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Are your merchant Is every account you have in your portfolio valuable? I
would say not. Thinking about the overall course of your
accounts valued and career, I would surmise you have boarded some merchants
you would just prefer to not have signed. Is that true? How
much can you afford to spend on customer acquisition?
valuable? What's your budget? Have you run profit and loss
statements on a monthly and yearly basis to understand
these economics?
By Jeffrey Shavitz
Charge Card Systems Inc. Given some of the recent news of Super ISOs and ISOs
going bankrupt and out-of-business, it is critical that an
ISO business owner and sales partners understand what is
reviously, in "Acquiring merchants – at what good business for both ISOs and MLSs.
cost?" (The Green Sheet, June 13, 2011, issue
13:06:01), I discussed what it costs to acquire a ISOs and MLSs must both benefit
P merchant account – a question that, based on
the feedback I received, was not being truly quantified by Good business is good for both parties, and although
many ISOs and merchant level salespeople (MLSs). MLSs always want the best split in their favor, it's virtually
impossible for an ISO to pay out a 90/10 split, include
I am now interested in exploring what constitutes a "valued a free terminal and provide an upfront bonus. I was an
and valuable merchant." There are many ways to define economics major, but even an eighth grade student can
these words. Do they pertain to the monthly residual, the figure out that the math just doesn't work.
time it took to earn the account, the aggravation factor of
merchants who place numerous customer service calls, Many processing partners haven't answered questions to
problems in working with the agent who helped win the ascertain the real value of merchants in their portfolios
account, etc.? I think you get the point. because, if they had, they would have realized certain
merchants aren't adding incremental value for their
companies when it takes a certain number of months to
Some accounts provide zero value
just break even (and I would argue that on small deals
As our world becomes more transparent through at interchange-plus pricing they may never break even),
technology, and our prospecting and time management regardless of the equity value.
tools grow more efficient, the value of a merchant account
can and should be determined before initiating any sales With regard to MLS customer acquisition, how much
and marketing plans. can you afford to spend to acquire a new customer? The
answer lies in understanding your lifetime customer value
Given the competition in the merchant processing (LCV).
industry (you'll likely agree it feels like everyone we meet
is somehow involved in the merchant processing space), What is your profit or residual on a particular merchant?
why would you spend your precious time prospecting a We are for-profit companies and deserve to make money.
merchant vertical niche if there were basically no margin I'm shocked at how frequently I witness salespeople
left to earn profit and provide value for your hard work. working so hard to write a $5,000 per month merchant at
interchange plus 10 basis points. Use your time properly,
Some accounts are not valuable. What a novel concept – and make sure you are being compensated for your efforts.
and probably antithetical to most salespeople's thinking.
(I love when I speak with professional businesspeople who Once you know what constitutes a valued and valuable
understand this and know the market they want to own merchant and have calculated the LCV, you will not only
– it could be based on geography, industry classification, determine what you can afford to spend on sales and
monthly sales volume, etc.) marketing, but you will also be positioned to more easily
identify other issues affecting your business practices.
How much can you afford?
Jeffrey Shavitz is a founder of Charge Card Systems Inc., a divi-
Hundreds of metrics can be used, but ask yourself – do sion of Card Connect, a nationwide leader in merchant services
you really have a vision or mission statement for how you offering a full suite of products and 12-hour funding. Mr. Shavitz
"go to market"? Many MLSs I have met and speak with is an active member of The Green Sheet Advisory Board, a con-
daily do not. Remember, luck does not determine how to tributing writer and the First Data ISO Advisory Board. He can be
become successful in our industry. reached at jshavitz@chargecardsystems.com or 800-878-4100.

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