Why Your Residuals Are Not Growing – Merchant Services Sales Commission

In this episode I’m going to talk about, “Why your residuals are not growing?”  We are talking about merchant services.  I think we’ve done three or four episodes in this mini-series about Merchant Services Sales Commission.  In our first episode we went over my definition of “an average salesperson.”  If you didn’t get to hear that episode, I would encourage you to go back and listen to “How Many Merchants Can You Sell?” 

Let’s use my income calculator.  Go to instantquotetool.com.  Pull it up and access it without even signing in.  Once you have found the calculator, click on “goals” in the navigation bar in the upper right-hand corner.  This will take you to the income calculator.

I’m going to assume you are an average merchant services sales rep based on my previous definition.  You are going to make twelve sales per month in year one, seven sales per month in year two, and five sales per month in year three.  I would guesstimate an average up-front bonus of $450 per deal.  If you are wondering where I came up with these numbers, I suggest you watch previous episodes from the last few days in order to catch up.  “How Many Merchants Can You Sell”  “How To Sell More Than 100 Merchants”  “Understanding Up-front Bonuses”

In the income calculator I have the gross margin set at $70.  I think this is a good number.  The gross margin is the least important assumption for your first year’s income, but it’s the most important assumption for your long-term income.  “Short term versus long term,” is always the balancing act in business.  Your gross margin is your total account profitability per month.  Gross margin is not what you bring in per month.  Gross margin is the total profit the account generates for the ISO, the processor, or the acquirer.  The matter of what percentage you are getting will be discussed in a later episode.

The size of an account dictates the gross margin.

1. Large accounts would seem to be the most profitable. However, huge mega accounts with multiple locations can be a bit less satisfying than you would hope. These accounts already have such good pricing you do not see a lot of profit for the work and stress required to maintain them.
2. Small accounts will normally be doing less than $7,000 a month in volume. I will call these “Mom and Pop” shops where you will be making $20 to $40 a month maximum per account.

You want to be right in the middle here.  I suggest putting 90% of your effort and focus into selling the $7,000 to $50,000 a month merchants.  This is your “sweet spot” that should keep your gross margin right around $70.  You may sell accounts at both ends of this spectrum, but to focus on the middle market is more profitable.

Thank you for taking the time to watch or listen to this mini-series.  Please tell us in the comments at the bottom of this post how the calculator at instantquotetool.com has helped you.

Read the previous post:  Understanding Up-front Bonuses

Understanding Up-front Bonuses – Merchant Services Sales Commission

Read next post:  How Much Residual Can You Make Selling Merchant Services?

How Much Residual Can You Make Selling Merchant Services? – Merchant Services Sales Commission