Many small business owners who still receive a paper statement have that statement mailed to or dropped off at their accountant’s office. They do...
How to Start and Run a Merchant Services Business
If you are thinking about starting and running a merchant services business, check out this post to learn the strategies for success.
#1 – Start by establishing your own portfolio and residual income stream. This is the toughest part in my opinion. When I came to the merchant services industry, I already had extensive experience in recruiting and training sales people and in running a business. This made it that much harder to work solo for a while to build up my own portfolio but I am sure glad I did! You need to establish the way that you want to do business in your local community before building your team so you can delegate a system of procedures rather than an idea.
#2 – Get a physical location. To me, this is a vital first step and in today’s real estate market, it can be relatively inexpensive. This will establish you as a true local business and make you more productive with a place to go to work. You don’t need a great retail type location, you just need an office in an office building. I recommend getting yourself a two room office. At one point I had 4 people working out of a two room office building before expanding into a larger location but having two rooms is important so one room can be for phone calls while the other room can be for admin tasks.
#3 – Use a CRM database from day 1 and build your email list! This could potentially be the most important tip I can give you. It is remarkably easy to get a team of reps going when you have 1,000 contacts in your local market and all you need to do is split them up by city and tell your reps to go follow up. I personally think you should have at least 1,000 contacts in a CRM and 300 email addresses before you hire your first local agent.
#4 – Develop your strategy. The financial side of building a strong merchant services business locally is based on a few core ideas. Here are some strategies for growing your local merchant services business:
Slow Growth / Low Risk: To make this strategy work, you should hire two types of people.
First is your part time contractors that are paid, not by the hour but by the job. Hire someone to do your installations and pay them per install. Hire someone to do your paperwork and pay them per sale they submit for you. This way, if you have a slow week, you do not go negative cash flow.
Secondly, your sales people would all be 100% commission. If you have a proven track record in sales management, this could be a great way to expand.
-Maximum Personal Productivity: This is a model that only a few reps have used that I know of but it is incredibly profitable and carries almost no risk. The basic idea is that you hire staff people to do everything but sell. You hire one person to start with that does your paperwork, installations and customer service. You can find someone for $10 to $12 per hour in most markets that will do a great job with the admin tasks and customer support with some training by you. Next you start to bring on some part time lead generators to make calls through your existing database and walk into businesses to make introductions and schedule meetings for you. They will work with your main admin person to do your schedule. If you are a top sales person, nothing beats this level of accountability and support from people who work for you. You will most likely double your sales with this model and only add about $3,000 per month to payroll. If you are making 10 sales month now, you could expect to reach 20 to 30 sales per month with this model, which will make up for the additional cost in up front bonuses while keeping 100% of the residuals.
-Fast Growth / High Risk: In this model you will be leveraging your portfolio with buyouts and loans in order to generate the cash flow to launch quickly or you will be investing your own capital. The two primary pillars of this model are paying your sales people more than just commission which gives you more control but, paying them less residual so you get a greater long term return on investment. The primary investment up front is lead generation and payroll.
#5 – Make Sales for Short Term Cash Flow Needs. Ironically, it is usually about the time that a sales rep has a full pipeline, great local connections and top tier sales skills that they want to stop selling and build a team. This is understandable but keep in mind that it is a slow process. You can’t stop selling all together unless you have a lot of money in the bank. I read a quote once that said in business you can sell your way out of almost any financial problem and that has proven true in my own local business many times. Once you have a team in place, your instinct is to sit in your office when you realize you are going to have a tight week financially or that payroll will be tough to meet. Resist this urge and go make some sales. You will probably find it remarkably easy to make sales at this point in your career. This will not only help generate cash but it will show your team that you still have what it takes to teach them.
#6 – Become the local business expert in your market. At this point, it is time to think seriously about how you are going to build your personal brand locally. Once you have 100 clients, think about hosting a small business seminar in your local market to educate them on Point of Sale Systems or Web Design. Leverage the resources you now have at your disposal to make more money from your connections. Don’t be afraid to step back in on a big deal or when one of your existing clients is interested in a more complex solution. These are the big opportunities where you will make most of your money early on while your residual builds up.I hope these tips help you build your local brand!Have a great weekend,