Success Is All in the Family

Apples don't fall too far from the tree - or, in Ed Freedman's case, the family tree. The founder and driving force behind Total Merchant Services was born into a family of entrepreneurs. Ed's grandfather was an immigrant whose motivation and vision propelled him from a dock loader to president of a manufacturing company. Following the death of her husband when Ed was 8, Ed's mother ran a publishing business that she started at her kitchen table in New Jersey surrounded by four kids.

That publishing business became Atlantic City Magazine, and for 20 years it was an invaluable source of inspiration and guidance for Ed. "My grandfather and mother were great role models, always talking to us kids about business," says Freedman. "That's how I got the spirit."

Having received daily instruction on business principles and philosophies from an early age, Ed started his first entrepreneurial endeavor at age 16. It was boat cleaning.

He'd go around the docks of Atlantic City, cleaning and waxing boats, setting up regular accounts. Ed grew the business and hired friends to work for him. Through his college years, Ed continued with his boat cleaning and says he earned up to $40,000 by the end of each summer, a staggering amount for a student.

In his senior year of college, Ed went on his first job interview. When he was offered the pitiful starting salary of $20,000, he realized it represented a path he didn't see himself going down. Ed never went on another job interview again.

In 1993, Ed graduated from George Washington University with a B.S. degree in psychology. He joined his two older brothers, who also had started their own company, a telecommunications business in Washington, D.C., and started reselling long-distance services to businesses.

Not surprisingly, he was successful during his first two years. He started training new employees, managing accounts and staff as well as setting up independent sales agents and outside reps to work for the company

At age 21, Ed was creating single and multilevel compensation programs.
"I realized that salesmen knew what to say and what to do, but they needed marketing materials and guidelines," said Ed. "So I set out to spoon-feed them. I created structure for them."

Through Ed's programs, the company increased its customer base by 10,000 new accounts.

In '96, Freedman started Total Merchant Services. He examined the telecommunications industry and saw the formula for sales success but didn't like the shrinking margins and difficulty in collecting money. Ed started looking at another industry that would work with his business model - the bankcard business. He applied his expertise to a business that offered greater margins, upfront money and recurring revenue.

"What I liked about the bankcard business was the recurring-revenue model and the upfront money made on leasing terminal equipment," Freedman said. "Back in '96, I could lease a terminal for $40-50 a month and make money."

And make money he did. Starting Total Merchant Services by himself, Ed went out into the streets of Philadelphia, where he had relocated, and began setting up accounts, leasing equipment and developing relationships with merchants, trade associations and other networking outlets. He contacted banks, got leads from them and started closing accounts daily.

"I started making a bunch of money. It was a great opportunity," said Ed. "But I kept asking: How are these companies really making money?"

Ed turned to the industry for answers. He started reading publications. One in particular stood out for him.

"I started reading The Green Sheet," said Ed. "Its Editor-in-Chief, Paul Green, was the quintessential advocate for salespeople, constantly writing great articles on sound business principles and good advice."

Ed found the writing and business philosophies in sync with his. Coming across an article about an ISO that sold its business for a great deal of money, Ed continued to ask questions. How did they do it? What's going on in this business? Where's the real revenue?

Ed looked for answers at Green Sheet seminars, where he constantly questioned industry professionals. He searched for companies that wanted to share their information and take him to the next level from sales to merchant acquiring. His entrepreneurial spirit motivated him to then study the merchant acquiring business.

Relocating to Colorado, Ed expanded Total Merchant Services and continued meeting with industry leaders. He found a bank that offered him the opportunity to earn back revenue and participate in merchant acquiring while staying in point-of-sale equipment sales.

In '97, Ed brought in a sales force to handle equipment sales while he concentrated on merchant acquiring. Again, not liking what he saw in equipment sales/leasing practices, Ed set out to change his world.

He would constantly ask salespeople, "Hey, guys, do you know where all the money is? It's not just in selling equipment; it's in the processing side! We're leaving different revenue streams on the table for the other guys to take."

Ed believed salespeople were being brainwashed into thinking the only money to be made was in equipment sales and leasing.

"I started talking to agents like no one else had done," said Ed. "I offered them info on actual costs, where the profits are. I laid it all out for them."

His idea was to share the revenue, splitting back-end profits that heretofore had been given away to the processors. For many, a consortium of agents was a new idea at the time. Not many, if any, were sharing contracts down the middle, owning all the revenue streams for the life of the account.

Ed's vision was to change the marketplace so that the average guy on the street could make as much money as the acquirers. He was all of 25 years old at the time.

"If salespeople do not start working in the same direction to build long- term revenue relationships, the profit margins on equipment are going to get driven down and they'll be out of business if they're not on the back end of revenue streams," says Freedman.

His philosophy is that long-term players need lifetime residuals and long- term relationships. In other words, long-term players need to be in the merchant acquiring business.

Today, many are doing just that. But, according to Ed, "We started it." He says he started it because of his strong belief that if one helps enough other people get what they want, that person will also get everything he or she wants out of life.
"I've dedicated my entire professional existence to helping salespeople get everything they want out of this business," he says.

And how does he view the business in 2001? Ed acknowledges there are fundamentally great things - great opportunity to make upfront money by selling/leasing equipment and software, and even greater opportunity for recurring revenue streams vis-a-vis profitable merchant accounts, thus increasing agents' portfolios.

Ed is excited about emerging merchant markets through the Internet and electronic services to support those market expansions. For him, the sky's the limit.

"Every month we're in business, we get stronger," says Ed. "We're in a very profitable business . can't say that about too many other industries."

He does see one major negative: the treatment of salespeople despite the growth of the industry.

"Salespeople have been taken advantage of in the past, getting involved in contracts that didn't protect their rights," says Freedman. "Our contracts protect our salespeople, no matter what, for life. There are no loopholes at Total Merchant Services."

Ed believes the industry needs more education, more information, more training. That's why he believes publications like The Green Sheet are paramount.

He also stresses that Total Merchant Services is focused on protecting sales professionals and educating them on the fine print of contracts. As Ed says, "If I don't want it for myself, then I know I don't want it for anyone else."

For example, he doesn't believe in buy-rate programs because he believes it assumes salespeople don't know what they're doing, don't know where all the revenue is. Total Merchant Services doesn't do buy rates for the simple reason that they inform their sales force where all the revenue is.

Another area that Ed is big on is training. "Not only do we still do it, we overdo it," he says.

In addition to an in-house program of twice-a-year education and training, Total Merchant Services goes out and conducts training seminars, leveraging its collective power and orchestrating not only better deals but also better sales agents.

By contracting with equipment manufacturers, terminal manufacturers, check guarantee companies, software developers, leasing companies and the like to sponsor the seminars, including hotel rooms, airfare and meals for sales participants, Ed brings both sides of the industry together under one roof.

General sessions deal with new opportunities, new products, etc. Training and breakout sessions are more personal because they include one-on-one interactions with suppliers and providers. Ed sees these events as learning environments for both vendors and sales agents where everyone is welcome.

In fact, Ed sees the lack of vendor relationships as the biggest challenge he and other sales professionals face today.

The bankcard business relies heavily on vendors. Trying to run a business without total control can be difficult, and Freedman acknowledges that it wasn't always easy selecting a viable partner.

Total Merchant Services went through its own minefield of bad vendors and learned from it. But it is in a good place now, thanks in a big way to its alliance with Global Payments.

"Our partner Global Payment is the best vendor we have ever worked with, by far. Their philosophy is similar to ours. They put our needs first," says Freedman. "Their value-added solutions give us what we need to run our business.

"Global has helped me meet the challenges of providing great customer service, tech support - things we've outsourced in past but didn't always get the quality we wanted."

Now that Ed has built a solid infrastructure for Total Merchant Services, where does he go next? Up, of course. Even though Ed has created a substantial amount of business and has been profitable for the last five years, he is looking to scale up production.

"We are ready to explode," says Freedman.

With a solid infrastructure, great vendor relationships, effective risk management, great sales staff, great pricing and quality customer service, Total Merchant Services is open to welcoming new salespeople who want to share in its wealth.

Ed contends that in the next two years Total Merchant Service will triple its business while continuing to provide good service with low attrition and a higher customer base. "I want us to be a leader in the ISO world," he says. "We are really a flagship property with the best contracts."

For the industry in general, Ed anticipates the future will encompass more mergers and acquisitions with a lot of ISOs being rolled up.

"The bottom line for these mergers and acquisitions is that ISO accounts are so valuable not just because of what they're looking to buy from your portfolio today, but what it's going to be worth tomorrow," Freedman says.

He sees a snowball effect with smaller ISOs signing merchants and then consolidating into bigger ISOs. According to Ed, the smart ISOs will be the ones who procure the right contracts, scale and relationships.

What is Ed's best piece of advice for agents who want to get smart? It involves a formula.

"Before you write another deal, ask yourself: Where do you want to be?" says Freedman. "Be sure the revenue is being shared with you. Be sure that you are protected in a contract for the life of the account. Be sure you're getting a fair revenue stream. Be sure the level of customer support is high. Be sure you share the same exit strategy as well as business philosophy with the company you are in business with.

"Don't fall into the quick ID number or quick approval trap. Don't do random business. If you go out and write another deal like that, you're cheating yourself and leaving a lot of money on the table."

SOURCE: 01/12/2002, The Green Sheet