Direct selling companies are dynamic in nature. Financials are in constant motion and the sometimes unpredictable nature business model often puts merchant account providers on edge. This article outlines the top considerations direct selling companies should focus on to ensure a long, healthy account with their merchant account provider.
Applying for a merchant account is similar to applying for a loan
When you apply for a merchant account, you’re company is vetted similarly to one applying for a loan. Banks delve into your financials, projections, business plans, product/service information, compensation information and any outstanding issues. Just like with a loan application, an underwriter will be thorough in researching all aspects of your business, so you should ensure that everything is in order before approaching a bank/processor looking to open a merchant account.
Banks and processors are businesses, too. As such, they are looking for ways to make money and tend to shy away from risky opportunities. Merchant account providers are totally liable for every single dollar processed for 6-18 months, so they are looking to minimize risk as much as possible.
Get a handle on volume and a plan for the future
Direct selling companies often have a high velocity of growth; volume can grow from $20,000 to $100,000 in as little as a month. That’s great news for the company and a red flag for merchant account providers. A main concern for merchant account providers is that there will not be enough product to match the velocity of growth. It’s against major card brand policies and regulations to sell products that do not yet exist, so it’s important to have a stable plan in place to account for high-volume growth. You should track and document your plans for growth and contingencies that demonstrate you’ll be able to deliver on the product side if sales take off. You should have disciplined records of existing and in-production inventory to demonstrate your due diligence to these merchant account providers.
Have a fair commision structure and abide by it
Commissions are often the lifeblood of successful direct selling companies, but they can raise significant concerns from a bank. Your commission structure include fair rates and timely payment. Keep a log of commissions paid on time and show that log to the bank/merchant account provider as evidence of your stability. For direct selling companies that have a commission structure, the best ratio is roughly 40-50% of revenue being paid back to a strong majority of distributors. For example, Nu Skin pays distributors approximately 42% of commissionable sales This balance can put banks’ minds at ease by demonstrating that a) the product is selling, and b) distributors are being paid in accordance with those sales.
Win at customer service
Customer service plays a key role for direct selling companies. Returns are a fact of business; people will be unhappy with your product from time to time. Having a strong return policy in place and knowledgeable, helpful customer service representatives to guide customers through the process can bolster your reputation and reduce chargebacks. It also demonstrates to merchant account providers that you’re operating as a legitimate business with the customers’ best interests in mind. That is the mark of a stable business and can reduce risk in their eyes.
Additionally, chargebacks are costly and can result in the loss of processing privileges. Having good customer service in place and policies clearly articulated on your websites and invoices can reduce disputes that result in chargebacks – and fines and penalties from the card associations.
Many direct selling companies have many or all of these items in place. The hard part can be organizing documentation in a way that makes it appealing to banks and merchant account providers. Working with an expert in the direct selling payment processing space can streamline your application for a merchant account. These professional have a thorough understanding of what banks are looking for from both a positive and negative point of view and can present a strong case on behalf of direct selling companies.
It’s also important to remember that it’s a long-game. Opening a merchant account is just one part of the equation and your company will have to continually focus on maintaining that relationship and ensuring you remain in good standing in the eyes of the merchant account provider. This equates to a full-time job that many organizations are simply not equipped to handle in-house. Those lacking internal resources to effectively manage the merchant account relationships are best-served to seek an outside expert to navigate the complexities and ensure that the account is optimized and that processing is not negatively impacted.
Struggling to establish credit card processing relationships or looking to reduce credit card and ACH fees? Set up a free consultation today and we’ll walk you through your options.