This is just a quick post to give you some options on how to handle the situation of switching a client from another processor who has an early termination fee. This post was actually taken from a response to an agent’s question yesterday. He asked, “Is the average ETF $250 to $500? How do you sell someone with an ETF, especially when the savings are not large?” My response: “Yes, $250 to $500 is the average range.
So if we are saving them $80 per month (which is not unusual), for them to pay a cancellation fee of $250 or even much more than that would make sense. You will also be getting $200 to $300 up front commission. You may decide to pay $100 or so of your money to get the deal if the monthly profit justifies a decision like that. I have found this to be very effective because the merchant sees how committed you are to getting his or her business. The merchant also sees you really are an independent business owner rather than a robot for some big company who has to follow protocol. There are a few merchants where the savings don’t make the cancellation fee sensible. Remember, the cost to leave the merchant’s old account open and just stop processing with it is usually between $10 and $20 per month.
Therefore, consider this scenario: Let’s say we could save this merchant $40 or $50 per month. Perhaps there are twelve months left on a three year agreement with a $500 cancellation fee. Just give the merchant a new terminal and put the old one under the counter for twelve months. The merchant will still save around $200 to $350 the first year even while paying the other processor to leave that account open. Then he or she can cancel with no penalty and increase savings the next year. One last tip on how to pitch this: I often say, “Bob, do you have any investments like a 401k or retirement account?” Bob responds, “Yes.” (If he responds “No,” just say, “but you obviously understand how investments work since you are in business.”) Then say, “If I offered you a stock that was $500 per share with a guaranteed dividend payment of $80 per month on that stock, do you think this is would be a good investment? Since you would have your money back in about six months and would have pure profit after that, isn’t it about 200% return on your investment? Pretty good deal, right? That is exactly what I am offering you today, Bob, if you pay $500 to cancel your old processor. I’m sure you will continue accepting credit cards, so you will make a profit (or a savings of $80 per month in this case – or whatever the amount of savings.) If you decide you do not like our service, we have no contracts. Your old processor would gladly give you the $500 back to earn your business. So you really have a no lose situation here, and your investment is literally guaranteed.”
Hope this helps!
James Shepherd
Read the previous post: 2 Quick Tips on Selling Merchant Services Part Time
Read the next post: How to Sell Merchant Services when you cannot offer significant savings
How to Sell Merchant Services when you cannot offer significant savings