs to refuse any potential deal. Signing accounts is what motivates agents to continue. But always keep in mind the moral of the story we just conveyed. Never take away a customer's pain for free, and know what your best and final offer (BAFO) will be.
If you have responded to a request for proposal, the term BAFO may be familiar. For the MLS, your BAFO might entail things like contract terms, termination fees, statement fees, transaction fees et cetera.
Know what your BAFO is on these items. Thus, when a merchant makes a request, you are prepared to respond accordingly.
GS Online MLS Forum member MTY MSI shared the following with us: "The one barrier that I've never even wanted to cross is when the existing pricing is so low it didn't make any sense to board the account.
One thing I think new people need to understand is if you can't make a fair profit, move on to the next prospect.
"Unfortunately, I'm guessing about 99.9 percent of those newbie's have never heard of The Green Sheet and are working on upfront bonuses at the cost of long-term residuals because they haven't been educated otherwise." MTY MSI is not willing to write a deal that will not be profitable for his business.
Forum member TheCreditCardMan wrote about a merchant who demanded no early termination fee (ETF) in his contract. "He wanted no ETF. I could write it at $0, but I never have and never will. Anyone thinking that hard how to get out of an agreement even before they sign it, I don't need them."
The Dustman agreed that "ETFs have been deal breakers forever," adding that "many reps use a portion of their upfront incentives to pay them for the merchants. Don't these reps and MSPs realize they are just digging another pothole to get stuck in?"
MLS Forum member NWBC indicated a "no monthly minimum and no account service fee combination is a deal breaker for me... they either acquiesce to my demand on these fees or they don't get a merchant contract from me ... period."
We are all dependent on all parties being successful to survive. If you don't earn a living, the processor doesn't make enough money, and the customer suffers due to lack of support and service.
Although many ISOs promote upfront bonuses and free terminals, these programs come with a cost. Should something go wrong with the account, a claw-back can occur. More importantly, we believe this fosters a short-term vision of how to earn a living in this industry.
The true potential for surviving is to build a long-term residual income, which is only achieved if all parties are doing their best for their customer.
NWBC understands the importance of writing deals that will be revenue generating month after month. He wrote, "I need to be able to offer service, and service costs money, so I have a minimum I need to earn per account (based on account type) and if I can't earn that amount I don't see how it makes any sense to keep that merchant."
NWBC's logic is simple: We are in business to make money, and we add value to our clients. Don't sell yourself short, and don't leave money on the table.
It is the nature of the beast that a competitor will approach one of your merchants with lower rates, better service and so on.
You set the tone from the first time you meet and sign a customer. If you take the approach of lowering a merchant's cost without taking anything away, even if you land the account, the merchant will likely entertain offers from competitors with the same approach.
Creating a sense of value with each new account can be your best method of maintaining accounts year after year. The goal is to have your merchant respond to solicitations with "No way I am every leaving Jon Smith Merchant Services!"
Ber wrote on the MLS Forum about his initial approach with a prospect. "I had a liquor store that I was pitching on rate match on credit card processing and a better deal on prepaid calling cards," he said. "The guy was so concerned with contract terms, ETF and pricing.
I told him that I wasn't interested in doing business with him, that my time and service was better used on customers that value me. He called me two months later when his terminal went crazy and he couldn't get a hold of his salesperson."
Ber has created a customer for life. What may seem like a deal breaker for the merchant often ends up being a "nice to have" when all of the chips are laid out.
Another good rule of thumb is to remember that not all accounts are equal. It is a very different situation when your largest account asks for a new credit card terminal than when a brand new restaurant prospect demands one because "everyone else is offering it."
For example, MLS Forum member AMSProcessing wrote, "I have paid a vet $1,200 because of a chargeback they lost (animal died on operating table). I paid $100 per month for 12 months. Gross profit on this account was $200 per month.
I don't like disgruntled merchants, and if I can throw a couple bucks at an issue to make it go away, I will. I consider this a value added service."
While this is an unusual situation, it shows that deal breakers will pop up throughout all merchant relationships. AMSProcessing knew he could give away a percentage of his profitability to create a customer for life.
It all starts by understanding when to draw the line. Most of us who have been in the industry a while know from experience that walking away from an over-demanding merchant is better than lowering your standards to write a deal and earn upfront income.
While we own and operate our own ISO, the prospect we are in front of usually has no idea we are the final decision makers.
When a merchant makes a demand that we are not comfortable with, we allow ourselves the flexibility to say we will ask the boss and get back to them with a response.
This ability to buy time is often more valuable than the perception of authority as the owner or president of your company. It is why none of our business cards have titles on them.
Over time and through experience, determine what your deal breakers are, and stick to them. Understand what your processor's deal breakers are, and respect them.
Discern the root cause of merchant demands, and assess the validity of their requests. Maybe they are being unreasonable, or maybe they have helped you identify a weakness in your organization.
Merchants will respect honesty and a hard-line approach when they understand your position. By respecting your processor's limitations, you will have more leverage should you ever need them to help you go beyond those limitations. Pick your battles wisely, and always remember your time and service are valuable.
Jon Perry and Vanessa Lang are the owners of Merchant Services Inc., an ISO based in Fort Worth, Texas. 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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