Merchant services are still one of the biggest and most frustrating struggles business owners deal with. Of course, payment processing is necessary—but does it have to drain your income?
The answer is no.
If you know how to choose the right merchant services provider, you can save money and time in the long run.
To help figure this puzzle out, we talked with Keith Sconiers, author of The Truth About Accepting Credit Cards. Keith is also the founder of PaySuite, a Portland-based payment technology company that helps entrepreneurs and software companies manage their payments.
Having worked in merchant services for six and a half years, Keith has learned a thing or two about how to choose the right provider for your business. He shares 5 smart tips that can help small-business owners like you navigate the murky waters of payment processing.
1. Learn the process behind merchant services.
Unfortunately, many small-business owners don’t understand the merchant-services industry in general. And that's understandable!
Before launching PaySuite, Keith worked at Heartland Payment Systems, one of the largest payment processors in the nation. He confesses that he didn’t understand how credit card companies got paid until he had been working at Heartland for six months.
“It speaks to how complicated it can be,” he says. “And then for small-business owners to try to figure that out is very challenging as well.”
At the very least, entrepreneurs should understand how credit card networks like Visa, Mastercard, American Express, and Discover get paid.
Whenever you use your credit card, the merchant pays the network a small percentage of that transaction. This fee is called “interchange” and can vary based on the network, number of transactions, and the value.
2. Choose a provider that offers more than payment processing.
“Being a small-business owner, you have to wear multiple hats,” Keith says. “So you have to make sure you’re getting the best setup and the best price for the best technology for growing your business and accepting payments.”
An integrated solution can save small-business owners plenty of time and money each month.
Look for a provider that's flexible enough to add additional features as your business grows. That could include recurring payments, point-of-sale, appointments, online payments, or customer loyalty solutions. If the provider offers a plugin for your website, that's even better.
You also want to make sure the software is easy to use. The dashboard should look clean and be easy to navigate. By combining various tools you need into one software, you save money in the long run.
3. Leverage customer data from your provider.
Your merchant services provider should give you some way to gather customer data to fuel your marketing. For instance, if your client purchases a certain item from your online store, you could use targeted ads to promote similar items to them.
“Many small-business owners still haven’t gotten to the point where they know how to leverage that customer information so they can get more clients,” Keith says. “There are tools like Facebook pixels that you can put on your website so you can find other people who are your ideal client.”
Even if you’re not ready to launch ads right now, using tracking tools like Facebook pixels can help you gather the data you need so you can reach the right people once you are ready for ads.
4. Refuse to sign contracts that could cost you thousands of dollars.
Be wary if your provider insists on you signing a contract. These contracts are usually designed to benefit the provider, not you.
“In the fine writing on these agreements, there are large penalties, where a business owner would have to pay anywhere from $1,000 to $5,000 just to cancel it,” he warns. “And if you’re a small business, $5,000 is a lot of money.”
For this same reason, Keith also advises against signing leases for processing equipment. If you absolutely have to sign a contract, be sure to take a long look at it so you fully understand what you’re getting into.
5. Ask the right questions.
Before you meet with a merchant processor, Keith recommends getting a clear sense of what your needs are before beginning your search. From those needs, write down a list of questions to ask the representative you're speaking with.
“In those questions, you’ll find out whether the person you’re meeting with understands the industry and understands your business,” he says. “If you can do that, then you’ll position yourself to protect your business from any unnecessary circumstances as it relates to dealing with bad agreements or bad service providers.”
Some good questions to ask are:
· What equipment would I receive and how much would it cost?
· Are there any penalties for canceling your services?
· Do you charge markups on top of interchange?
· What other fees will you charge me?
· Who do I call if I run into problems with my payment processing?
If you’re careful to follow Keith’s tips, you’re well on your way to saving money and growing your business with your payment processor!