Choose Your Revenue Sources Wisely

When I began this business 12 years ago, I learned anything and everything I could to satisfy client needs if it helped pay the bills. Over time, our skills grew, our services broadened, and we were flush with new sources of revenue. Even so, we’ve occasionally bumped up to circumstances that has us question whether once new and exciting services and revenue sources were worth today’s financial consideration received.

I wrote last week about the buyout of our agent business (for merchant accounts) through an ISO partnership. Disappointed about the loss of monthly residual income, we realized the buyout provided us the chance to reevaluate the direction this ancillary business should take.

First, we hired our attorney to help create a new agreement. As I paid the attorney’s fees, I realized we’d spent more money negotiating legal aspects of ISO contracts than all other legal needs combined. Maybe I was too caught up working in the business rather than on it, because the revelation surprised me. And the surprises kept mounting.

As the agent assisting with merchant account setup, we help clients fill out an application, explain costs and terms, and smooth ruffled feathers when glitches surface. In addition, support is ongoing as our residuals were based on the fact that we’re the first link in the ISO chain. All told, staff time spent on merchant account related questions ranged between 5-25 hours a month. During hectic months, the earnings to time translates to as little as $25 per hour in earnings. I can’t even hire for that salary!

Comparing the investment in time to setup ThunderTix accounts (much streamlined due to ongoing administrative feature updates) versus that spent in merchant account setup provided another ah-ha moment. We spend minutes setting up a new ThunderTix account. Possibly seconds. And our retention rates are fantastic! Conversely, we might spend hours on merchant account setup, but retention rates with our ISO are less than stellar. Why the difference? We think it lies customer service.

We pride ourselves on exceeding expectations, yet our first-link-in-the-chain status entangled our own phenomenal customer service with the customer service and expectations of an organization that is beyond our control. No financial consideration is worth lost goodwill due to another company’s actions.

Further, merchant fees paid by clients involve labyrinthine fee structures and lots of explanation. We’re talking about people’s money here, and when the dollars don’t add up, a client’s credit worthiness is questioned, or unexpected challenges arise, our own reputation is open to criticism even when ThunderTix offers straightforward, predefined monthly fees with no surprises.

And finally, as the recent buyout of our ISO portfolio indicates, we cannot rely on this revenue source for future earnings. Worse, the new contract guarantees a trivial buyout amount well under the dollar figure our recent successful negotiations yielded.

The early disappointment of losing our residuals has given way to relief. Relief that we’ve opened up more hours to focus on our core product. Relief that our reputation is wholly separated from another service provider’s. And relief that we can focus on one business–our business.