The merchant services industry is a competitive one, and account reps. are very good at getting themselves endorsed by local chambers of commerce and other business groups. Speaking from experience, I can tell you that an endorsement is not the best way to select a payment processing solution. This is because these accounts have relatively complex terms and conditions, and no one setup is the universal answer for all businesses. Therefore, the best way to proceed is to interview as many service providers as you can.

North American Bancard (NAB) is a relatively well established payment service provider based in Troy, Mich. The company services more than 100,000 businesses with a full slate of payment services, including the traditional credit and debit card solutions and other offerings like business cash advances, gift card/loyalty card programs, electronic processing and check verification services.

NAB processes more than $8 billion in transactions annually, and so has the scale to offer 24/7 customer service, among other things. Round-the-clock customer service is super important if your business is open during nontraditional hours or if you only have free time during nontraditional hours. Most small business owners fall into one or both of those categories.

NAB’s scale also makes the company relatively easy to research. You can view a few different online resources to learn more, including:

1. North American Bancard Wikipedia Page
2. North American Bancard Company Profile
3. North American Bancard Blog

When you review a service provider’s blog or profile page, you are basically looking to understand the business’s position in the industry. Is the company big enough to handle your needs? Or is the company too big, such that you won’t be an important customer? You also want to know that the company offers the services you need now, and those you may need in the future.

Blogs and other additional resources, unfortunately, are not available for all providers. By comparison, the first payment processing provider we used in our business had no website, no blog, and little means of contact. I had a phone number that someone would answer between 9:00AM and 5:00PM, but that was it. We selected them based on a chamber endorsement, and eventually regretted making the decision too quickly. There are two huge reasons you’ll want to avoid making the same mistake:

1. You will probably incur contract cancellation charges for prematurely switching providers.
2. Merchant account reps. like to cold call. You want to be confident in your service provider, so you aren’t doubting or regretting your decision every time a competing provider calls you. Chances are, you don’t need any more problems to solve, right?

To learn more about NAB, visit the resources above or the company website at www.nabancard.com/

But that’s theory. In practice, the decision to set up a merchant credit card processing service isn’t always a no-brainer. It’s important, first, to understand how you would use a merchant account. Do that analysis upfront and, if you decide to proceed, you will be better prepared to select the right service provider.

Questions to ask

What are your sales channels?

Analyze the accepted forms of payment in your current and prospective sales channels. For example:

1. Online retailing to any customer type generally requires some form of credit card processing service, either through a direct provider like North American Bancard or through a third-party provider like PayPal.
2. Door-to-door selling usually involves cash or check.
3. Direct mail sellers tend to accept check and credit card.
4. Storefront, consumer businesses vary in accepted forms of payment. The decision to accept credit cards should depend on the average sale and the composition of the store’s walk-in traffic.

Who are your customers and target customers?

Credit card processing capabilities are often more important when you are selling product (rather than services) to consumers (rather than businesses). If you sell t-shirts on your Web site, you won’t make many sales if you ask your customers to mail you a check. On the other hand, if you are mowing lawns or repairing computers for your neighbors, your customers might be more comfortable paying in cash.

Business customers, particularly larger corporate entities, tend to pay their service providers via check. This varies by industry and company size, of course. If you aren’t sure, ask your customers to specify their payment preferences.

The other factor to consider is where your business is headed. Do you have plans to go after new customer groups? Check out what the competitors are doing in that space; if they accept credit cards, then you need to as well.

What is your average sale amount? How tight are your margins? How flexible is your pricing?

Credit card processing comes at a cost. If your average sale is tiny or your margins are thin, it can tough to absorb those extra fees. Your options are:

1. Adjust your pricing
2. Accept a lower margin in return for higher sales and lower AR. Make sure you set sales and AR goals, and then track your performance against those goals.

What are your average monthly sales? What percentage of your customers can you convert to credit card payments?

A portion of your processing fees will be composed of monthly minimums. You’ll have to estimate what your average monthly credit card sales might be for two reasons. One, it helps you determine the bottom line impact of accepting credit cards. And two, it helps you understand the terms offered to you by prospective merchant service providers.

Choosing to accept credit cards is like any other business decision: you have to do your homework to identify the right course of action.

One of the challenges of running your own business is finding the time to manage the details and still do the work that makes you money. If you are a graphic designer, for example, you must market, sell, bill and collect — while still finding the time to design. When your scarcest asset is time, you are attracted to services of convenience, services like the Intuit QuickBooks Billing Solution.

This service allows you to set up your invoices in QuickBooks, and then transmit them electronically to a fulfillment center. The fulfillment center then prints them, stuffs them in envelopes and mails them off for you. Having spent too many hours printing, stuffing and stamping dozens of invoices monthly, I found this service offering to be somewhat compelling. The cost is reasonable as well, and so I decided to give it a shot in March of 2008.

Cost

The cost of the billing service is $14.95 monthly plus $0.79 per invoice, which includes the printing of the invoice, plus the envelope, return envelope and postage.

Experience

I really wanted the billing service to work out; I loved setting up the invoices, clicking send and then being able to move on to other tasks. While using the billing service, we went through less paper, ink, envelopes and stamps. All good outcomes.

Unfortunately, Intuit QuickBooks Billing Solution just isn’t reliable. Customers repeatedly told us they never received their invoices. Sure, you do accept these comments with some skepticism — just like you do when a customer tells you the check is in the mail. But the number of customers claiming they didn’t get an invoice definitely increased after we started using Intuit’s solution.

The final straw came in November of 2009. We sent out a batch of invoices at the end of October. Two weeks later, we received an email from Intuit explaining that, due to a technical glitch, our invoices were not mailed. We were assured that the invoices would be mailed out by late-November.

Now when you bill your customers monthly, they get a little irked when you send them one invoice and then another a week later. But this is exactly what we had to do. Our past-due balances shot way up and our cash flow for the month fell well short of projections. Now, three months later, we are just starting to get our monthly customers caught up and our receivables back under control.

We have since canceled the billing service and are, once again, printing, stuffing and stamping our own invoices.

Here’s my quick take on the Intuit billing service: avoid it. Our experience may have been an isolated incident, but it’s the type of incident that could put some businesses out of business. If you are walking a delicate balance with your cash flow, you can’t afford any upsets.

This cost may be measured in terms of money, time or even missed opportunities. That’s why it’s so important that you understand who your most profitable customers are, and focus your energy on finding and keeping them.

To do this, you’ll first need to define your ideal customer profile. This will help you focus your efforts like a laser, enabling you to get the best ROI for your lead generation efforts.

Take a look at your existing clients.

You may not realize it yet, but your ideal target client is sitting right there in front of you.

In business, there’s an “80/20 rule” which states that 20 percent of your clients will generate 80 percent your income. You need to analyze your current client list in order to isolate the top 20% of your customers, and make careful notes about all the characteristics that they have in common.

Once you’ve determined who your best clients are, invite these customers out for lunch and ask them why they decided to do business with you. You might be surprised by their answers.

Determine which problems you can solve

Now that you know who your ideal customers are, you need to figure out how you fit into their world.

• What problems can you help them solve?
• What causes do they care about, which you can help support?
• What communities do they participate in?

This will help you decide where to focus your energies for future campaigns.

A perfect example:

When Kimberley-Clark first introduced Kleenex disposable tissues in 1924, they were marketed to women as a means of removing makeup.

But, as you might have guessed, their best customers found an alternative (and less pleasant) use for these tissues. Although the company initially objected to having their brand portrayed in such a negative manner, they did their market research and decided to follow the money… even if it was less glamorous.

After the re-branding, the product became so successful that Kleenex is now a part of our everyday vocabulary.

Remember, your brand reputation is determined primarily by your customers. (Not your company) Talk to your most profitable clients today and find out more about how you can help them interact with your brand more effectively.

About Storagepipe:

Storagepipe is a leading provider of online backup services, and they also offer a partner program that assists partners and resellers in creating & selling their own backup software products.

One option that’s becoming more popular for entrepreneurs and small business owners is the merchant cash advance. Merchant cash advance providers offer cash upfront in exchange for a piece of the business’ future sales. While this arrangement technically isn’t an extension of credit, it does generally function like an unsecured small business loan: the business obtains a lump sum of cash and repays it, along with a fee, over time.

Banking on credit card sales

The merchant cash advance provider is usually a credit card processor that takes its repayments from the business’ future credit card sales. Therefore, the approval of a merchant cash advance is dependent on the business’ credit card processing history; businesses with higher levels of credit card processing activity will be approved for larger cash advance amounts.

While the business’ historic credit card processing activity drives the cash advance amount, it is the future credit card activity that determines the amount and timing of repayment. The merchant cash advance provider will collect a percentage of each credit card transaction processed by the business until the amounts owed, including fees, are fully repaid. Essentially, this creates a repayment schedule that matches the business’ sales activity—when sales are good, the repayments will be higher, and vice versa. For seasonal businesses, this type of repayment is easier to digest than a fixed, monthly loan payment.

Bad credit not an issue

Candidates for a merchant cash advance include retailers, restaurants and service providers who process a reasonable amount of credit card sales monthly. As long as the credit card sales are sufficient, a business’ bad credit won’t be an issue. Also, many merchant advance providers will not require a personal guaranty or any type of security in the business’ assets. Therefore, businesses that don’t qualify for non-guaranteed, unsecured small business loans, for whatever reason, may find the merchant cash advance is their only workable option for fast cash.

Cost and cash flow considerations

The primary disadvantage of the merchant cash advance is cost. A merchant cash provider may be quick to explain that the business doesn’t incur interest charges, because the advance is not a loan. But the business will incur fees, and those fees can be high. Any business considering a merchant cash advance should evaluate the quoted fees as finance charges; as a percentage of the advanced amount, those fees will probably be more expensive that what a business might pay for a conventional, unsecured small business loan. Of course, when the small business loan isn’t available, the merchant cash advance begins to look increasingly attractive.

The small business owner should also carefully consider how the repayments are going to impact the business’ cash flow going forward. Paying out 15 percent of all future credit card transactions, for example, can be burdensome if the business is already barely making ends meet. On the other hand, if the advanced funds will be used for a project that increases sales, the repayment might be easily managed.

Here’s the bottom line on merchant cash advances: they have a place, but they’re not appropriate for businesses that are barely keeping the doors open. Business owners should evaluate the opportunity carefully to ensure that the merchant cash advance is indeed the right solution.

Advertise more efficiently

Cancelling all of your ad contracts isn’t an option if you plan to stay in business. If you are wondering why, read Recession Market Strategies. What you can do is…

take steps to improve your advertising efficiency. Admittedly, this is a puzzle that’s not neatly solved with a few calculations. Review your current spending and shift money into the initiatives that create lasting impressions with the right audiences. Reassess your “guilt-induced” advertising, which might include listings in publications produced by local nonprofits or even your chamber. If those listings aren’t putting you in front of the right people, consider giving a straight donation instead of draining your ad budget. Find a balance between traditional advertising and grassroots campaigns.

Change your policies

The options here depend on what kind of business you have. Potential strategies include:

• Paper conservation policy: employees are not allowed to print out personal information on company ink and paper; emails should not be printed; documents for internal use should be printed on both sides of the paper
• Overtime policy: prohibit overtime without prior approval from a supervisor; start using temporary employees, when possible, to fill in gaps
• Document transmission/correspondence policy: advise your employees to use email and fax instead of snail mail

Team up with neighbors

Organize a buying group with neighboring businesses to take advantage of bulk discounts on supplies.

Reassess your subscription-based fees and dues

Review what you are paying for landlines, Internet, cell phone service, cable—basically everything that gets auto-billed to you periodically. These subscription services can be hidden stores of excess costs, simply because they are easy to ignore over time. Questions to ask include:

• Could you do with one less phone line? Evaluate the pricing on buying a switching box that routes faxes from one landline.
• Can you save by bundling the phone lines and Internet service?
• Is Vonage or a similar low-cost service an option for you?

Also evaluate the membership dues you are paying. If you don’t have the time and resources to work these memberships, you may be wasting money on those dues.

Farm out your space

If you have an office, consider leasing a corner to a successful freelancer. If you have a retail space, lease space to a local artist or designer who offers products that are complimentary to your own. Or, sell products on consignment. In a retail environment, this strategy takes a little extra analysis. For example, you need to evaluate whether you are giving up revenue dollars when you give up the space. If you have extra space due to inventory reductions, then the money earned on the lease or consignment deal should be gravy.

Refinance your debt and contracts

It never hurts to ask. Shop around first to get a feel for market interest rates and market lease rates. Apply for a loan from a competing bank or credit union, so you know how marketable your debt is. Then approach your bank and your landlord and ask about renegotiating your contracts.