Understanding the Value of Your Merchant Residual Portfolio Companies purchasing merchant residual portfolios will pay handsomely...
Understanding your Residual Split
I would say nine out of ten agents I speak to in this industry do not fully understand how their residual split works. Don’t be one of these agents! Read these short tips to gain a better understanding of your residual split. How to Sell Merchant Services in 6 Steps If I could write […]
I would say nine out of ten agents I speak to in this industry do not fully understand how their residual split works. Don’t be one of these agents! Read these short tips to gain a better understanding of your residual split.
How to Sell Merchant Services in 6 Steps
If I could write an eBook knowing what I know today and then go back in time and deliver it to myself 10 years ago when I first got into this industry, this would be the one! CLICK HERE TO DOWNLOAD
1. Is your residual “life vested” or “owned for the life of the account?” Imagine how frustrated you would be if you sold for years and built up thousands of dollars per month in income only to learn that as soon as you stop selling for thirty days, three months, or six months your residual income will stop. I would say at least 60% of the agents in our industry have such a plan. DO NOT LET THIS HAPPEN TO YOURSELF!!!!! I have seen so many agents who take the larger split even though it isn’t life vested. They usually learn two things quickly:
First, they are building a job not a business, and it is a waste of time.
Second, they would be making more residual with a company that pays lifetime vested residuals anyway because of the lower cost structure. This is the future of your family’s financial success, so DO NOT GIVE YOUR PROCESSOR A PASS ON THIS!!! Ask them to walk you through your exit strategy. Here are some good questions to ask via email so you get a response in writing.
- “Let’s say I do this for a couple years and build up $2,000 per month in residual. Then I get into a car accident and can’t work anymore. Will I still get that $2,000 per month as long as my accounts stay active or does my residual depend on future performance?” (ask them to tell you where in your agent agreement this is discussed.)
- “What if I do this for five or ten years and build up, say, $6,000 per month in residual income. Then I decide to do something else. Do I still get my residual. If so, for how long?”
3. Cost Structure is more important than the percentage split. You will usually find the cost structure on the “Schedule A” from your processor. You need to know two things in order to calculate the best deal for yourself:
(1) Is it a true interchange pass through or do they add basis points before calculating profit? (called a bin sponsorship)
(2) What is the transaction fee cost? *Side note: if you are on a “Buy Rate” program, you are not getting the best deal. That is just the truth. If you have questions about it, give me a call or send me an email. I would be glad to give you a break down. Revenue share plans are always better than buy rate plans (with the right processor.) I actually saw a processor yesterday doing a buy rate for registered ISO’s; what a joke! If you are on one of these cost structures, get off and start building your income.
4. Cost structure, not pricing is the key to landing large accounts. If you want to land a large account, you need a low cost structure. Even if your current processor pays out 80% of the residual, but their cost per transaction is $0.06 or more, you will rarely land a large deal. Large accounts usually get a transaction fee of less than $0.06 which would put you in the negative. If selling large and multi-location businesses is a part of your business plan for the future, you need a partner with multiple platforms.
5. Lastly, remember that compensation and cost structure do not determine how much you make. The determining factor in how much you make is how many sales you get. Find a partner in this industry who will provide you the training, and technology resources you need! Without that, all the talk about compensation will be meaningless. 80% of $0.00 is the same as 50% of $0.00, and 80% residual on five sales per month is less than 50% residual on ten sales per month.
Make it a great day!
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