Is Payment Processing Necessary for a New Business?

I wanted to post this response to a potential customer I had yesterday, because it answers a lot of questions for a new business owner looking to get payment processing for their business:
Ms. Smith (alias of course), I understand what you are saying about your situation because I have a lot of customers in the same boat.  About 80%+ of my customers are new business owners.

Unfortunately, all these processing companies have 3-5yr contracts.  Because of a few unaccountable people who break agreements and jump around to save $10 here and there, everyone suffers.  It’s similar to why doctors charge you for canceled/missed appointments now, and not 15yrs ago.  Also because of the default rate of legitimate businesses that cause ‘losses’ to these companies who make money on the long haul.

As far as the usefulness of credit card acceptance: Everyone is using plastic and almost everyone is buying things they shouldn’t for things they can’t afford to. I am guilty of this (and I should know better).  This is the culture, so if that is the case, then look at the monthly cost of a payment solution in a different way.

1  For your particular products and services how much MORE business would you do if you could accept visa and master card?

How much profit is that each month?

How about annually?

And the opposite of that- your LOSSES?

How many people actually have extra cash on them to buy what you offer?

2 Talk to your accountant- how much of these costs for payment processing can you deduct against income?

If you can deduct, then you are losing monthly cash flow for that deductible amount, BUT NOT YOUR CASH.  An advantage of not being an employee.

Most people’s monthly cell phone bills are higher than a payment processing program and the difference, the cell phone usually doesn’t bring in income, however, both are essential.

3 What is essential to your business in 2009 and what is personal preference/ style?

If you take these things into account, then the decision making process will be simpler.

Who uses credit cards properly? That is, they purchase things that make them money, or they purchase what they have cash for by using a credit card for convenience, then paying off that amount at the end of the month to not pay any interest.

These people also want to get the airmiles/points for the purchases of the stuff that they would have to get anyways.

Broke people (I am including myself) want to get the airmiles/points to justify their purchases that will depreciate in value immediately.  And then they will be paying for that purchase 3-6 times over or more over their lifetimes.

I think that I calculated years ago that I would have to put $78 000 on my credit card to get a “FREE” round trip to see my friends in BC.

I also calculated that I would have to spend close to $4000 at Shoppers to get $50 back in their point system.

None of this business stuff is rocket science, just do the math.

My point in this rant is that every business needs credit card acceptance this day and age.  The difference that I see in new businesses from under $3 000/mth in total volume to $5 000/mth or more is accepting credit cards.

I’ve told lots of customers that MOST of these huge payment processing companies are evil, but I’m here to explain everything, so you at least are not surprised at who you made a bargain with.

Being surprised later is what causes the stress; you still have to deal with them even if you don’t like them, or agree with their charges.

Do you agree with your cell phone companies?  Still pay monthly?

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