Merchant Processing for Start-Ups
Start-up businesses have special needs for merchant processing and can have some disadvantages, too. What they don’t have to have, however, is a processing consultant who is not committed to the well-being of the start-up enterprise. This commitment is important because while well-established businesses often face well-established risks and challenges – at least in cash flow – start-ups need to be analyzed differently.
The first question in determining whether you will need merchant processing is your customers. Do they expect to pay by credit card? If so, are recurrent payments important to you (and they should be important to most businesses). If your customers are corporations or businesses, this does not necessarily mean that they won’t pay by credit card. You will be far better off if you can get the customer to agree to pay immediately by credit card than if it pays by invoice and either by policy, happenstance, or necessity, defers payment on those invoices. If being able to take payment by credit card affects just a few decisions it could have a significant impact on the business.
On such things as that the life of the business can depend, but unfortunately customers and clients rarely tell you in advance what they will need. Most of them, obviously, will simply go to a business that offers them what they want and expect. While this fact is obvious to most, its importance can still be undervalued because there may not be any explicit link from the lack of payment choice to the statistical loss of business.
Cash-Flow and Other Considerations
If your clients will, or expect to, pay by credit card, a second question might be volume of anticipated payment flow. This could affect the type of processing you get and your willingness to make commitments.
Start-up owners have a particularly difficult time with this one, in my experience. Some entrepreneurs are overly optimistic and assume that the payments will flow instantly and in large quantity. Others tend either to underestimate volume or view the transactions in a way that might not be beneficial to their business. Just because, for example, low volume might translate into higher transaction costs for standard processing, this does not mean that flat rate services like the Square or Paypal are actually more beneficial. Determining whether or not to use standard processing takes a more sophisticated analysis than that, as there are times when paying a higher fee in exchange for some services that could help build the business makes sense.
Merchant Processing Isn’t Rocket Science
Merchant processing is not as complicated as it may seem to people who have their hands full of other things. Your ability to analyze the situation and come to the best solution, however, will be more impacted by what you don’t know (and don’t know you don’t know) than by crunching the numbers available. Just as it pays to have an accountant, for example, it also pays to have a merchant processing consultant you can trust. You only may need to see the tip of the iceberg, but it’s a good idea to have someone around who knows what’s below the surface.
After practicing law in St. Louis for many years, I established Gibert and Associates – a firm that provides consultation regarding merchant processing and helps businesses accept credit, debit and other electronic forms of payment.
Have also operated several small businesses.
My experience as a lawyer, start-up entrepreneur, and business person give me great sympathy for people looking for merchant processing services, and I am dedicated to helping business people understand and find the best services available.