t's been a turbulent decade in the payments industry, and ISOs and merchant level salespeople (MLSs) have been on the front line as each challenge has emerged.

As the dollar value of credit and debit card payments has skyrocketed, it is now rare to find an established merchant who doesn't have credit card processing of some sort. Rapid technological changes have made it nearly a full-time job to stay abreast of the myriad alternatives in our ever-changing market.

And one of the latest industry developments - free equipment - has changed the financial landscape for MLSs. There's more opportunity, perhaps, but it's more elusive.

To remain successful, established agents have embraced change with agility. But what have these changes meant to those entering the field, those who are without a steady base of residuals to cushion the industry's inevitable bumps and sharp turns? And what has it meant to ISOs trying to recruit and retain quality agents?

The necessary nest egg

According to Sam Chanin, Chief Executive Officer of Business Payment Systems, many new agents without cash reserves to cover living expenses while they build their client base simply don't make it. "Of the agents we hire, only about 20% survive, and 20% of those actually are successful," he said. "And we don't have a free terminal program; that's not the way we do business.

"We've had success with the very young, say 18 to 21 years old, who are still living at home and so can afford to go a month or two without an income; and older people who are retired or who already have another job, especially if they are already selling to the same kind of merchant; ... or perhaps insurance agents who understand the concept of residuals."

Oscar H. Barry, an independent rep with BPS, is a case in point. He has been an MLS for just under a year and still has another full-time job. "The biggest problem is getting the time to get enough sales so that I don't need a second job," he said.

Barry has been successful, but he's not ready to give up the steady income and benefits of his other job. "My goal is to build enough business [so] that I can rep full time, but I think it may be another year or two yet," he said. "When I started I didn't know what I was doing, but I could see there was opportunity there. You don't need to be a big-time salesman. You just need to have the guts to walk in to a business and hear them say no."

Barry's goal is to build a residual base that will allow him and his wife to travel across the country full time in their fifth-wheel trailer.

"We love travel and we love camping, and with a solid residual base I could continue to sell from the road," he said. "But if you have a family or other commitments, it can be pretty hard to make it without a steady job, too. You need at least four months of nest egg to pursue a career in this field - at least."

Barry also noted that it's important to work with a reputable company. "I think it's a good idea to do a lot of research first and make sure you start with the kind of company you want to be with," he said.

MLS David Hanlin agreed. (He goes by Slick streetman on GS Online's MLS Forum.) "I didn't know beans about this whole arena when I started," he said.

"I started with what we'd now call an equipment slammer: a real slipshod company. It was all scare tactics and high pressure sales. I didn't know any better; I thought that was just the way this industry was.

"I was ready to get out of the industry altogether when I came across a legitimate company. That was when I started building my portfolio. I wish I'd discovered this industry years earlier; I love it."

The patience principle

It's common for a new rep in the industry to go six months or more before earning an income that meets living expenses. "The biggest barrier to making it in this business is getting over that hump the first year," Hanlin said. "That dry spell is hard. At times I had to borrow from my parents until I was up and running."

Kathy Harper, Director of the Merchants' TPS Georgia office, thinks free equipment programs can be problematic, especially for new MLSs.

"Quite honestly, I don't know how anyone could make it in this industry if they're going to focus on free equipment," she said. "With free equipment you can go after existing merchants easier, so the residuals build faster, but you'd have to have some other income. ... Even if you sold 10 merchants right out the gate and got a bonus for each of them, you wouldn't bring in that much."

Chanin said his most successful agents are those with patience. "This is not a get-rich-quick scheme," he said. "My first residual check was $7.87. But I stuck with it. At the end of the day, it does work and it works well. But it doesn't work fast."

Chris Perrine, an MLS, said the first six months to a year were his hardest. "I had savings and lived frugally, really frugally, for awhile," he said. "I had a small part-time job, and I just worked as hard as I could. I think of myself as more of a consultant to my merchants than just a salesman. And now I'm at the point where I'm getting referrals because of that.

"If you want to make it and do it right, you can't give up. Just when you want to give up is when it opens up for you, and I think some people quit too soon. The day when you could get in, make a fast buck in equipment sales and get out is over. I think that's a good thing."

Ed Freedman, President and CEO of Total Merchant Services Inc., concurred. "Those who are really successful are those who consider this a long-term business and who take care of their merchants," he said. "In the history of this industry the money was in equipment sales or leasing, and no one thought about long-term income potential.

"Now the focus is on building a portfolio with a recurring revenue base. The concept that it's a bad time to be an MLS is insane. In the history of the bankcard, there has never been a time when MLSs have been paid more."

The self-educated MLS

Successful agents typically are motivated to educate themselves. "It's really hard to do it all in the dark, and a lot of companies just toss you out there and you have to sink or swim," Hanlin said. "The Green Sheet was really helpful to me, and when I discovered The Green Sheet [MLS Forum] a whole new world opened up for me.

"It's a great way to find out who the best companies to sign with are: I wish I'd known about it when I first started; it could've saved me some headaches. The forum is like an extended family ... I've gotten great advice there about business, and I've gotten support when my father passed away and after our recent house fire. I can't say enough about [it]."

Barry pointed out that little coaching is available in the industry. "Everyone says just go out and get an application," he said. "What would really help would be an online or CD-based video showing a typical sales call or two so you could feel more comfortable on those first attempts."

Perrine thinks the initial learning curve is steep. "It's a huge amount of knowledge to absorb: regulations, technology, interchange, everything. And you need to understand it all to be successful.

"I read The Green Sheet every month. I read the book How to Survive and Thrive in the Merchant Services Industry by Marc J. Beauchamp and William Graham (Performance Training Systems, 2003). And I was fortunate enough to qualify for one of TMS' training seminars. It's a really good seminar. All of that helped a lot, but you're always learning."

Joe Creegan, National Sales Manager of Charge Card Systems Inc., has found that educated agents are more professional, and they get the higher-volume merchants. "Free terminals don't mean much to the higher-volume merchants," he said. "Most of them use computer systems, not terminals, anyway.

"Being proficient in interchange, in reading the merchants' statements, in being able to do a cost comparison analysis ... that means much more. Agents need to learn. They can read The Green Sheet; they can study their processors' pricing; and they should look to do business with ISOs who will give them the tools they need, because frankly, in the end, it is in everyone's best interest if ISOs provide the information agents need to do the job right."

The learning curve is steepest in the early months when many reps are working two jobs to make ends meet. "I've got a lot of part-time agents, and they make decent money," Chanin said. "But I don't think you can be really successful without really understanding the business. And understanding the business is not a part-time thing."

The bonus boost

Chanin thinks organizations can take steps to help new agents weather the early months. "I let my agents draw against their residuals for free up to five times if they commit to signing a couple more deals a month than their average," he said. "Sometimes that's what they need until they're making real money."

Hanlin cited companies like Heartland Payment Systems Inc. that offer a year of residuals upfront or offer signing bonuses as essential for agents starting out in this industry. TMS offers an initial signing or conversion bonus of $200 to $500 per merchant to help agents get over the start-up hurdle.

"I think in the beginning the free equipment programs were designed with established agents in mind," Freedman said. "They could land four times as many applications with these programs, and they already had established portfolios ... so the loss of upfront equipment money wasn't an issue."

It's more of an issue for MLSs just entering the industry, Freedman acknowledged, which is why TMS developed its signing bonus program. "It used to be you'd profit about $300 on equipment, so we designed our program to replicate the kind of upfront money you could get from equipment rentals just to [help agents] get by in the beginning," he said. "But the focus is where it should be, on building a portfolio with a long-term recurring revenue base."

Charge Card Systems also offers upfront conversion bonuses to agents even though it doesn't have a free terminal program. "We don't see any point in offering free equipment to mom-and-pop merchants who will do such a small volume that you never recover the costs," Creegan said.

"But we do offer equipment at very low cost, so the agents can mark it up, sell it, lease it or even offer it free to the merchants if they want to.

"They can supplement their income with equipment charges while they build their portfolio if they want, but they do get a signing bonus as well. We focus on large ($25,000 or more a month) merchants."

Some ISOs said free equipment programs make it impossible to recruit high-quality salespeople. They fear that the long start-up period diverts experienced salespeople to salaried jobs or to industries where commission checks roll in faster.

"I have noticed a trend toward ISOs creating salaried sales positions," Harper said. "That is probably a way for the ISO to recruit good salespeople, and it may be one way for someone who doesn't have a huge savings account to get into the industry."

While salaried positions offer security, many successful agents have an entrepreneurial spirit that chafes at not running their own show. "There were definitely times when a steady paycheck sounded appealing," Perrine said. "But I knew I wanted my own business, so I stuck it out."

And according to Freedman, opportunities abound for MLSs to earn significant long-term revenue. "The fast buck may be gone," he said. "But in the past 10 years, there has never been a better time to be an MLS than right now."