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THE REAL COST OF OBTAINING A MERCHANT
ACCOUNT
Small or start up business entrepreneurs
constantly watch out for innovative ways
to save their precious capital. However,
if you want to save money by not
investing in the smart tools and
technology of today which appeal to the
customers, then you will mostly probably
loose out a lot of money in the long run
than you are saving in the short term.
Let’s take an example to make you
understand better. Consider two
companies Company A and the Company B.
Both of the companies have excellent
expertise related to the plumbing. Now
“A” has a CEO who is dynamic and
intelligent and is willing to spend
money in the short term to get long term
benefits. However, “B” has a CEO who is
very conservative and does not want to
invest in anything as he wants to save
money, even if the investment will be
very fruitful in the long run of the
company.
Both the companies have equal expertise
and both their initial schedules get
filled up with the same speed, after the
campaigns. But, after their first
quarters, “A” will be way ahead of “B”
when it comes to sales and jobs done.
Therefore, when “B” brought in a
business consultant to remedy the
problem he found out that:
The only difference between Company A
and B is that, “A” accepts credit cards
while “B” does not. “A” went another
step ahead by paying twenty dollars per
month for the wireless processing of
credit card service. This service’s
discount rate is 4% for every
transaction. “A” company’s CEO was well
experienced and therefore knew that
accepting credit card payments was a key
factor to increase revenue and stay
afloat in the competition. He also knew
that by accepting credit cards they get
their payments immediately unlike with
checks. This cuts down the paperwork and
also the accounting problems.
“B” company’s CEO realised his mistake
and opened a merchant account. He saw
that his company was losing about 5
transactions per month, with each
transaction costing him $500. Therefore,
his company was losing about $2500 in
revenue each month.
Sadly, the CEO of company B lost out
$2500*3=$7500 just because he did not
want to pay $20+$120+4% per transaction
per month, which is the cost of
accepting credit card payments.
Also, the lost customers of “B” come to
“A” because both companies have the same
quality of service. Happy customers of
any company freely advertise for the
company by telling their friends and
relatives to use the services of the
company.
Several of A’s customers would have gone
to “B” if they had only had a merchant
account to accept credit cards.
Therefore, “B” not only lost out on the
revenue it also lost numerous customers.
Also, the lost customers would have
publicised negatively against “B”
thereby bringing down the reputation of
the company by a huge margin. Now “B”
will have to pay lot more to make up for
the damage.
This is the True Cost of Not Having a
Merchant Account.
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