Secrets of Building a Successful ISO Archives

Overcoming Merchant Attrition

Posted on December 30, 2022December 30, 2022 by Elaina Smith

If you’re spending more time on new sales rather than supporting existing merchants, you might just be on a hamster wheel to nowhere.

With typical attrition rates hovering around 20%, that number can be almost impossible to overcome, even by the very best merchant services sales force.

What can you do about it?

The easiest and best place to start is choosing a processing partner that addresses these support areas well:

Access to right-fit products & solutions for the types of merchants you serve. What are the pain points your merchants experience, and who has the solutions that best address them?
Access to a self-service reporting platform that is easy to use and accurate.
Transparency delivered, not just talked about. If there’s an issue that affects merchants, do they own it or do they use the complexity of payments to hide behind it? When you want to dig deeper into the data for your merchants, do you have that information available?
Customer service requests like refunds and cancellations are handled fairly and quickly.

Also:

Reviewing merchant attrition should be an ongoing activity. What are their reasons for leaving? Do you see any trends? How can you address them?

The old adage is true ~ if you’re not growing, you’re dying. But don’t focus so much on bringing new business through the front door that you fail to see the back door swinging wide open.

How to Boost the Bottom Line of Your ISO

Posted on December 22, 2022December 22, 2022 by Elaina Smith

As you do year-end reviews and projections for the upcoming year, remember this and you’ll be 99% ahead of the rest:

Savings go to the bottom line just as easily as sales do.

Most ISOs are so hyper-focused on their sales engine that they neglect the operations back office. Spend a little time optimizing the back office and reap significant rewards in the new year.

Start with looking at how you can automate these functions:
✔️ Applications
✔️ Boarding
✔️ Deployment
✔️ Updates and tracking of updates like banking, demographics
✔️ Commission payouts for agents

Now your employees are free to do the things that make your business shine. Let automation handle everything that can be automated.

Then make sure you have these in place:
✔️ Margin reviews
✔️ Attrition reviews (how and why are you losing accounts and how do you stop the bleeding?)
✔️ Cost reviews. Find dead costs like fees on closed or inactive accounts. What operational costs can you optimize?
✔️ Customer acquisition reviews. What channels are working best and can be replicated? Which are duds and need to be cut?
✔️ Operational efficiency reviews. How effectively are you completing the tasks in my above list?

Now you’re not losing money on merchant services activities that add zero value.

If you’re an ISO and struggling with where to start, this is the secret sauce of Secure Bancard. We built our Pioneer platform for the kind of operational efficiency that’s listed above.

What’s the impact?
👉1/4 of the overhead of our competitors
👉10x the service

We’d love to dive in and show you how we’re able to share this efficiency with our sales partners. 🙌

How to Prevent Profit Leakage on Closed Merchants

Posted on October 13, 2022October 20, 2022 by Elaina Smith

It’s bad enough to lose a merchant in your portfolio, but it’s even worse when a closed merchant is COSTING you money.

Let’s do some review and cleanup and make sure you’re not losing money on closed merchants.

👉 Compare your processing billing detail against your active merchant list. Any unmatched merchants are likely closed and you’re probably paying a per-merchant-per-month fee for these closed merchants.
👉 Compare your gateway billing against your closed merchant list to be sure you’re not paying monthly fees for merchants who are no longer processing.
👉 Compare any third-party services where you pay per merchant account — PCI services, CRM, risk monitoring, etc.
👉 Did you deploy any equipment that has ongoing costs associated that flow through to you, even if the merchant no longer processes through you? Did you collect the equipment if it belongs to you?
👉 Are you losing money on closed merchants because you didn’t adequately reserve higher-risk accounts, and now you’re stuck paying their chargebacks and resulting fees? If so, it’s time to revisit your underwriting/reserve guidelines.

Now that you’ve completed the above and see how much money you’ve saved, formalize a merchant closing procedure so that you can prevent these costs in the first place.

Building Win/Win Compensation Plans for Agents

Posted on October 13, 2022October 21, 2022 by Elaina Smith

Sales offices seem to believe that the more complicated they make their compensation plan, the more attractive it will be to their agents.

This isn’t the best approach for a couple of reasons:

1️⃣ If you can’t systematically, accurately, and cost-effectively calculate downline residuals, your comp plan is flawed from the start. Remember that this activity is non-revenue generating. Do you want to spend too much time figuring out what’s already taken place or out driving more sales?
2️⃣ If your agents can’t easily recalculate their own compensation with what you’ve provided them, how can you expect them to trust you? A relationship without trust 👉 flawed.

We’ve seen simple comp plans work quite well. And it’s a win for both the sales office and its agents.

Before rolling out any new comp plan, first, ask yourself these two questions:
1️⃣ Can I automate this calculation and reporting?
2️⃣ Can I provide transparent reporting to all parties involved?

The winning plan is fully automated and provides complete transparency. And most importantly, all parties feel like they are receiving fair value in return for their contribution.

What is a Reasonable Acquisition Cost for Landing a New Merchant Services Customer?

Posted on October 13, 2022October 20, 2022 by Elaina Smith

Customer acquisition cost is the amount of money spent to acquire new merchant services clients. It can provide a lot of insight into the best way for ISOs and agents to spend their time and dollars on attracting new customers.

So, what is a reasonable customer acquisition cost when it comes to merchant services?

Well, like just about everything else in this world, it depends. But fortunately, with a little math, we can get closer to an answer for your specific situation.

First, you have to know your customer lifetime value. This is the amount you’ve earned for a single client over the course of your entire relationship with them. You can use averages here over a payments portfolio of business, but we’d highly recommend breaking these out based on similar merchant types since the margins can vary so widely.

You won’t earn the same amount on a restaurant client as you do on a B2B client, nor will you earn the same amount from a cash discount portfolio as you will an interchange plus one. The more specific you can get in your grouping, the more accurate you can be.

Now, subtract any direct costs of acquiring a single merchant account. If you always provide free equipment, use the typical amount you’d spend on a merchant in this type of portfolio. Again, more specific grouping leads to better results. A restaurant would need an expensive POS while a B2B client needs no equipment at all. If you provide an upfront signing bonus to agents, factor this in, too.

Next, we have to estimate what it costs us to support this business. I would recommend you come up with an operating expense % to apply. Take your operating expenses from your P&L and divide that total by your total residual income. Use amounts over an entire year to account for the cyclical nature of our business. Apply this percentage to the customer lifetime value.

For the sake of example:
Customer lifetime value: $2000 (100 months @ $20/month)
Upfront cost: $500 ($300 in equipment & $200 agent signing bonus)
Overhead applied: 10% ~ $200
Net: $1300

We could spend up to $1300 in customer acquisition costs and break-even, but let’s be real, NO ONE WANTS TO WORK FOR FREE.

And we should also plan for a little wiggle room for the unknown and unexpected.

So, a good starting point is 25-50% of this amount. Then you can adjust according to the trends and your comfort level.

Sometimes it can be hard to see money fly out the door on sales and marketing, but as long as you do the math and see positive ROI, you can increase your spend to drive more sales, and ultimately, more margin.

What is a Reasonable Customer Acquisition Cost for Merchant Services?

Posted on September 24, 2022November 7, 2022 by Elaina Smith

What is a reasonable customer acquisition cost in the land of merchant services?

Well, like just about everything else in this world, it depends. But fortunately, with a little math, we can get closer to an answer for your specific situation.

First, you have to know your customer lifetime value. This is the amount you’ve earned for a single client over the course of your entire relationship with them. You can use averages here over a payments portfolio of business, but we’d highly recommend breaking these out based on similar merchant types since the margins can vary so widely.

You won’t earn the same amount on a restaurant client as you do on a B2B client, nor will you earn the same amount from a cash discount portfolio as you will an interchange plus one. The more specific you can get in your grouping, the more accurate you can be.

Now, subtract any direct costs of acquiring a single merchant account. If you always provide free equipment, use the typical amount you’d spend on a merchant in this type of portfolio. Again, more specific grouping leads to better results. A restaurant would need an expensive POS while a B2B client needs no equipment at all. If you provide an upfront signing bonus to agents, factor this in, too.

Next, we have to estimate what it costs us to support this business. We would recommend you come up with an operating expense % to apply. Take your operating expenses from your P&L and divide that total by your total residual income. Use amounts over an entire year to account for the cyclical nature of our business. Apply this percentage to the customer lifetime value.

For the sake of example:
Customer lifetime value: $2000 (100 months @ $20/month)
Upfront cost: $500 ($300 in equipment & $200 agent signing bonus)
Overhead applied: 10% ~ $200
Net: $1300

You could spend up to $1300 in customer acquisition costs and break-even, but let’s be real, no one wants to work for free.

And we should also plan for a little wiggle room for the unknown and unexpected.

So, a good starting point is 25-50% of this amount. Then you can adjust according to the trends and your comfort level.

Sometimes it can be hard to see money fly out the door on sales and marketing, but as long as you do the math and see positive ROI, you can increase your spend to drive more sales, and ultimately, more margin.

How to Identify Your Best Performing Portfolios

Posted on September 24, 2022October 20, 2022 by Elaina Smith

While you juggle payments relationships, are you trying to figure out which ones outperform the others in margin?

This can be a difficult task.

All things the same— business type, pricing, and Schedule A, you will still likely see consistent differences in margin between relationships.

There are legitimate reasons for this— card mix accepted by the merchant, method of acceptance, etc. And then there are illegitimate reasons. 🚨🚨🚨

So how can you tell one from the other?

Here’s where you can start:
💡If you’re getting summary level residual reporting from your provider, ask for more specifics— Interchange breakdown, assessment detail, etc. If they don’t have it or won’t give it to you, alarm bells should be going off. 🚩🚩🚩This is the most common place I’ve seen providers tweaking numbers for their own benefit.
💡Periodically recalculate the costs they’ve charged against your Schedule A to be sure they are accurately calculating them.
💡Compare merchant statements to the same items on your residuals— income, interchange, etc. to ensure accuracy.
💡Avoid relationships that offer a big front-end incentive. There’s a reason they’re willing to pay you upfront, and it’s not to your benefit.
💡Compare residual income as a percentage of billed fees on different providers every month to see where you’re outperforming others. It’s important that you’re comparing similar business types here. Review the data and watch for consistent trends.

Find a provider you can trust, but verify.

Many of our partners tell us that even though they think they have better pricing elsewhere, they see better margins with us. That is the power of transparency and accuracy.

Dig into the data and go get the income that’s yours.

What’s Considered a Fair Revenue Share in Merchant Services?

Posted on September 24, 2022November 9, 2022 by Elaina Smith

What is considered a fair revenue share on merchant residuals?

There’s no hard and fast formula. But consider revenue share a sliding scale that depends on these factors:

👉 The amount of training you need
👉 The amount of support the ISO provides to your merchants. A referral arrangement where you simply hand off leads will earn less than one where you provide ongoing service/support to merchants.
👉 The amount of liability the ISO is taking on your behalf. Low risk/card present payments portfolios have higher revenue shares than high risk ones.
👉 Your proximity to the processor. The closer you are to the party actually processing transactions, the more revenue share. If you’re an agent sending business to an ISO that sends it to another ISO, you’re getting a split of a split. There’s nothing wrong with this as they are likely providing support or resources not available to you closer to the processor. Just know where you stand and the parties involved.
👉 The number of freebies you receive. Getting free equipment? That’s fine, but understand it’s baked into the cost of your agreement.
👉 Access to proprietary software or technology.

What’s “fair?”
⚖️ The arrangement where both parties feel it is a mutually beneficial arrangement with potential for growth.

Homework assignment:
📝 Check your existing agreements to be sure you’re earning revenue share on every item billed. This is a common margin buster for sales agents/offices.

Streamline Merchant Onboarding

Posted on September 24, 2022September 24, 2022 by Elaina Smith

What is one of the worst habits we see in merchant services? Rekeying application data over and over.

Why is this so bad? We’ll get to that in a second, but first let’s cover how it happens.

Agent collects information from the small business in the field.
Agent submits to their ISO.
ISO keys into their own CRM.
ISO keys into their processing relationship as well as any additional services like gateways.

This is:
❌ Inefficient
❌ Prone to error
❌ Often not very secure. Personal identifiable information is included here.

When is the last time you revisited your application process to eliminate redundancy and human error? Here are some tools you might deploy to tighten it up:
🔨API between interfacing applications, both internal and external, to eliminate rekeying.
🪚 Online application so that the merchant enters their own information, which feeds to your internal systems
🪛Data filters and rules to ensure validity of information collected (for example, routing number is 9 digits with valid check digit)

Yes, these things take time to implement but you’ll see a positive ROI shortly thereafter.

Plus, if you’ve ever boarded an account only to have the merchant’s first deposit bounce due to someone miskeying the account number, you might be highly motivated to make a change. That’s not exactly the best first impression.

How to Choose New Processing Relationships

Posted on September 24, 2022September 24, 2022 by Elaina Smith

When you’re shopping for a new home to place your merchant services business, what exactly should you be looking for?

There’s a long list of considerations. And not every provider will check every box in the same way.

So it’s important that you set priorities and try to find the provider that most closely meets your most important criteria.

For example, if you’re looking for lots of training and support, you’re probably going to have to sacrifice some revenue share compared to another provider that doesn’t do this.

One of the most important things you can do? Make sure their goals align with your goals.

☑️ Are they looking to exit in the near future?
☑️ In what ways are they reinvesting in their own business?
☑️ How do their partners/agents fit into the picture and what value do they place on them?