July 10th, 2006 by Jamie Estep
How Much do Merchant Account Sales Agents Make
Selling merchant accounts can be a very profitable venture. Selling merchant accounts is not an easy task by any means. It takes hours of work, a strong knowledge of the payment processing industry, dedication, and the ability to be told ‘NO’ many times and still keeping at it.
Selling merchant accounts is often first done successfully as a part time job, because it takes a long time to build up a residual stream large enough to live off of. In truth, more that 50% of all people that start out to sell merchant accounts, never make it, and maybe 10% are profitable enough to stick with it. Once a person has found the ability to sell merchant accounts, they can make a very good living from it.
How much can be made:
Statistically, an average merchant account will give a sales agent about $30 per month in residual income. If that sales agent can sign 10 accounts per month, they will be making $3600 per month at the end of the first year, or $36,000 per year. At the end of the second year, $72,000 per year, and at the end of the third year, $108,000 per year.
$108,000 per year is a very decent salary. As long as the agent keeps signing accounts, their income will keep growing. But, 10 accounts per month is not an easy task especially for someone new to the merchant services industry. Also, over time attrition shows up and the average number of accounts a person can setup goes down.
A simple overview of how a merchant account sales agent works:
A sales agent signs a contract with an ISO (Independent Service Operator) who is registered with Visa and MasterCard. The agent signs up businesses for merchant accounts, and the ISO provides the business with the merchant account, technical support, and some customer support depending on what the agent is capable of themselves. The ISO splits any processing fees with the sales agent above their cost. The more a business processes credit cards, the more the ISO and agent make.
Common pitfalls of selling merchant accounts:
- High Pressure Sales: While the merchant services industry has cleaned up a lot in the past five years, there are still many ISO’s that use high pressure sales, and other ‘gray area’ tactics to gain more business. These ISO’s are becoming extinct and simply are not doing good business. Watch the movie ‘boiler room’. If the ISO acts similar to the company in that movie, stay away. Find an ISO with a good reputation that is willing to work to meet your needs.
- Not signing a contract: If a sales agent doesn’t sign a legal contract with the ISO, they are at the risk of getting their income cut off with no recourse. Always make sure to sign and agree on a contract with an ISO before sending them a single account.
- Free Terminals: Free terminal programs often sound like the instant fix to selling merchant accounts, but they aren’t. Free terminal programs are OK for signing existing businesses, but they often come with many strings, and can cost an agent a lot of money if things don’t go as planned.
- Upfront Cash Programs: Upfront cash programs can be a great way to get some instant return on a merchant account. But, like free terminal programs, make sure you understand the conditions of getting the upfront cash. Normally you are exchanging upfront money for future residuals.
- Price Wars: One of the biggest mistakes an agent or ISO can make is getting into price wars with other companies. The problem is that by getting into a bidding war the service quality is devalued. Agents should set a competitive price, and should hold steady at that price. While it may be necessary to lower the price for an occasional larger business, constantly getting into the lowest price game gets nothing but customers that will leave as soon as another lower price comes along. Agents should provide personal service to their customers making a value that far exceeds any price.
- Going after the big fish: Naturally, most new sales agents think that the bigger the business, the more that can be made from them. While the idea is on track, the execution never plays out like that. In truth, the larger the business, the lower the margin above cost, making it much more difficult to make any profit. Large businesses shop fiercely, and most often have the lowest margins to make any profit from. While a businesses that processes $20,000 per month, may make an agent $30 per month, a business that processes $5,000,000 per month may only make the agent $2 – $3 per month. This combined with the huge amount of work and trust needed to sign a large company makes it un-profitable and generally a waste of time for most independent agents.