How & Why to Avoid Certain MBAs like the Plague
Most MBAs are Masters of Business Administration. Those MBAs are good. The other MBAs, the Major Bullshit Artists, are another story altogether. I’ve been lucky, I rarely bump into those. . . until now.
I recently started a new business unit attached to my consultancy for the retail, foodservice, and hospitality industries. . . plastic payment processing. The fun thing about that business unit is that it opens us up to other industries. Unfortunately, it also puts us in more frequent contact with Major BS Artists.
Let’s look at a “case study.”
A client asked me to review his billing. Tom does about a $600K a year in plastic and pays about $900 a month in fees. I broke down that $900 and immediately saw that Tom had an excellent existing payment plan.
I figured we could save him about $100 a month. That’s still a good chunk of the actual processing portion of his fees (~$285). Considering all Tom had to do to save the money was ask his bookkeeper to email a PDF of his statement, that’s a great ROI.
I called to let him know.
“Geeze, Paulo, you gotta sharpen your pencil. One guy said he could save me about $475, and another said $390. I wanted to give you a shot before signing with the 475 guy. Match it and we’re good to go. Heck, if you can just come close, I’d rather go with you.”
Uh oh, Tom met with two of the wrong type of MBA.
There are things a processor can do and things we can’t. We can’t force Visa or MasterCard to accept a lower assessment fee than they are entitled to. We can’t force the issuing banks to accept lower interchange rates than they are entitled to.
Assuming your business is properly categorized, those things are cut in stone.
We can only control the part we control. We can also help you control the parts you control. Sometimes, we can help you avoid surcharges.
We can’t, or at least shouldn’t, just make shit up. I mean, there’s no honest way to save you more than you pay.
Major BS Artist #1: The Magician, saving $475
This Major BS Artist cut his lies from whole cloth. He left his “analysis” with Tom. Nothing balanced. Nothing made sense. He got the monthly volume and the total fees right, but that was it. As far as I could see, he just plugged numbers into a spreadsheet until he arrived at savings better than 50% of total fees.
Tom and I were confused. Was it just simple incompetence or was it something else? Either way, something was fishy. No one commits to losing $200 a month to close a deal.
We looked at the agreement Tom was supposed to sign. There was a $199 application fee. I thought that was high, and Tom agreed, but, paying $199 once to save $475 every month is fair enough, I guess. Let's table that for a second.
Continuing on, we saw that the agreement was for five years (Oy!!!) with a $475 cancellation fee. (Hum, $475 pops up often, doesn’t it?) That cancellation fee is pretty high too.
As near as I can figure it, this is the “deal.”
Major BS Artist #1 signs Tom and gets a big chunk of the application fee. He may also get a new client bonus. Tom needs to upgrade his old terminals because the ones he has are not PCI-compliant. Major BS Artist #1 proposed a lease whose payment would cover three times the terminals’ value. More commissions for him.
Once Tom starts getting his new bills, he will freak out and cancel. Major BS Artist #1 gets a chunk of that fee too.
Tom would be stuck with the lease but the terminals could be reprogrammed. That wouldn’t be the end of the world, but not exactly “kosher” either.
Maybe The Magician is just incompetent. Maybe he’s unscrupulous. Whatever. . .
He is to be avoided like the plague.
Major BS Artist #2: The Mathematical Trickster, saving $390
Back in school, I had a professor who would fill a blackboard with math equations. He would go from formula to formula at breakneck speed, making several mistakes-on-purpose and ending with 3 = 5. I missed his intentional errors the first time around, they were subtle, but I knew 3 = 5 was impossible.
This guy tried something similar with Tom. Maybe Major BS Artist #1 didn’t have a clue, but Major BS Artist #2 certainly did.
To understand his trickery, we need to understand that there are two basic families of credit card, Qualified and Non-Qualified. Some Non-Qualified cards can be split off as Mid-Qualified. They all carry different interchange rates.
Qualified cards are basic plain-vanilla cards with no rewards programs attached to them. They form a definite minority and make up only about 10% of Tom’s sales.
This guy gave Tom a below-cost rate on Qualified cards. The interchange is the rate that the issuing bank gets. It’s non-negotiable. He went lower than that anyway. Major BS Artist #2 would actually lose money every time Tom would pass a qualified card.
Then Major BS Artist #2 applied that rate to all Tom’s sales to claim a $390 monthly saving.
Not quite, that's just smoke and mirrors. When I applied his Non-Qualified rate to Tom's non-qualified sales, Major BS Artist #2 was really saving Tom about $60 a month. . . It just looked like he was saving him $390.
Maybe Major BS Artist #2 was a con. Maybe he did it out of self-preservation. Faking a big saving while giving a real but smaller one is one way to avoid the “That’s all?” syndrome we sometimes face. It’s just not the honest way.
This type is to be avoided like the plague too.
It isn’t as cut and dried as you think
Your business is different from mine just like mine is different from Tom’s. A cookie-cutter approach is a bad idea. Your processing plan needs to match your business, not some imaginary average business.
You know what they say about averages, “If your hair’s on fire and your feet are encased in ice, on average you feel fine.”
If you expect to cut your total plastics bill by 50%, it just ain't gonna happen. You will eventually fall prey to the Major BS Artists.
Knowledge is power. These articles are my way of helping people understand a complex thing that seems simple. If you know what goes on in the background, you're less likely to fall prey to Major BS Artists.
All it takes to find out if you're okay or not is to send me a recent statement. Tom's total involvement was a minute or two to tell his bookkeeper to do just that. I took it from there. Now that's an ROI! What can you do in the next two minutes that will make you $100 a month or more every month from now on?
My promise to you
If you accept plastic, reach out. If I can help, I will. If you need help, but I can’t provide it, I’ll point you to who can. If you’re well served as is, I’ll tell you.
We’ll stay friends.
It’s like the insurance lizard says, “A few minutes can save you thousands.”