In this final post on commission traps faced by merchant services sales professionals, I want to present a very simple but often overlooked commission trap. Just about every processor out there pays residual income and in the last post on the “Schedule A” I showed you how to calculate your residual and how it works. This still leaves one big and very important question, do you own or earn your residual?
#1 – Do You Own or Earn Your Residual?
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How many accounts do you have to sell before you get paid residual? Probaby the worst residual plans include a number of sales that you must make before you even start getting residual income. The first processor I was with a long time ago, paid $10.00 per account, per month residual but you had to have 100 sales activated before the residual started paying out. This is not only a very low residual amount per account, but making 100 sales is no easy task, especially when you have no residual building over time.
*The average residual per account should be betweeen $30 to $40 per month per account and it is easy to find processors like us that pay you residual from sale number one. You should never wait till “X number” of accounts before getting residual.
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How many accounts do you have to sell each month / quarter in order to keep your residual? This is the other common trap and honestly it just doesn’t make any sense. You will have 50 or 100 accounts with a processor, but they will tell you that you must make at least 1 sale per month or you don’t get to keep your residuals. They are getting paid, why shouldn’t they pay you? Never accept this performanced based residual. Once you have an established portfolio, there is no reason that you should not get paid. What if, God forbid, you built up $5,000 per month residual and then you were in a car accident? The processor would be under no legal obligation to keep the residual checks coming to help your family.
*You must ask about this BEFORE signing the agent agreement and make sure you see it in writting. Many recruiters will say things like, “You own the residual, it is life vested.” but you need to be specific in your question. My advice is to ask this question, “If I were to get into a car accident and I didn’t make a sale for a year and I had $1,000 per month in residual built up, would you continue to pay me my residual and where does it say that in the paperwork?” This is an issue that has implications for your family, don’t let it slide until you get a clear answer. You are about to put in a lot of work into building a portfolio, make sure you own it.
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How much do you have sell before you own your residual? Now, this is actually one restriction that makes sense but it is important for you to understand it.