Agents Beware: What to look for when approaching new merchants

As a general rule, I am more inclined to warn merchants away from unscrupulous agents or sales representatives. There are some instances, however, where an honest sales rep might want to pause before pursuing a relationship with a merchant. This posting is for the sales representative who needs to be wary before setting up an account he or she might regret.

When should a sales agent avoid a merchant?

It seems almost counter-intuitive to suggest that sometimes a sales rep might be better off not making a sale. And certainly this post will be somewhat different in perspective than my previous exploration for merchants on whether a sales rep should be trusted. But as with most relationships, business or otherwise, this is a two-way street. Coming into a business cold, an agent will want to look for signs that the merchant is going to be worth pursuing and not end up wasting time and resources that could be better spent elsewhere.

After all, sales reps do not want to risk being involved in legal action or be subjected to threats or libelous statements. No agent wishes to end up out of pocket at the end of a deal or go through a process that can only end in damaging the agent's relationship with his or her own processing company or service provider.

Tip-offs that a business owner may be problematic

Typically, merchants are highly professional, mean well and try hard to service their customers while running their business in as solid and competent manner as possible. Every so often, a merchant may be encountered with one of these red flags:

• Multiple Owners that do not communicate with one another
• Partial owner wishes to make a deal without consulting partner
• Partner is away while deal is being processed
• Partners are "at odds" about what is best for business
• Office is in complete disarray
• Processing statements are difficult to find
• No idea where accounting paperwork is
• Cannot operate main computer or access email properly
• Office machines are inoperable or inaccessible
• Attitude is too eager
• Strong desire for advance capital
• Really wants quick reimbursal for current processor ETF
• Promises multiple accounts if you can "help out" with current problem

One or two of these things might easily be a simple quirk that is part of a merchant's personality, or a matter of timing and nothing more. Sometimes, especially when a number of these flags show up together, it might be a sign of something more.

There are merchants out there who are "serial converters." That is, they switch processing companies every six months or so because they believe it somehow saves them money or that they get to profit from monetary incentives being offered to them. In some cases, the merchant will agree to a conversion only if the agent covers the costs associated with reprogramming their POS system. Unless the agent has good reason to believe the merchant is completely upfront, I highly recommend that agents do not agree to cover costs that will be coming out of the agent's pocket. While this certainly shows that the agent is willing to "put skin in the game," it also puts the merchant in a position where they are at no risk for switching services again on a whim, which is why every agent should try to find out this essential piece of information: how many processors the merchant has used in the last three years. 

Normally, the answer will be "one." It is still typical that merchants are signed to multi-year agreements, and most will choose not to break those agreements less than half-way through. Sometimes this will not be the case and a merchant will have had good reason to switch processors, perhaps even twice, during a three year period. But if a merchant has switched processing companies more than once in the past year, the agent should take a very close look at why before getting involved with that business.

I have come across merchants who had multiple open processing accounts from different companies that were not even servicing the business. This is never a good sign. And I have been sucked in by my own desire to help straighten things out for a merchant who I had perceived as having been victimized by an unscrupulous agent. In the end, I was taken advantage of fairly strongly by a business owner who was somewhat lazy and incompetent when it came to his own office affairs and who never lived up to his end of the agreement (nor had he the authority to do so). Even so, I will generally give merchants the benefit of the doubt when I hear their stories or see their situation for the first time. I always make my first approach with an open mind. But when I see any red flags go up, I try to assess them thoroughly before proceeding.

Multiple Owners

When encountering a situation where a single partner wants to make all the accounting decisions for a business, the agent should be cautious to ensure this is not merely going to be a time waster. Often it is the case where one partner runs the business and the other partner(s) are silent. Still, being careful to have the approval of a majority partner is important. This may require the actual signatures of two partners on an application or agreement, but even if only one signature is required there is a chance that a disgruntled partner could derail the processing relationship.

One very important factor is that different partners may have different priorities. This is especially true if the business has multiple locations with different partners running each one. It may not be apparent right away that a single partner is not in a position to speak for the entire business; sometimes a junior partner wants to look good or just feels empowered for some reason and fails to consult when appropriate. Whatever the reasons may be, it is always best to make certain that the other partner(s) are cool with the transition. When one partner wants to go rogue with the processing agreement, that is a big tip off that there could easily be trouble around the bend.

Office Condition

My own office looks like a disaster zone most of the time, so I tend to be sympathetic toward any business owner whose desk is buried under stacks of paper or whose copy machine is being used as the base for a modern sculpture of paper clips and magazine clippings. Even if it is impossible to find a working phone jack or Ethernet port among the dozen or so that are apparently available, the glow of the fish tank is barely bright enough to read by in the otherwise unlit room, or even if the business owner asks for help searching through stacks of unopened envelopes to find a statement, I encourage patience and understanding. But there are degrees that need to be measured, and if the merchant has no idea where in the mess his or her own banking statements are, it is never a good sign. Moreover, if there are several months of unopened statements lying around, that is not good at all.

One of the reasons that merchants end up getting angry with processing companies is that they do not check their statements. If an error goes undetected, regardless of whose fault it is, the longer a merchant waits to address it the less likely it is that it will be rectified in the manner which the merchant desires. 

When I see an office that clearly has no sense of organization, I know right away that if I choose to move forward with a processing agreement I am also going to have to commit to months of hounding the merchant to ensure that everything is working the way it is supposed to and that every party involved is fulfilling appropriate obligations.

Also, sales representatives should beware of any merchant who is not interested in the "fine print." If a merchant says he or she does not want to read the terms and conditions, that is understandable. I have never met one who relishes the idea of cozying down with a glass of wine and the full merchant agreement with a dozen pages of 8 point type in dry legalese. But if a merchant does not even want to hear the broad terms of cancellation fees or extent of the contract, there is a potential problem right there. And if the merchant refuses a copy of the agreement, or will not acknowledge receiving a copy, that is a red flag that should not be ignored.

Eager Attitude

The fact that a sales agent has just walked in with the promise of dramatically lowering a merchant's costs might be enough to truly excite many business owners. And if there is the promise of advance capital that the business truly needs to grow, so much the better. Many processing companies send their agents out with the specific intent of generating that kind of eagerness in order to make sales. But when a merchant is well versed in the pitch and jumps in at a fevered pace, there is a good chance that a bankruptcy is lying in the background or some other glitch that is going to squash the possibility of completing the deal.

Some merchants see a new processing company as a way to work around bad credit, debt or questionable business practices that have gotten them into trouble (but not out of business). On occasion, an agent is likely to come across a merchant with some sort of shady deal lurking in the background. There is little danger that such a merchant will get approved by the underwriting department of a reliable merchant services processor, but getting too involved with such a merchant may not be the best plan for an agent trying to develop his or her integrity and a base of solid merchant clients.

An Ideal Merchant

The fact is, all agents want to deal with merchants who are enthusiastic about the service they are being offered. That is not only an essential part of the sales process, but the kind of attitude that will get an agent referrals and repeat business. If the merchant is not happy, then there is little chance for retention when the next sales rep walks through the door claiming a "better deal," if for not other reason than "better deal" might equal "better experience" for that particular merchant. It could be as simple as ensuring smooth customer service, or even just being able to listen to questions and concerns as they arise. 

There are a few hallmarks of "ideal merchants" that a sales rep should look for when making an approach for the first time.

• The merchant should be informed
• The merchant understands the current rates and fees
• The merchant knows about PCI compliance
• The merchant knows about early termination fees (if any)
• The merchant knows whether a terminal is owned or leased
• The merchant knows who to contact about programming a POS system
• The merchant should want change
• The merchant is interested in saving money
• The merchant wants a better customer service relationship
• The merchant is looking to change banks
• The merchant is installing a new POS System
• The merchant wants to begin new gift or loyalty card program
• The merchant is expanding
• The merchant has had a bad experience with current processor or agent
• Unfulfilled promises
• Rates or fees not as promised
• Slow responses
• New needs of business that cannot be serviced
• The merchant is ready for action
• The merchant is organized
• The merchant is available
• The merchant is accountable
• All partners are on the same page
• Agent is dealing with the right person
• The merchant has stated that it is time to make the change
• It is possible to terminate existing agreement
• It is possible to reprogram existing equipment (or replace)
• The merchant is happy with YOU
• Personalities make a difference
• Clear communication is essential
• Trust and integrity are essential on both sides
• Taking time to build a relationship is worth doing
• Shared ideals
• Work toward a common goal
• Expend the effort to ensure that promises are kept
• See where there are other areas that can be assisted
• Go above and beyond
• Point out the fine print
• Explain and anticipate questions (without confounding the merchant)
• Be there to help, not just profit

More often than not, bad merchant / agent relationships are fostered by poor communication. The fault of this may rest on either or both sides; sometimes, no matter how hard an agent tries or how good the agent's intentions are, the relationship is doomed to failure. There is good reason, however, for many merchants to feel that sales reps do not have their best interests at heart. That is because most sales reps are looking to turn as big a profit for themselves as possible, which is what the processing companies all really want (whether they admit it or not) because it is what helps the processing companies grow and become more profitable. 

Smart agents know that the slow and steady course is likely to pay off better in the long run. Many of the processing companies also go by this philosophy, but not all of them. Corporate culture varies from processor to processor. Working with a service provider that is in sync with a sales representatives own values is essential for numerous reasons, all of which trickle down to the basic merchant / agent relationship.

While there is no hard and fast algorithm to determine which merchants will be the best fit for an agent and which merchants will be trouble, taking the time to figure it out upfront as much as possible is always worth the effort. The good merchants will always appreciate this and the good agents will also benefit from the experience.