The Green Sheet Online Edition
December 14, 2009 • Issue 09:12:01
The best moves of 2009 - Part I
With the close of 2009 approaching, we sought insights from The Green Sheet Advisory Board to help you, our readers, as you strategize for the coming year. We asked the following questions of our industry leaders about their business decisions in the past year:
- What is the absolute smartest thing you've done for your business in the past year?
- Why was it a good move?
- Did it require you to take risks? If so, what were they?
- Is it something other companies could duplicate or something only your organization could do? Why?
- What do you think your next smart move is going to be?
Following is the first part of their responses. The remaining answers will be published in The Green Sheet, Dec. 28, 2009, issue 09:12:02. Thank you to all advisory board members who participated.
Attorney at Law
1. Having worked as a payments industry lawyer for a number of years, I decided to offer business strategy consulting in addition to legal advice.
Many lawyers make the foolish mistake of thinking they would make good entrepreneurs because they have spent years advising entrepreneurs. I have not made that mistake.
Instead, I draw on the hundreds of payments business scenarios I have seen to provide a little bit of consulting when clients are making difficult decisions about the direction of their payment businesses. This consulting is most appreciated by businesses that are new to the payments space.
2. I am drawing on the area of business and law that I already know. It's gratifying to have knowledge in a specific area and for clients to see value in the knowledge. Of course, everyone doesn't require business consulting. But for those clients who need it, I am very pleased to help.
3. The principal risk in offering business consulting is that many entrepreneurs are (rightfully) proud and not interested in taking advice from other people on how to improve their businesses. The solution is to always be tactful and have a clear understanding of clients' expectations and do the very best to meet those expectations.
4. Yes. In today's economy, on top of their usual offerings, businesses have to prove to their clients that they are adding value to their clients' enterprises. Some products and services, other than core processing services, can actually increase profits for merchants. Those services are especially interesting now.
5. My next smart move will be to try to create more value for each client within each hour that I work for them. By using technology, such as electronic filing, I am managing to save time for clients and thereby delivering more value to them in the same amount of time. In short, I am always trying to become more efficient for the benefit of both my clients and my practice.
Secure Payment Systems Inc.
1. We started a program that gave merchants a pseudo-financing option through the use of checks. We pay merchants all of their money upfront, and consumers get 90 days to pay.
2. Absolutely. There were "90 days same as cash" funding options with checks in the marketplace, but we found none that would actually fund the merchant upfront.
3. Yes. This is an extremely risky proposition, even using proven check-risk tools combined with some credit background; we still have no real guarantee that the consumer is going to pay us back.
The merchant is made whole and can rest because we have guaranteed the transactions. We, on the other hand, have to rely on our experience, savvy and expertise to collect these funds. And in this economy, consumers may not have those funds at all.
4. Yes, but it is risky. It is likely competitors will emulate this program eventually, but due to the risk and the fact that we have filed a patent on the procedure, I would say we are safe for the time being.
5. We have another program that will blow the doors off of this one, which will be revealed at a later date.
United Bank Card Inc.
1. The best decision I've made in the past year was definitely the launch of the free electronic cash register (ECR) program. While it required a tremendous investment in new technology, it clearly delivered a valuable new product for our ISO partners and merchants.
Integrating the capabilities of a cash register and a credit card terminal into one device truly revolutionizes the way merchants accept credit cards and provides a unique sales tool exclusively to our ISO partners.
2. Up until now, ISOs were competing solely on rates and fees. The free ECR program changes that. It provides an enormous competitive advantage to our sales partners by allowing them to offer a valuable piece of equipment that is vital to any business's operations, completely free of charge.
By all measures, this program has proven to be an overwhelmingly good business move. Since its launch, we have seen an astounding 40 percent growth in application count, higher merchant satisfaction and lower attrition.
3. Risks are always involved with any investment in new technology, most notably the money and resources that go into the innovation, but when you believe in the product and your sales partners' ability to market it, you have a winning formula.
4. We have exclusivity on the product, so it will remain unique to our company. When so much is invested in a new technology, it's important to protect that investment. We made sure we did exactly that with our innovative, free cash register program.
5. I think we will continue to focus on our Harbortouch and ECR product lines. These products, as with anything we do, are constantly evolving and being improved.
We will continue to enhance their capabilities and offer additional complementary services and solutions in line with what our POS systems and free cash registers represent.
Allen P. Kopelman
Nationwide Payment Systems Inc.
1. We looked at all our expenses and overhead and cut back where we could. Also, we're looking to take advantage of the downturn in the real estate market and either lower our rent or buy a building/office. In addition, we have technology, and we figured out a way to get more resellers by offering it to merchant level salespeople (MLSs) and ISOs. We started the company Payment Access to do this.
2. It is a good move to lower fixed expenses if you have the chance. The reseller program is in the beginning stages for Payment Access, but we are slowly getting it going.
3. Being in business is always about taking risks. One risk is teaching MLSs how to make money and just hope that they partner with us to get the job done and not go out and try to do it some place else.
The risk associated with lowering expenses is that you don't want to sacrifice service and quality. The risk in getting a reseller channel going is that it is a shift from selling merchant accounts to selling resellers - MLS, ISOs and so forth - but we have over 1,000 merchants using our software, and it is a great product for the middle market merchant.
We just have to find the right salespeople who understand how to sell to larger merchants in the middle market.
4. Any MLS or ISO should be looking at what is going on in the market. Integrated solutions are growing. Many companies are cutting out the MLS and ISO by doing direct deals.
Partnering with Payment Access gets ISOs and MLSs a private-label solution they can market and use to build their brand, while getting an integration done with a company to bring in more businesses. Any MLS, ISO or other qualified professionals can partner with us. We will assist in integrating their solution into Payment Access to enable payments. Deals like this are being done every day. Partner with someone who can private-label for you, and learn how to grow your business.
5. Growing our payment access network and gaining acceptance by ISOs and MLSs.
The key is building Payment Access into a product that is being private-labeled.
AmeriBanc National Ltd.
1. My partner, Chris McIntire, and I decided the smartest thing we've done in the last year was to fall back to our core competencies and, frankly, abandon any new sales channel we were experimenting with. With the boom came the financial ability to investigate new areas of revenue production to capitalize on the boom economy; with the bust, we had to be realistic and focus on our core game plan, which became simply to "stay in the game." This also led us to let go personnel that weren't generating income, or weren't critical for other reasons, to reduce our expenses. We even renegotiated with our landlord to cut our lease in half for six months. Nothing was sacred; we had to get realistic and play conservative instead of hoping things would improve.
2. This was a good move, as the economy didn't just bounce back, and there's still a lot of progress to be made. Our processors began to implement fees to merchants and raise some of our prices also, so we had to rethink how we compensate our consultants and pass some increases through to merchants so we could preserve our margins.
3. This was risky in that everyone is feeling the pinch, and increasing prices seems like it could aggravate the problem, but it hasn't been too problematic since we committed to the course of action.
4. Every company can do this; it's just there is a natural reluctance to change even when you have to. It's intimidating to lead a company in a tough economy. A lot of our competitors went out of business because they had extended themselves too far or weren't willing to fully commit to changing to the level it would take to survive and eventually thrive.
5. Our next move is to reach a point of stability and profitability that we are happy with and save even more money than we did before to insulate us further from economic downturns. We didn't have much debt to begin with, which was a major help, but we found many of our vendors and processors had a lot of debt, and they weren't able to hold up their end of agreements we had negotiated in better times.
So it really is a word to the wise to make sure you're never completely reliant on actions of other parties for survival, as that can turn into unpleasant leverage they are all too willing to use if they feel they have to.
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