Edward Freedman Total Merchant Services Former CEO would like to share an aspen times article.

Basalt mulls its business climate

Merchants will meet Wednesday to discuss concerns and opportunities

Scott Condon
The Aspen Times
Aspen CO Colorado

There are mixed signals about the health of the downtown core and surrounding commercial area. Two high-profile businesses, Basalt Bike and Ski as well as Bristlecone Mountain Sports, left downtown sites to rent at Willits Town Center, the blossoming commercial area where Whole Foods Market opened last summer. In addition, Total Merchant Services, which helps companies process credit-card purchases, recently announced it will close its Basalt office on May 28. It employs 140 workers.

http://www.aspentimes.com/article/20130409/NEWS/130409851/1004/business01

Ed Freedman, Total Merchant Services, Basalt’s biggest employer to close

Total Merchant Services will lay off 123 workers, relocate 17 to L.A.

BASALT — Four months after a top executive at Total Merchant Services said the business had no intention of leaving Basalt, the town’s largest free-market employer announced Tuesday that it will pull out by May 28.

The privately held company said it is consolidating its operations at its Woodland Hills, Calif., location. The firm employs 140 workers in Basalt.

“There will be employee separations from today through May 28,” CEO Joe Kaplan said. The terminations will be scattered throughout that period, he said.

Some terminations and restructuring in November fueled rumors within the company and in Basalt that Total Merchant Services was leaving, but Ed Freedman, co-founder and chairman of the board of directors, said in November that Basalt was not facing a threat.

“Our expectation is to stay in the valley,” he said in November.

Workers remained uneasy. One former employee left one month ago for a different job in anticipation of Total Merchant Services closing its Basalt office.

“We all knew this was coming but they wouldn’t tell anybody,” the former worker said.

An employee who was released Tuesday and didn’t want to be identified said workers were expecting the closure but they were unaware of the timing.

“We’ve lost all of our income, every bit,” the employee said. “We will have to leave the area.”

The mood at the firm Tuesday morning was “somber, at best,” the source said.

Kaplan said the decision to consolidate was made “in the last few months” after consultations with business experts on the company’s direction.

“It wasn’t a plan, initially,” he said of moving from Basalt. “It was a really, really tough decision for us.” But it is also the best decision for the company and its long-term growth plan, he added.

Some employees were offered jobs in Woodland Hills, Kaplan said. He wouldn’t disclose the exact number but said it is in double digits. Some of them are accepting the positions. Other employees can apply for a transfer, and the company will assess their requests, he said.

A letter from Total Merchant Services to the town of Basalt says 123 positions will be eliminated in Basalt and 17 will be relocated.

All employees will remain on the payroll through May 28, Kaplan said. In addition, those released before then will receive a severance package that Kaplan declined to reveal. Those losing their jobs will also have access to a career counselor, he said.

An employee released Tuesday confirmed that there was a severance package that provides health insurance through May 28 and payment of accrued vacation time on that date.

Total Merchant Services describes itself as one of the fastest-growing credit-card merchant-account acquirers in the nation. Kaplan said the firm works on business solutions with companies and provides everything from customer service to risk analysis for its clients. Many of the employees in Basalt worked in customer service on the telephone with clients.

The company was founded in Philadelphia in 1996 by Ed and Matt Freedman and then relocated to Basalt in 1997. It has expanded numerous times and now leases about 22,100 square feet of commercial space in the Riverside Plaza near downtown Basalt, according to landlord Bob Ritchie.

Ritchie said Total Merchant Services outgrew the space and that the Freedmans acquired property at Glenwood Meadows in 2007 for an office and employee housing. The relocation fell through when the recession hit, he said.

While he was prepared for the company to relocate in 2007, its decision to leave Basalt comes as “a total surprise, actually, at this point,” Ritchie said. It has been an excellent tenant that grew from just 15 employees to about 200 at its height over 13 years, he said. The company’s experience shows that Basalt “is a place where you can build a national company,” Ritchie said.

Total Merchant Services spent a considerable amount of money for fiber-optic cable and high-speed Internet connections at the space. Ritchie said he has the flexibility to market the entire site for another high-tech incubator company or it can easily be divided into smaller sections.

Ritchie said the firm won’t have to break its lease to leave.

“They have a way to get out,” he said.

Workers were informed Tuesday morning about the decision to close the Basalt office, and some terminations were immediate, Kaplan said. While there had been rumors previously about the move, when the announcement was made, it still came as a shock for some employees, Kaplan acknowledged. He said the company is grateful for its Roaring Fork Valley employees, who played a big role in the company’s expansion.

He was uncertain how many employees live in Basalt and how many commute from other towns.

“We pull from all the way down to Rifle,” Kaplan said.

A terminated employee said the closure will hit the Glenwood Springs, New Castle and Silt areas harder than Basalt.

Basalt Mayor Jacque Whitsitt said the closure obviously will affect some Basalt families as well as businesses and restaurants where they dine and shop.

“I think everybody’s going to be sad to see them go,” she said. “I think in the long run, we’ll be fine. We have a lot of things in the hopper.” Whitsitt referred to other development proposals under review in and near downtown.

Town Manager Mike Scanlon said Total Merchant Services was a 24-hour operation, so some employees didn’t use services. In addition, a considerable but unknown number of employees commuted from out of town. Still, the loss will be felt.

“Everybody has to eat. Everybody has to buy gas,” Scanlon said.

He believes the departure is more a product of the company growing rather than Basalt being unsuitable as a place for business. The company can tap into a larger employee pool in the Los Angeles area simply as a function of its size, he said.

scondon@aspentimes.com

He Always Keeps the Window of Opportunity Open

He Always Keeps the Window of Opportunity Open

T otal Merchant Services is a stellar example of how wide a window can open when a door closes. Its founder and President/CEO, Ed Freedman, saw opportunity through that window and plotted a course that has enabled Total Merchant Services to successfully sail through the payment-processing seas.

Founded in 1996, Colorado-based Total Merchant Services is a credit card merchant account acquirer that puts ISO peace of mind at its helm. Its captain started out in the bankcard business working for other ISOs and was told that the way to make money was through selling and leasing terminals. Through business seminars and research, however, Freedman determined the money was in processing.

“Would the ISOs share that revenue with me? No way,” says Freedman. “That door was shut. So I decided to start a company and get a direct relationship with a bank and a processor. I started talking to other agents, pooling other salespeople together who also felt they were being cheated and wanted to share in the revenue.”

With a business philosophy centered on forming a consortium of independent salespeople sharing in revenue associated with merchant acquiring, Total Merchant Services was created.

“We offered a package of ownership to the common sales guy,” says Freedman. “Being a salesman myself, I knew someone had to underwrite and deploy, do risk management while the agents sold. So I set up the back office for support services and let our sales guys focus on selling. We helped other people get out of selling equipment and get into sharing in revenue.”

That model has translated into a core competency focused on a comprehensive sales and marketing training program, a robust risk-management system and an aggressive underwriting policy.

“We are able to approve accounts no other company can,” says Freedman. “The key to success is writing merchants and not take losses on them.”

In addition to Total Merchant Services’ risk-management, sales and marketing programs, Freedman lists technology, online application capabilities and its unique training program as clear-cut differentiators. “We offer a free three-day training event that includes airfare, hotel and food,” says Freedman. “We want to make it easy not only for them to get to know us but for us to get to know them.”

TMS also offers a free Web site to its agents that includes an affiliate marketing software package, affiliate tracing software and other goodies. “No one else offers free copies of Authorize.Net or VeriSign, the two leading gateways,” says Freedman. “We do.” Freedman believes these offerings will attract the sales professionals who want it all. “This is very competitive market,” Freedman says. “If you are an independent and you investigate our programs, I think you’ll see ours stands out from all the others from both a contract and a financial standpoint.” Already, more than 200 ISOs have boarded Total Merchant Services.

TMS provides for a lucrative compensation plan. In fact, Freedman boasts that his CHOICE program is the most lucrative compensation plan in the country, though he’s quick to emphasize that’s not the only reason to do business with Total Merchant Services.

TMS’s CHOICE program allows agents to select, on a merchant-by-merchant basis, either a revenue-sharing program or a buy-rate program. The reason behind this dual offering: TMS wants ISOs to maximize earnings without having to work with more than one provider.

“I always explain that the key to success is getting an agreement that protects you against losing your monthly residual commissions,” Freedman says. “Our sales partners are protected from ever losing their residual commissions. Our agreement has no liability for merchant losses and has no exclusivity requirements. Smart sales professionals are figuring out, oftentimes the hard way, that their agreement for residual income will be the determining factor as to whether they will be able to survive in this great business.”

According to Freedman, the target market for this great business is across-the-board merchants, though TMS’s main success has been with small to midsize merchants. At present, more than 15,000 merchants are aboard with TMS.

Since Total Merchant Services sees two emerging markets – wireless processing and government card processing – its hottest products and services currently focus on them. The demand is huge for its Internet commerce solution, a solution that provides for automatic approval and online application process.

“We offer a fast and easy enrollment,” says Freedman. “It takes 24 hours for completion from the time the ISO submits the app. If they don’t get it back in 24 hours, it’s their fault, not ours.”

Freedman continues, “Our wireless processing is flexible, reliable – meaning it works. That’s key. A lot of companies offer solutions that aren’t working. We also support it.”

Partnerships and alliances are also key to Total Merchant Services’ success. Consider the companies TMS has inked deals with:

It is a Member Service Provider (MSP) of HSBC Bank. For back-end settlement of merchants’ daily and monthly transactions, and for chargeback and retrieval processing, Total Merchant Services works with Global Payments. Total Merchant Services also works with a number of front-end authorization networks, including NDC East, NDC Central, NDC West, VisaNet and Paymentech.

As mentioned above, for Internet merchant accounts TMS is hooked up with several Internet gateway providers, including VeriSign, Authorize.Net and Plug ‘n Pay Technologies Inc. For wireless merchants, TMS works with the leading wireless service providers, including Cingular (RAM network) and U.S. Wireless Data (CDPD and Motient networks).

“We’ve been through a minefield of vendors in the past,” says Freedman. “Our partners are the main differentiator factor. We’ve pooled together such a high level of service from the vendors we now work with.”

Another high level of service that TMS is proud of is its agent support. Six months ago, the entire Total Merchant Services staff of 40 moved to a new 10,000-square-foot, state-of-the-art office space to support its sales partners. “In our corporate offices in Colorado, that’s all we do,” says Freedman. “For merchant support, we outsource to Global.”

Through TMS’s sales-partner portal, its agents get real-time Internet access to all of their account data. They then can log onto a Web-based portal and view anything TMS’s internal staff sees.

“Our agents can view not only the status of their accounts but can look at compensation, merchant notes, etc.,” Freedman says. “Here’s a huge ability for them to review their accounts at any time.” What does TMS look for in its agents? “We look for people that are honest not just with us but also with the merchant,” says Freedman. “Size doesn’t matter, but quality does. How do you represent Total Merchant Services, how do you service your customers – that matters to me. They are the front line of Total Merchant Services. Our reputation gets built by them.”

Which is probably the reason TMS provides good pricing, good support, solid communication, free three-day training, manuals, marketing materials, brochures, videos, letterhead, business cards and the ability to customize Web sites with the agent’s name, address and phone.

It would appear that Total Merchant Services is shipshape, ready to face any storm. So where is its biggest challenge? According to Freedman, it’s the commitment to continue to grow the business, continue to develop relationships with good ISOs and continue to get its message out.

“From a challenge standpoint, we need to do more of the same,” says Freedman. “The hardest thing is the day-to-day grind, to be able to sit down and do this every day … to scale up the model.”

Freedman anticipates that Total Merchant Services will triple in size within the next two to three years, especially in light of the strong infrastructure that is already in place. “We all know that if you build it, they will come. Well, we’ve built it,” says Freedman. “We are a flagship company in the ISO world, not just for offering the best compensation but because we treat people fairly. That’s been our mission – i.e., protecting their rights and ownership in their contracts.”

Freedman also anticipates that the industry will change as well within the next few years. “Through a lot of pressure, the industry is cleaning up its act,” he says. “Five years from now, you won’t hear about bad ISOs. We will be considered an industry where there are only good ISOs.

“Anybody who is not taking a proactive approach in cleaning up this business won’t be in this business. We must be responsible not only for services delivered to merchants but what their reps are saying out on the street. The ones who do it will be the leaders in this business.” Total Merchant Services is banking on being one of those leaders.

And toward that end, Freedman extends a special message to the industry: “I would like to encourage anyone interested in developing a long-term relationship to call me personally. I want them to know me personally. Not a lot of company presidents’ phone lines are open – mine always is.”

Total Merchant Services ISO contact: Ed Freedman, President/CEO Phone: 1-888-84-TOTAL, ext. 314 E-mail:ed@totalmerchantservices.com

Company address: 255 Gold Rivers Road Basalt, CO 81621 Phone: 1-888-84-TOTAL Web site: www.totalmerchantservices.com

ISO benefits: • Business philosophy centers on forming a consortium of independent salespeople sharing in revenue associated with merchant acquiring. • Offers free copies of Authorize.Net or VeriSign. • CHOICE program allows agents to select, on a merchant-by-merchant basis, either a revenue-sharing program or a buy-rate program. • Outstanding agent support. • Free three-day training, manuals, marketing materials, brochures, videos, letterhead, business cards and the ability to customize Web sites with the agent’s name, address and phone.

He Always Keeps the Window of Opportunity Open

He Always Keeps the Window of Opportunity Open

T otal Merchant Services is a stellar example of how wide a window can open when a door closes. Its founder and President/CEO, Ed Freedman, saw opportunity through that window and plotted a course that has enabled Total Merchant Services to successfully sail through the payment-processing seas.

Founded in 1996, Colorado-based Total Merchant Services is a credit card merchant account acquirer that puts ISO peace of mind at its helm. Its captain started out in the bankcard business working for other ISOs and was told that the way to make money was through selling and leasing terminals. Through business seminars and research, however, Freedman determined the money was in processing.

“Would the ISOs share that revenue with me? No way,” says Freedman. “That door was shut. So I decided to start a company and get a direct relationship with a bank and a processor. I started talking to other agents, pooling other salespeople together who also felt they were being cheated and wanted to share in the revenue.”

With a business philosophy centered on forming a consortium of independent salespeople sharing in revenue associated with merchant acquiring, Total Merchant Services was created.

“We offered a package of ownership to the common sales guy,” says Freedman. “Being a salesman myself, I knew someone had to underwrite and deploy, do risk management while the agents sold. So I set up the back office for support services and let our sales guys focus on selling. We helped other people get out of selling equipment and get into sharing in revenue.”

That model has translated into a core competency focused on a comprehensive sales and marketing training program, a robust risk-management system and an aggressive underwriting policy.

“We are able to approve accounts no other company can,” says Freedman. “The key to success is writing merchants and not take losses on them.”

In addition to Total Merchant Services’ risk-management, sales and marketing programs, Freedman lists technology, online application capabilities and its unique training program as clear-cut differentiators. “We offer a free three-day training event that includes airfare, hotel and food,” says Freedman. “We want to make it easy not only for them to get to know us but for us to get to know them.”

TMS also offers a free Web site to its agents that includes an affiliate marketing software package, affiliate tracing software and other goodies. “No one else offers free copies of Authorize.Net or VeriSign, the two leading gateways,” says Freedman. “We do.” Freedman believes these offerings will attract the sales professionals who want it all. “This is very competitive market,” Freedman says. “If you are an independent and you investigate our programs, I think you’ll see ours stands out from all the others from both a contract and a financial standpoint.” Already, more than 200 ISOs have boarded Total Merchant Services.

TMS provides for a lucrative compensation plan. In fact, Freedman boasts that his CHOICE program is the most lucrative compensation plan in the country, though he’s quick to emphasize that’s not the only reason to do business with Total Merchant Services.

TMS’s CHOICE program allows agents to select, on a merchant-by-merchant basis, either a revenue-sharing program or a buy-rate program. The reason behind this dual offering: TMS wants ISOs to maximize earnings without having to work with more than one provider.

“I always explain that the key to success is getting an agreement that protects you against losing your monthly residual commissions,” Freedman says. “Our sales partners are protected from ever losing their residual commissions. Our agreement has no liability for merchant losses and has no exclusivity requirements. Smart sales professionals are figuring out, oftentimes the hard way, that their agreement for residual income will be the determining factor as to whether they will be able to survive in this great business.”

According to Freedman, the target market for this great business is across-the-board merchants, though TMS’s main success has been with small to midsize merchants. At present, more than 15,000 merchants are aboard with TMS.

Since Total Merchant Services sees two emerging markets – wireless processing and government card processing – its hottest products and services currently focus on them. The demand is huge for its Internet commerce solution, a solution that provides for automatic approval and online application process.

“We offer a fast and easy enrollment,” says Freedman. “It takes 24 hours for completion from the time the ISO submits the app. If they don’t get it back in 24 hours, it’s their fault, not ours.”

Freedman continues, “Our wireless processing is flexible, reliable – meaning it works. That’s key. A lot of companies offer solutions that aren’t working. We also support it.”

Partnerships and alliances are also key to Total Merchant Services’ success. Consider the companies TMS has inked deals with:

It is a Member Service Provider (MSP) of HSBC Bank. For back-end settlement of merchants’ daily and monthly transactions, and for chargeback and retrieval processing, Total Merchant Services works with Global Payments. Total Merchant Services also works with a number of front-end authorization networks, including NDC East, NDC Central, NDC West, VisaNet and Paymentech.

As mentioned above, for Internet merchant accounts TMS is hooked up with several Internet gateway providers, including VeriSign, Authorize.Net and Plug ‘n Pay Technologies Inc. For wireless merchants, TMS works with the leading wireless service providers, including Cingular (RAM network) and U.S. Wireless Data (CDPD and Motient networks).

“We’ve been through a minefield of vendors in the past,” says Freedman. “Our partners are the main differentiator factor. We’ve pooled together such a high level of service from the vendors we now work with.”

Another high level of service that TMS is proud of is its agent support. Six months ago, the entire Total Merchant Services staff of 40 moved to a new 10,000-square-foot, state-of-the-art office space to support its sales partners. “In our corporate offices in Colorado, that’s all we do,” says Freedman. “For merchant support, we outsource to Global.”

Through TMS’s sales-partner portal, its agents get real-time Internet access to all of their account data. They then can log onto a Web-based portal and view anything TMS’s internal staff sees.

“Our agents can view not only the status of their accounts but can look at compensation, merchant notes, etc.,” Freedman says. “Here’s a huge ability for them to review their accounts at any time.” What does TMS look for in its agents? “We look for people that are honest not just with us but also with the merchant,” says Freedman. “Size doesn’t matter, but quality does. How do you represent Total Merchant Services, how do you service your customers – that matters to me. They are the front line of Total Merchant Services. Our reputation gets built by them.”

Which is probably the reason TMS provides good pricing, good support, solid communication, free three-day training, manuals, marketing materials, brochures, videos, letterhead, business cards and the ability to customize Web sites with the agent’s name, address and phone.

It would appear that Total Merchant Services is shipshape, ready to face any storm. So where is its biggest challenge? According to Freedman, it’s the commitment to continue to grow the business, continue to develop relationships with good ISOs and continue to get its message out.

“From a challenge standpoint, we need to do more of the same,” says Freedman. “The hardest thing is the day-to-day grind, to be able to sit down and do this every day … to scale up the model.”

Freedman anticipates that Total Merchant Services will triple in size within the next two to three years, especially in light of the strong infrastructure that is already in place. “We all know that if you build it, they will come. Well, we’ve built it,” says Freedman. “We are a flagship company in the ISO world, not just for offering the best compensation but because we treat people fairly. That’s been our mission – i.e., protecting their rights and ownership in their contracts.”

Freedman also anticipates that the industry will change as well within the next few years. “Through a lot of pressure, the industry is cleaning up its act,” he says. “Five years from now, you won’t hear about bad ISOs. We will be considered an industry where there are only good ISOs.

“Anybody who is not taking a proactive approach in cleaning up this business won’t be in this business. We must be responsible not only for services delivered to merchants but what their reps are saying out on the street. The ones who do it will be the leaders in this business.” Total Merchant Services is banking on being one of those leaders.

And toward that end, Freedman extends a special message to the industry: “I would like to encourage anyone interested in developing a long-term relationship to call me personally. I want them to know me personally. Not a lot of company presidents’ phone lines are open – mine always is.”

Total Merchant Services ISO contact: Ed Freedman, President/CEO Phone: 1-888-84-TOTAL, ext. 314 E-mail:ed@totalmerchantservices.com

Company address: 255 Gold Rivers Road Basalt, CO 81621 Phone: 1-888-84-TOTAL Web site: www.totalmerchantservices.com

ISO benefits: • Business philosophy centers on forming a consortium of independent salespeople sharing in revenue associated with merchant acquiring. • Offers free copies of Authorize.Net or VeriSign. • CHOICE program allows agents to select, on a merchant-by-merchant basis, either a revenue-sharing program or a buy-rate program. • Outstanding agent support. • Free three-day training, manuals, marketing materials, brochures, videos, letterhead, business cards and the ability to customize Web sites with the agent’s name, address and phone.

Street SmartsSM Partnerships for Success – Part II

Street SmartsSM Partnerships for Success – Part II

In my previous column, we discussed the importance of effective vendor partner selection. Paramount to smart partnership is compatibility, service and price. When it comes to choosing the right ISO partner or merchant account provider, additional factors come into play.

Since the most important vendor is your ISO partner or merchant account provider, it’s imperative that all issues are examined. In keeping with my commitment to make this column interactive and ensure that your voice – the voice of the Merchant Level Salesperson – is heard, I placed the following post on The Green Sheet MLS Forum for feedback on merchant account program selection:

“In an effort to educate the Merchant Level Salesperson about the important issues when considering a merchant bankcard program and, in an effort to educate the bankcard companies you’re working with as to what’s really important to you, I’m dedicating my next column to the hot topic of merchant account program selection.

“As such, I’d like feedback from you, the hard-working MLS. Which of the following are the most important considerations in deciding which merchant account program to represent … and why?

  • Residual compensation program
  • Sales representative agreement (terms and conditions)
  • Reputation/experience in the industry
  • Front-end processing platforms
  • Vendor relationships
  • Partner support
  • Customer support
  • Risk management and loss prevention
  • Accurate and timely reporting of commissions

“Please let me know what you think. Your voice needs to be heard. Also indicate whether you’d like your name and company noted in the article.” The response to my query was overwhelming. Agents across the country weighed in on picking the right ISO partner. Here are just a few of their comments. As always, at the end of the article, I’ll give you my opinion.

MLS Forum Posts

“Well, they are all obviously very important, but if I had to pick one, just one overall, then in my humble opinion I would have to go with door number 2: ‘Reputation/experience in the industry.’

“I believe this to be the key most important item listed because, to me, everything else is crap if they do not stand by their word and their agreements. Usually, the ISO’s exposed in the open with nothing to hide, the ones who have a [good] reputation, are the ones you can count on. Not everyone will be happy with them, but in the overall scheme of things they usually will come out on top. In my limited time doing bankcard, I can easily think of five off the top of my head whose reputation/experience has made me decide they are definitely great to work with.

“As far as the other items listed, they are all important, too, and if each of those categories is running smoothly then that’s what I consider BONUSES to an honest, ethical ISO that has a great reputation in the industry with good knowledge and experience at the helm.”

– Mike Robinson

“The question you ask has a simple answer, from my skeptical point of view. I’ve become skeptical after learning the hard way – by discovering the same lessons so many of us have had to learn in this business. Reputation of the company is by far the most important thing I’m going to consider. It doesn’t make any difference what the company claims as far as how good their service [is], the contract, the residuals or anything else, for that matter.

“What other reps in this business have to say about the company is what matters. If they have a good reputation, then it’s most likely they have decent customer service, fair contracts and pay residuals. What we need most is a better way of communicating with each other so we might learn more of how a company performs according to the people who count most – the street-level reps writing the business.

“All companies may claim great customer service, lowest rates, good contracts, etc. but I’m not going to trust an advertisement or what’s in the contract. The contract is no better than their reputation for doing what’s right rather than looking for a way to legally screw the customers or the reps writing the deal. Reputation is key, and everything else will fall into place.”

– Neil Mink

“Which of the following is most important when you get in your car and want to drive to work?

  1. Gas in the tank?
  2. An engine that will run?
  3. Tires on the axles?
  4. Brakes that will work?

“Would you expect an automobile to be in good working order if any of the above were missing? Probably not. So why not expect the same in this MLS industry. All the named factors must be present for me to want to work diligently for the time I spend. They are all equally important and all equally expected.”

– “Melzer” (MLS Forum User Name) “I think that the single MOST important factor is having a contract that protects and ensures a continual residual income stream to the agent – especially in light of all of the acquisitions going on in the industry lately. After all, the best pricing and service in the world won’t matter if the acquirer gets bought and the residuals go along with it.

“That being said – the car analogy is right on track. However, I think that the EXACT mix will vary according to the type of portfolio being built. For instance, if a company has a strong focus on MO/TO and Internet deals, then they will be more interested in liberal underwriting and strength on the e-commerce/risk-management side.”

– Chris West

“Additional perspective on your post might go this way: You list nine strong reasons on what you believe are attributes that are necessary to make a successful business operate. And I agree with you so totally (no pun intended) I challenge you to pick just one of those nine categories and ignore it so completely that it gets a grade of “F” and then give me your opinion on whether TMS would still be a leader in this POS industry.

“My point? Like the car analogy, the thing simply cannot operate without all the significant parts in place operating perfectly. And if you do not provide the absolute complete parts offering, then you will finish far from the front of the pack. I think you and Matt must know that because the attention to the details are obvious!”

– Melzer

Ed’s Rating

First, I would like to thank all of the Merchant Level Salespeople who sent such intelligent and articulate responses to my post. I hope you recognize that your voice has been heard. Surely, the companies that are actively seeking your business will respond accordingly.

Personally, it was very heartening to see that the #1 issue was “Reputation/experience in the industry.” I am in total agreement with this. After all, a contract is only as good as the people who stand behind it. I think that many merchant account providers have an image in their minds that the Merchant Level Salesperson is out there screaming “SHOW ME THE MONEY” when in reality you’re saying very politely, “Please treat me and my customers fairly.”

As always, I’d love to hear from you. Please send feedback on this topic (and any others) tostreetsmarts@totalmerchantservices.com. My next column will discuss the latest trends in effective lead generation. Please watch for my Green Sheet MLS Forum post on this timely topic. Obviously, this is a hot one, and I’d really like to include your opinions in that discussion.

“You can’t build a reputation on what you are going to do.”

– Henry Ford

I’ll see you next time where the rubber meets the road.

 


Ed Freedman is founder and President/CEO of Total Merchant Services, one of the fastest-growing credit card merchant account acquirers in the nation. Ed is the driving force behind all business development activity as well as the execution of Total Merchant Services’ marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available. To learn more about Total Merchant Services, visit www.totalmerchantservices.com. To learn more about partnering with Total Merchant Services, visit www.upfrontandresiduals.com or contact Ed directly ated@totalmerchantservices.com

Street SmartsSM Partnerships for Success – Part II

Street SmartsSM Partnerships for Success – Part II

In my previous column, we discussed the importance of effective vendor partner selection. Paramount to smart partnership is compatibility, service and price. When it comes to choosing the right ISO partner or merchant account provider, additional factors come into play.

Since the most important vendor is your ISO partner or merchant account provider, it’s imperative that all issues are examined. In keeping with my commitment to make this column interactive and ensure that your voice – the voice of the Merchant Level Salesperson – is heard, I placed the following post on The Green Sheet MLS Forum for feedback on merchant account program selection:

“In an effort to educate the Merchant Level Salesperson about the important issues when considering a merchant bankcard program and, in an effort to educate the bankcard companies you’re working with as to what’s really important to you, I’m dedicating my next column to the hot topic of merchant account program selection.

“As such, I’d like feedback from you, the hard-working MLS. Which of the following are the most important considerations in deciding which merchant account program to represent … and why?

  • Residual compensation program
  • Sales representative agreement (terms and conditions)
  • Reputation/experience in the industry
  • Front-end processing platforms
  • Vendor relationships
  • Partner support
  • Customer support
  • Risk management and loss prevention
  • Accurate and timely reporting of commissions

“Please let me know what you think. Your voice needs to be heard. Also indicate whether you’d like your name and company noted in the article.” The response to my query was overwhelming. Agents across the country weighed in on picking the right ISO partner. Here are just a few of their comments. As always, at the end of the article, I’ll give you my opinion.

MLS Forum Posts

“Well, they are all obviously very important, but if I had to pick one, just one overall, then in my humble opinion I would have to go with door number 2: ‘Reputation/experience in the industry.’

“I believe this to be the key most important item listed because, to me, everything else is crap if they do not stand by their word and their agreements. Usually, the ISO’s exposed in the open with nothing to hide, the ones who have a [good] reputation, are the ones you can count on. Not everyone will be happy with them, but in the overall scheme of things they usually will come out on top. In my limited time doing bankcard, I can easily think of five off the top of my head whose reputation/experience has made me decide they are definitely great to work with.

“As far as the other items listed, they are all important, too, and if each of those categories is running smoothly then that’s what I consider BONUSES to an honest, ethical ISO that has a great reputation in the industry with good knowledge and experience at the helm.”

– Mike Robinson

“The question you ask has a simple answer, from my skeptical point of view. I’ve become skeptical after learning the hard way – by discovering the same lessons so many of us have had to learn in this business. Reputation of the company is by far the most important thing I’m going to consider. It doesn’t make any difference what the company claims as far as how good their service [is], the contract, the residuals or anything else, for that matter.

“What other reps in this business have to say about the company is what matters. If they have a good reputation, then it’s most likely they have decent customer service, fair contracts and pay residuals. What we need most is a better way of communicating with each other so we might learn more of how a company performs according to the people who count most – the street-level reps writing the business.

“All companies may claim great customer service, lowest rates, good contracts, etc. but I’m not going to trust an advertisement or what’s in the contract. The contract is no better than their reputation for doing what’s right rather than looking for a way to legally screw the customers or the reps writing the deal. Reputation is key, and everything else will fall into place.”

– Neil Mink

“Which of the following is most important when you get in your car and want to drive to work?

  1. Gas in the tank?
  2. An engine that will run?
  3. Tires on the axles?
  4. Brakes that will work?

“Would you expect an automobile to be in good working order if any of the above were missing? Probably not. So why not expect the same in this MLS industry. All the named factors must be present for me to want to work diligently for the time I spend. They are all equally important and all equally expected.”

– “Melzer” (MLS Forum User Name) “I think that the single MOST important factor is having a contract that protects and ensures a continual residual income stream to the agent – especially in light of all of the acquisitions going on in the industry lately. After all, the best pricing and service in the world won’t matter if the acquirer gets bought and the residuals go along with it.

“That being said – the car analogy is right on track. However, I think that the EXACT mix will vary according to the type of portfolio being built. For instance, if a company has a strong focus on MO/TO and Internet deals, then they will be more interested in liberal underwriting and strength on the e-commerce/risk-management side.”

– Chris West

“Additional perspective on your post might go this way: You list nine strong reasons on what you believe are attributes that are necessary to make a successful business operate. And I agree with you so totally (no pun intended) I challenge you to pick just one of those nine categories and ignore it so completely that it gets a grade of “F” and then give me your opinion on whether TMS would still be a leader in this POS industry.

“My point? Like the car analogy, the thing simply cannot operate without all the significant parts in place operating perfectly. And if you do not provide the absolute complete parts offering, then you will finish far from the front of the pack. I think you and Matt must know that because the attention to the details are obvious!”

– Melzer

Ed’s Rating

First, I would like to thank all of the Merchant Level Salespeople who sent such intelligent and articulate responses to my post. I hope you recognize that your voice has been heard. Surely, the companies that are actively seeking your business will respond accordingly.

Personally, it was very heartening to see that the #1 issue was “Reputation/experience in the industry.” I am in total agreement with this. After all, a contract is only as good as the people who stand behind it. I think that many merchant account providers have an image in their minds that the Merchant Level Salesperson is out there screaming “SHOW ME THE MONEY” when in reality you’re saying very politely, “Please treat me and my customers fairly.”

As always, I’d love to hear from you. Please send feedback on this topic (and any others) tostreetsmarts@totalmerchantservices.com. My next column will discuss the latest trends in effective lead generation. Please watch for my Green Sheet MLS Forum post on this timely topic. Obviously, this is a hot one, and I’d really like to include your opinions in that discussion.

“You can’t build a reputation on what you are going to do.”

– Henry Ford

I’ll see you next time where the rubber meets the road.

 


Ed Freedman is founder and President/CEO of Total Merchant Services, one of the fastest-growing credit card merchant account acquirers in the nation. Ed is the driving force behind all business development activity as well as the execution of Total Merchant Services’ marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available. To learn more about Total Merchant Services, visit www.totalmerchantservices.com. To learn more about partnering with Total Merchant Services, visit www.upfrontandresiduals.com or contact Ed directly ated@totalmerchantservices.com

Street SmartsSM: Update on Leasing

Street SmartsSM: Update on Leasing

Update on Leasing

I‘d like to share a story with you about my first day in the credit card processing business. It’s funny, but this day (and what turned out to be my first year in this business) had less to do with credit card processing and bankcard acquiring and more to do with the business of leasing POS terminals.

Almost a decade ago, I responded to a sales recruiting ad in “USA Today.” The company advertised promised a six-figure income selling a business service. After several years of selling long distance services to business customers this offer sounded pretty good, so I made the call.

This company was an ISO/MSP, and it required new sales reps to come to the corporate office in Cleveland for training. So, I hopped on a plane. In Cleveland, the trainer explained how we would make tons of money by leasing terminals, which, in those days, consisted of a Tranz 330, a Tranz 330 with a 250 printer or a Tranz 460. For an extra $10 a month, the merchant could even have a PIN pad.

Here’s what the sales pitch to Mr. First-day-in-the-bankcard-business (that was me) consisted of:

“You can buy these terminals wholesale from the ISO/MSP for $250 – $400. You can pay us a $125 application fee, and you can lease POS terminals to merchants for $59 – $99/month (48-month leases) and earn $1,000 – $1,500 upfront on each deal. Now go get ’em!”

And the sales pitch to a merchant (who didn’t currently accept credit cards):

“Hello, Mr. Merchant. How much more business could you do if you accepted credit cards? $1,000 per month? $500 per month? (Write down the merchant’s answer). What is your gross profit margin? 40%? 35%? 30%? (Write this answer down, too).

“Well, if you accepted credit cards, you could earn another (insert the correct amount after multiplying the sales volume by the gross profit margin).

“For example, as you said, you could sell another $1,000 a month if you accepted credit cards and your margins are 35%. That means you’ll earn another $350. The cost to get set up and running with this credit card machine and the service needed to accept all major credit cards (Visa, MasterCard, AmEx, Discover) is $59 – $99 per month, depending on the personal credit for your lease and the type of terminal.

“Even after factoring in the cost for the terminal, you will earn another $300 per month. And, even if we lower our sales figures 50% to $500 per month, you’ll still earn $150 more.

“Anyway you look at it, this is a money making proposition that won’t cost you anything. You’ll start making more money the minute you start using and promoting the use of credit card acceptance at your business.”

If the merchant showed any skepticism, you’d break out some statistics from Visa and MasterCard about increased amounts of business from accepting credit cards. Selling bankcard services was still at the stage where business owners needed to be convinced that they should accept credit cards at their businesses.

The other funny thing was that the presentation on the processing fees (discount rates, per item fees, other fees, etc.) was glossed over. They told us to sell a certain set of rates and fees and, in return, we’d get paid $5 per merchant per month.

During this “training” session, I actually asked, “How much money is there in the processing fees? It doesn’t seem like you guys are making any money here.” That’s when they told us there wasn’t much money to be made in the processing fees.

And then I did what I tell everyone not to do: I signed a contract that permitted this company to stop paying my residual commissions the minute I stopped doing business with them.

At that time, I wasn’t sure how much money there was in the bankcard business, and this technicality didn’t seem very important. Thankfully, we’ve come a long way from those days.

The bankcard processing business has witnessed great transformations in the past decade. Residual income not important? Boy, has that changed. So has the POS equipment leasing business.

These days, no one has a business plan centered around upfront money on sales and leases of equipment. Income from leasing may still be a part of an MLS’s income and business plan but should not be the major component.

So where is leasing headed in 2004? In the past, MLSs could make a living on leasing. Today, word on the street is that they can’t. Rather, they’re selling at cost and relying on residual income.

Is leasing still a viable service for MLSs? What is its true value proposition? Is equipment becoming obsolete? How has leasing changed in the past few years? What types of equipment are being leased? What are the price points? What kinds of credit mix rations do MLSs need to maintain to stay in good standing with their leasing provider?

To get answers to some of these questions, I sought the expertise of two leading industry professionals in the leasing arena, Lee Ladd, President/CEO of LADCO Leasing, and Tom McCarthy, Executive Vice President of Lease Finance Group (LFG), a division of CIT.

“Without a doubt!” Ladd responded when I asked him if leasing is still viable for MLSs. “It’s not only viable, it’s a necessity. Without POS leasing as part of the POS history there probably would not be MLSs as we know them today. Leasing has been the life blood of the industry.”

Ladd sees the value proposition of leasing as somewhat one-sided. “Where could you get a 1985 Oldsmobile financed for five times the blue book value?” he said. “Only at a POS lessor! Not only do we lease antiquated equipment, we do it for many times the cost.”

Ladd is quick to point out he’s not complaining since each lease company makes its own policy. His bottom line is that the POS lessor provides a service that does not exist in any other industry. Does he see equipment becoming obsolete? His answer is true politics.

“Yes and no,” he said. “We still see leases for 330’s and 250’s every month, but we are also seeing substantially more of the newer lines from the major companies.”

Ladd acknowledged the leasing industry has changed. He believes that as the quality of the ISO/MSP has improved, so has the quality of the lease business. “The incidence of fraud and gross misrepresentation has reduced in recent times,” he said. “We are no longer seeing lease requests for 48 x $139.00 on XLs.

“For the most part our business has been pretty static. We did not get involved in any of the business opportunity, computer, virtual terminal or software leases when they were the hot ticket for leasing. Our constant has been to do a lot of good deals for a few good people.”

In regards to advising MLSs on how to be successful when it comes to leasing, Ladd recommends looking to the bigger providers for product. “I would suggest selecting a major lessor that will have no problem funding your leases when times get tough,” he said.

“Treat your lessor like a partner in your business. Be aware of your portfolio performance and be available to assist your partner when the inevitable dispute with your customer takes place.”

Ladd also predicts substantial opportunity for equipment upgrades in 2004. “As new equipment becomes available and more marketing takes place to sell smart cards, check conversion and other new processing products, existing lessees will be prime for upgrade conversions,” he said.

“It will be a great opportunity for the well managed ISO that has good contact with his existing lease and processing customer base. Those that give good customer service will prosper.” LFG’s Tom McCarthy also sees leasing as a viable service for MLSs, especially if they deal with merchants with limited capital that need equipment. McCarthy believes leasing can offer those types of merchants very favorable terms.

He also believes that as ISOs build a larger merchant base and begin to reap the rewards of residual proceeds, the emphasis on the large upfront commissions for leases becomes less of a necessity. Consequently, the lease is still a very valuable commodity for MLSs.

“I think the true value to MLSs is when they provide a service and pricing to the merchant that is competitive,” McCarthy said.

“The key is to retain the merchant. Disclosure, pricing and service are the secrets. Retain the merchant, and you’ll retain processing residuals…and a leasing company will be more than willing to fund as much business as you can provide.”

When asked if he sees equipment becoming obsolete, McCarthy responded with insight from years of experience. “Over the years there have been improvements in equipment, but the basic functionality is still pretty much the same,” he said.

“There has been more development and improvement in the software application, but the basic card swipe terminal is still very similar to the terminal of 10 years ago. Memory has increased (for higher volume merchants) and additional track readers have been added to read additional data added to the magnetic strip.”

From a provider’s perspective, McCarthy said he has not witnessed too many significant changes in the leasing marketplace. “Leasing in the POS market has not changed that much over the years,” he said.

“Although, the percentage of leases to merchants boarded has declined. Payment caps have also declined over the years. What has remained constant in leasing are delinquencies and defaults.”

McCarthy has very clear advice for the MLS looking for success in leasing: “Be reasonable with your expectations of your leasing company. The leasing company will be successful if it can get a fair return on the leases submitted for funding.

“If delinquencies and charge offs are higher than industry standards, then the leasing company is not making a fair return on the leases. Make sure that the merchant understands that they are leasing equipment. Do not try to bundle everything together and hide the fact that he is paying to lease the equipment.”

McCarthy said MLSs and leasing companies will continue to work together in 2004. “The POS leasing market is still controlled by a few leasing companies that have been around for many years,” he said.

“It’s a capital intensive industry that needs to be managed with good systems and good personnel. Managing the risks and defaults is the key to survival. The partnership that forms when an MLS and a leasing company start doing business together will thrive when they work together to satisfy the merchant.”

Since the voice of the MLS is vital to any industry-centric discussion, I posted the following on The Green Sheet Online’s MLS Forum:

“How has the business of leasing equipment changed for you? What are the biggest challenges you face in leasing? What is the value proposition for MLSs in regards to leasing?”

Here are some of the responses I received: “Today, more merchants are buying equipment for cash, and some merchants go on the Internet to price out equipment. It’s more important than ever to offer value-added services to get a good price for a terminal even if it’s for cash instead of a lease…

“As an MLS, you need to sell other value-added products along with your terminal to be successful and to get the price up, i.e. a terminal and a check imager, gift cards, PIN pad or free check recovery.

“Think up things to bring up the value of what your selling and then the price is high enough to lease. To get leases you need to be creative” -cc guy

“I use two different providers and get great service from both. I use two so I will not have all my eggs in one basket…I do 10 or more equipment deals a month and not more than three leases a month on average.

“I make about 40% more money when I lease, so there is the value. When I sell cash it’s lower profit, and when I sell a lease it’s a great deal more.” – bankcardrep1

“I used to lease a Zon and a printer for $59.95: ‘the good ‘ole days.’ Now you’re lucky to get $39.95 out of a 2085-plus. The biggest challenge I face is keeping the credit mix, merchants that are afraid of a 48-month lease, getting verifications done on sales made over the phone or the Internet (face-to-face has never been a problem) and leasing Internet solutions.

“I see leasing as a means for agents to put a little money in their pocket on the front end. It’s a great concept: You can get paid up front and keep the long term residuals.” -SalesAMS

“We have not leased a terminal in years for the following reasons:

1) It’s very hard to justify the cost of a lease to a merchant. When you can buy an entire computer today for $500, how can you justify a simple credit card terminal costing several thousand dollars on a lease? 2) The paperwork required by the leasing companies is more work than it’s worth. 3) If the merchant prefers a small monthly payment, we offer our own rental program. This builds long term revenue.” -ecom

“…the idea is you are leasing the whole package…’what good is a refrigerator if it has no electricity?’ We lease the fridge and supply ‘enhanced’ electricity to make our package a better value. Moving forward, I see true enhanced lease opportunities as:

 

  1. 90-day instant credit;
  2. gift/loyalty, phone card;
  3. medical.

“I also see the opportunity for leasing in cash advance scenarios. If a business is going to switch processors to get a high interest loan, they must sign a lease of some sort or a long-term processing agreement of some sort…if the bad credit will fly.” -Adam Friedman

Ten years ago, there was no easy place for a merchant to purchase a terminal. Today, a merchant can go online to ebay.com or other Web sites and purchase a terminal right off the Internet with no obligation to set up service.

They can buy the terminal online or even purchase a terminal at a wholesale club such as Costco. I do not think that leasing of lower end or older machines is really viable. Instead, I believe the best use for leasing right now would be for one of the newer generation-multi-application terminals.

Based on the comments posted to the MLS Forum, it appears that salespeople are looking to maintain long-term relationships with quality leasing companies. Today, MLSs value their relationship with their leasing provider. They care about their “credit mix.” They are not leasing to bad credit guarantors.

MLSs would rather sell or rent a terminal to the D/E credit grade guarantors and are clearly looking out for the best interests of their leasing partner.

The bottom line is that leasing terminals is a good means to an end. Unlike years ago, it’s not our primary business and should not be the main focus of your business plan. Leasing will help you close deals, and will earn you extra upfront money.

You just need to use it to implement your real business plan-building a stable group of processing merchants that provide you with recurring revenue every month.

Look for my next post on the MLS Forum. Your opinions and support of “Street Smarts” is invaluable. Please send your feedback on this and any other issue to streetsmarts@totalmerchantservices.com.

“Life consists not in holding good cards but in playing those you hold well.” – Josh Billings

See you next time where the rubber meets the road.

 

Ed Freedman is founder and President/CEO of Total Merchant Services, one of the fastest-growing credit card merchant account acquirers in the nation. Ed is the driving force behind all business development activity as well as the execution of Total Merchant Services’ marketing plan, including recruiting and training independent sales offices and establishing strategic alliance partnerships with leading vendors, so that Total Merchant Services can provide its customers with the highest quality and most reliable services available. 

To learn more about Total Merchant Services, visit the Web site at www.totalmerchantservices.com. To learn more about partnering with Total Merchant Services, visit www.upfrontandresiduals.com or contact Ed directly ated@totalmerchantservices.com.