Are you using a standard Mercury Control? Other controls have different travel for shifting length.
If you have a Mercury control, set the control to neutral. Remove the wrap cowl. Disconnect the throttle cable. Remove the shift cable from it's clamp. Now verify the motor is still in neutral, and adjust the barrel nut to fit the clamp.
.Mercury controls have plenty of "travel" to engage all gears.
The way I have been adjusting it is by pulling the cable out and twisting the black cylinderThe shift rod should not have any play in it. The shift slide should be in about the center of the slide travel. If you set the gearcase to neutral, does it "click in" and stay there? It should stay in neutral, and allow you to adjust the barrel nut to fit the clamp, when the control is in neutral as well.