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Table of Contents

Lead Story

Online networking has come of age: Is your next sale a mouse-click away?

News

Industry Update

East Coast cabbies "walk" over payment requirements

Visa says upgrade or pay

Fair Isaac and NYCE tag team against data thieves

Mercator weighs upstart payment options

Help someone soar on NAOPP's board

2007 & 2008 calendar of events

Features

GS Advisory Board:
Unsettled economic times - boon or bust? Part I

Advanced-function ATMs register on college campuses

Bill Yackey
ATMmarketplace.com

Views

A quick test to up your ethics quotient - and profits

Steve Schwimmer
Renaissance Merchant Services

Fewer checks, faster process

Patti Murphy
The Takoma Group

Education

Street SmartsSM:
Would you rather have a boss or be your boss?

Dee Karawadra
Impact PaySystem

Time's up for one cash advance patent

Adam Atlas
Attorney at Law

Raising the green bar: EV SSL

Mike Petitti
Trustwave

Think negative

Nancy Drexler
Marketing Moguls

Merchant account fees demystified

Jason Felts
Advanced Merchant Services Inc.

Company Profile

YourTownMall Business

New Products

Secure customer data by not storing it

MES e-Commerce Payment Gateway and MES Virtual Terminals
Merchant e-Solutions

Virtual assistant for real biz travel

Verbal Expense Tracking
Virtual Management Inc.

Inspiration

Congrats, you're an expert

Departments

Forum

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

September 24, 2007  •  Issue 07:09:02

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Street SmartsSM

Would you rather have a boss or be your boss?

By Dee Karawadra

As I was contemplating a topic for this article, I read a post by joeychicago on GS Online's MLS Forum. He had worked at a company with a branch in Chicago. Allegedly his employer closed the office, laid off the staff and cut off everyone's residuals.

Joeychicago asked the MLS Forum for advice. He came to the right place. The scenario he described is one with which veteran merchant level salespeople (MLSs) are all too familiar.

Several companies were interested in him. Few of them wanted to bring him on as an employee; many wanted him to work as an independent contractor. He wanted to know which arrangement would be best.

As stated in "1099 or W-2: What's right for you?" The Green Sheet, Feb. 12, 2007, issue 07:02:01, "Income received as an employee is reported at year's end on a W-2 form, and employers withhold taxes, submitting the funds on behalf of employees to the appropriate governmental agencies. Independent contractor income is reported on a 1099 form, and contractors are responsible for making their own estimated quarterly tax payments."

Many in our industry have had to decide between employee and independent contractor status. I still sometimes think about the headaches of owning an ISO and, for a very brief moment, wonder if I would be better off working for someone else.

MLSs can be employees or independent contractors. So, what are the advantages and disadvantages to being an independent contractor versus an employee?

Fast Transact Inc.'s Anna Solomon said, "I can tell you from experience with this over the last six years, it's 50/50. Some like the security and perform with a guaranteed base that covers their bills and a residual split that gives them their play money. Others use it as a springboard to launch themselves onto higher planes. Both have benefits."

Anna could not have said it better. Whether to be an employee or independent contractor depends on an individual's goals. MLSs must consider whether they are making decisions based on their short-term or long-term goals. It is important to consider both before making a decision.

Take a moment and write down your short-term and long-term goals. Is there a way to meet both types of goals with one partner relationship? You deserve a partner that will try to accommodate both.

For example, I have an agent who was having financial problems. He was going through a divorce and needed the security of a predictable income. I asked him to write down for me his short-term and long-term goals for his career in this industry.

I found that he needed a set income for six months. However, his long-term goal was to build residual income and form his own ISO. I evaluated the portfolio he had with me and came up with a plan to get him through the next six months.

I was willing to pay him a base for that period. In turn, we lowered his residual percentage for the term and set a monthly quota for him to meet. It was a win/win solution.

When the six months was up, he had built his merchant base considerably because he met his quota each month, and his residuals almost doubled when we reinstated his residual percentage. He could now live on his residuals and no longer needed a base salary.

Perhaps you are not interested in becoming an ISO or even owning your own merchant portfolio. Maybe you are looking for a "job" and the benefits of one. In this case, you would not benefit from being an independent contractor.

Most MLSs work as independent contractors on a commission-only basis, which can be very challenging. In this type of position, it takes someone months to build up residuals, leaving the MLS without funds to live on at first. If you are not prepared for this, it can be very stressful and sometimes paralyzing.

Securing an employee position can alleviate some of these concerns. Normally, being an employee means you are paid a base salary and a small commission. Because of the base salary, you are given a monthly sales quota.

If you do become an employee, make sure your quota is realistic. Also, make sure the penalties for not meeting the quota are clear. The last thing you want is to miss your quota and then be surprised when you don't get paid.

Also, make sure you don't get shell-shocked like joeychicago did when he lost both his job and his residuals.

Michael Cheong, known to the forum as MichaelC, listed a few more pros to being an employee:

  1. Steady pay even when sales results fluctuate
  2. A team or department to share problem solving
  3. Better benefits than independent contractors receive.

MichaelC's list _ coupled with training, a shoulder to cry on and a drill sergeant to keep you on your toes _ doesn't sound too bad. Being an independent contractor means putting your time in. After about a year, independent MLSs can see the fruits of their labor. It takes time and patience.

The entrepreneurial spirit is a must if you are going to follow the independent contractor route. Just like an entrepreneur, you have to be disciplined, self-motivated and creative. The rewards? Nobody to boss you around, no quotas, and no more Monday morning meetings.

As David Hanlin, Slick Streetman on the MLS Forum, put it, "Freedom, freedom, freedom, Baby. What could possibly be more important than that?" So, is it more appealing to be an independent contractor or an employee? As an MLS, you can have it either way. Which route will help you succeed?

Safari njema: Safe journey

Dee Karawadra is the founder, Chief Executive Officer and President of Impact PaySystem, based in Memphis, Tenn. He and his team have a wealth of knowledge on the merchant services industry, with a niche in the petroleum market. Dee's experience on the street as an agent has guided him in laying a foundation for an agent program that is both straightforward and lucrative for his agents. Contact him at 877-251-0778 or dee@impactpaysystem.com.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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