ach day, my phone rings with questions from ISOs and merchant level salespeople (MLSs), new and experienced. They want answers on how the industry works, how they can be profitable (or more profitable) and the types of businesses on which they should focus. This article provides answers to some of those questions.

First, a note about profitability: If you aren't generating the margins I talk about in this piece, and you feel you are pricing your merchants correctly, ask your current partner for a better pricing deal or look elsewhere. After all, a lot of people make a nice living in this industry ... so why shouldn't you?

What types of accounts should I target?

There really is no right or wrong answer. Much depends on your business model, assuming you have one, and the maturity of your current portfolio. Keep in mind that large-volume accounts can be tougher to land and will require more time, resources, meetings, presentations, etc.

Don't be disillusioned. It's not unusual for one of these negotiations to drag on for months.

In the meantime, you need to be out looking for ordinary merchants, those whom you are able to close with only one or two visits. Signing 12 to 15 of these accounts per month, every month, will quickly build your portfolio. This should get you more than $5,000 per month in residual income after 12 months (based on average merchant figures of $8,000 per month and a 45 basis-point spread, which I'll explain shortly).

Building your portfolio this way will allow you time to go after large-volume accounts in a relaxed, professional manner.

Should I even bother with very small merchants?

Why not? Small-volume merchants often take up a lot of your energy, but over time they may become big merchants. Servicing the small guy can also lead to referrals for other, larger merchants. Targeting very small merchants might not make sense to you, but don't turn them away when given the opportunity. It only takes one of these to lead you to a biggie.

How much should I be making per account?

Again, the answer depends on what works for you. The most successful agents/offices seem to have one thing in common: They know how much they want to make on every account in dollars or in basis points. Consider the margin, or basis-point spread, when soliciting an account or evaluating your portfolio. You are in good shape if you are making a minimum of 45 basis points.

How can I figure out my basis point spread?

Basis point spread is your residual divided by merchant volume. For example, if your residual is $4,500 per month, and the total merchant volume is $1 million, your spread is 45 basis points for that month (4,500 ö 1 million = 0.0045).

If you are not averaging 45 basis points, you are either not charging enough or, more likely, you need to reevaluate your pricing program. It's not uncommon to find ISO/MLS portfolios averaging 60 basis points or more.

How do I get 45 basis points on a competitively priced, large-volume merchant?

Often you can't. If you're in talks with a merchant who has a volume of $500,000 per month, chances are the merchant already has decent pricing. If you want the business, you might need to price it at the level where you get 15 basis points, for example. Fifteen basis points on $500,000 equates to $750.

Is that enough? Only you can answer that question. Look to average 45 basis points across your entire portfolio. Then you will be able to go lower for large-volume accounts, which generate much more income due to their volume.

Conversely, some low-volume merchants generate 60 basis points or more per month. But a merchant processing $8,000 per month and generating 60 basis points in revenue nets you $48. And if you're getting that, then you're getting what you deserve.

Tom Della Badia is Vice President of Sales at IRN Payment Systems. IRN has provided electronic payment processing solutions through its PartnerAmerica program to businesses nationwide for over 18 years. Services include credit card and check/debit processing for merchants, retailers, manufacturers, distributors and wholesalers of all sizes, from individual facilities to multiple and chain operations. For more information, call Della Badia at 800-366-1388, ext. 210, or visit www.partner-america.com