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The Green Sheet Online Edition

July 11, 2022 • Issue 22:07:01

Compete with Square and remain profitable

By Dustin Magaziner

We've all been in situations where a close friend or family member approaches you for help setting up credit card processing for their new side hustle or small, part-time business. When you ask them how much they expect to process per month, they respond, "I dunno, maybe $300 to $3,000 per month."

Your eyes roll. You think if you set them up with your merchant processor, they'll balk at the monthly fees (PCI fees, on file fees, etc.) and you'll end up making just a few dollars per month in residuals, if anything at all. Heck, you may even lose money.

Then you wonder, should you send them to Square and not worry? Every agent faces this conundrum, and not just with business customers who happen to be friends or family members. My advice: accept them all, no matter how small. But make sure you have a winning solution for these merchants.

Small business, big potential

Let's look at three reasons why it makes sense to work with micro-merchants.

  1. There are a lot of them. According to the U.S. Small Business Administration, there are 31.7 million small businesses in the United States, and 81 percent of them (25.7 million) are small and have no employees. (Only about 19 percent, or 6 million, have paid employees.) The playing field is vast.
  2. Those small businesses will likely grow. As they grow, they will process more and more payments. If you are their agent, your residuals will increase with time. Remember, they are likely not starting a business with the intention of not making money. They might admit to happily processing $300/month at first, but they do not want to stay there.

    Imagine how painful it would be to send a friend to Square, then, two years later, learn they're doing over $5,000 per month and on track to get to $10,000 per month by the end of the year. But at that point, it's too late for you. They are already invested with Square or another competitor. It's so common to see smaller merchants grow, so get in early before Square or someone else does.

  3. You'll get referrals. Referrals are the name of the acquiring game. When something works, and is at an attractive price, people tend to spread the word. Positive word of mouth is how Square spread like wildfire.

Value in relationships

Your neighbor with her small bakery business might be delighted with the service you're giving her and introduce you to several other business owners she knows. Even if the commissions aren't high to start, relationships have value, and they lead to referrals and future business. When I was out selling years ago, one of my largest accounts came from one of my smallest. The referring merchant was so small it earned me no money. Most agents would pass on the opportunity, leaving a very large referral and eventual merchant in the wind.

It's time we gave even the tiniest businesses the attention they deserve and stop referring smaller opportunities to Square. We should all borrow a page from Square and find the right mix of fees and equipment that can make our services competitive while being there every step of the way as that micro-merchant grows.

I'm not advising that agents stop working with larger accounts or only target micro-merchants, but it's crucial to recognize that smaller merchants also offer value to your portfolio. Ignoring them is a mistake.

If you are passing up on micro-merchant opportunities or losing them due to the fees your processor charges, ask yourself why. If it's because you don't have a great solution for yourself or merchants in these situations, it's time to expand your offerings and take your business to the next level. end of article

Dustin Magaziner is CEO of PayBright, founded in 2012 with the motto "Merchant Services, Done Right." Top to bottom, PayBright is focused on providing agents and ISOs, and in turn their merchants, with the absolute best experience in the industry. By offering the absolute best rates, no contracts, free terminals and POS for each merchant and true transparency, PayBright has found a way to set itself apart in an industry of little differentiation. Feel free to reach out to Dustin with any questions at dustin@gopaybright.com.

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