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How Much Should I Make Selling Merchant Services?
In order to understand compensation and account value in the merchant services business, there are two simple terms you must understand. #1 –...
Is Your Processor Playing Games with Your UpFront Bonus? – 5 Commission Traps Part 3
Your upfront bonus and the way it is paid out will dictate your personal cash flow as you start your credit card processing sales career. Read this article to learn the biggest up front bonus issues you will find in the merchant services industry.
James Shepherd
May 23, 2014
For 3 days in a row you have been out walking into businesses with little interest. Finally, you meet a business owner that connects with you, she agrees to provide you with a statement and after 3 return visits you finally get the statement. 2 days later you come back and close the sale. You spend an hour making sure the paperwork is in order and faxing in the deal. Isn’t this enough work on your part to merit getting your full up front bonus?
Nope! Sorry, at many processors, you have to install the terminal, wait for them to process several hundred dollars to get your first up front bonus and then, even that bonus is only a portion of what you should get total. You then have to wait 30 to 90 days to get the rest of the money. I don’t believe it should be that way. As a sales partner, you work hard and you deserve to get paid. Here are the most common upfront bonus issues in our industry so you can ask your processor about them and avoid these cashflow killing compensation programs.
#3 – UpFront Bonus Games
- “Paid on Activation” – Let’s face it, there are finally enough processors that pay on approval that you should no longer accept “Paid on Activation.” This type of program means you have to wait till the merchant processes several hundred dollars before you get your upfront bonus. Instead, look for a processor that will provide “Paid on Approval” compensation which means you get paid the day after the sale is approved rather than the day after it “Activates.” This will help your cashflow in a big way and will put the risk of activation back on the processor giving them extra incentive to help you activate your deals.
- “True Up / Profit Review / Volume Bonuses” – As a sales partner in our industry, you will see ads all the time for programs that pay “Up to $800” or “Up to $1,000” or one I saw recently, “Up to $2,000 Per Sale” in upfront compensation. This is a gimmick, as this size bonus only pays out on a very small percentage of the deals. The way they work traditionally is that you must use certain minimum pricing guidelines to get the bonus which is not easy to do on large accounts that already have low pricing. Even if you do give them the correct pricing, you usually have to wait 30 to 90 days to get the full bonus and this doesn’t help you put gas in your car to keep prospecting. The reality is that most accounts only pays $200 or so up front, bringing the average up front pay out to less than $300 when free equipment is provided. The most important stat for upfront bonuses, is how much do I get paid on approval for the average deal after providing free equipment?
- No Free Terminal Placement Bonus – Most processors who have a good up front bonus and residual mix, penalize you for providing a free terminal. In other words, you make more money if you don’t provide a free terminal. This makes obvious financial sense for the processor since they don’t have to buy a terminal and I realize that I am just about on my own with this belief, but I really don’t think it is smart to reward sales people for not providing a free, upgraded terminal. To me it is obvious having spent hundreds of hours in the field personally that providing a free, pre-programmed terminal to every merchant creates the best experience for the client and allows the sales partner to move on to the next deal without spending two hours reprogram a 10 year old terminal.**For those of you still leasing terminals you are a couple steps away from this issue. First, you need to come to grips with the fact that the US market is now saturated with the free loaner terminal model so to sell or lease a terminal just doesn’t make sense anymore.
- Chargebacks and Profit Adjustments – Chargebacks will probably always be a part of our industry’s compensation at some level in order to discourage dishonest sales people from placing shady deals that will never activate. A chargeback is where you have to pay back your up front bonus if and when someone cancels during a certain time period. Most processors have either a 6, 12 or 18 month “Chargeback”, “BuyBack” or “Claw Back” period (it is called different things by different processors). I believe that once the sales partner makes a legitimate sale and activates it, they should keep their up front bonus but this is a tough pill to swallow financially for a processor. Other processors have a “Profit Adjustment” where even if the merchant remains active, you could end up paying back a portion of the bonus if the profit level is not where the processor wants it.
The reason I wanted to write this artile was simply to make sure you understand your compensation program. There are many different options and I don’t believe in a “One Size Fits All” approach but I do believe that you as a merchant services sales professional need to research your compensation program to ensure that your up front compensation will meet your short term cash flow needs.
Have a great day!
James Shepherd
Read previous post: Independent Sales Partners Are Not Robots
Read next post: How Important is a High Residual Split – 5 Commission Traps that are Costing You Money – Part 2
How important is a High Residual Split – 5 Commission Traps that are Costing You Money – Part 2
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