How Do I Avoid Payment Processing Fees?

As entrepreneurs and business owners, we're always seeking ways to optimize our earnings and cut down unnecessary costs. In today's digital marketplace, one prevalent concern that often nibbles at our profit margins is the fee associated with payment processing services. On the latest episode of Keep What You Earn, your host Shannon dives deep into this topic, unraveling the complexity of payment processing fees and offering a fresh perspective on how to approach them.

It's almost a rite of passage for every new entrepreneur to express a touch of shock or frustration upon realizing that services like Stripe, Square, or PayPal nibble away a small percentage of each transaction. This fee, typically around 3%, might seem like a thorn in the side, but as Shannon eloquently explains, it's simply the cost of doing modern business.

Why do we incur these fees? Shannon compares it to the cost of any other business service or software we use, like QuickBooks, DocuSign, or Canva. These tools, including payment processors, offer convenience and enable businesses to operate more effectively. The payment processors, instead of charging a flat fee, deduct a percentage from each transaction, aligning their costs with your sales activity. This model can be advantageous, as it scales with your business – you pay more when you earn more, and nothing when you're not making sales.

Now, you might wonder, "Isn't there any way to avoid these fees?" Yes, there is – accept cash only. However, as Shannon points out, this is hardly a viable solution in our increasingly digital economy. The reality is that consumers love the flexibility and benefits that come with credit card transactions, such as earning rewards points. By not offering a credit card payment option, you potentially limit your customer base and, consequently, your sales.

Moreover, payment processing services aren't just a line item on your expense report; they're an investment in your business's growth. They enhance customer experience by providing options and flexibility in payment methods – an invaluable feature that shouldn't be underestimated. Consider the higher ticket items or services you offer. By enabling customers to pay with credit, you're accommodating their financial planning and possibly persuading them to make the purchase they might otherwise defer.

It's also about business maturation. Offering credit card options signals to the market that your business is established, trustworthy, and customer-centric. In a world where electronic payments are the norm, not offering them can set you apart for all the wrong reasons. It’s a subtle message about your business's modernity and reliability.

Shannon challenges listeners to shift their mindset from focusing on the small percentage lost to fees to appreciating the larger percentage gained as revenue. Just like a professional golfer gladly pays their caddy a percentage of their winnings, business owners can view payment processing fees as a small share of their success – the cost of having an expert 'carry their bag'.

In essence, these processing fees facilitate a broader reach, a smoother transaction process, and ultimately, more sales. Just think – without payment processors, the 97% that remains after fees wouldn't even exist. It's not about the 3% you pay, but the 97% you earn through the convenience these services provide.

To bring it all together, Shannon invites listeners to stop dwelling on minimizing the unavoidable costs and instead focus on maximizing the value we provide, the sales we make, and the profit we take home. This mindset shift from avoidance to acceptance and strategy can free up our energy to concentrate on what truly adds value to our businesses.

Embracing payment processing fees as an integral, worthwhile part of your business model can transform an annoying inconvenience into a strategic advantage. Remember, it's not just about the fees you pay; it's about the earnings those fees enable.

With Shannon’s guidance, Keep What You Earn listeners gain insights to cultivate a healthy financial mindset equipped to thrive in today's entrepreneurial landscape. Here's to celebrating the remainder of our revenue and investing in the convenience that credits us with continued success.

What you'll hear in this episode:

04:27 Business owners prioritize customer payment flexibility and value.
08:03 Accept payment processing fees as an investment.

If you like this episode, check out:

Is Productivity the Same as Profitability?

Building a Business with Exit Strategy in Mind

The Best Places to Look to Find Cost Savings

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Watch this episode and more here: https://www.youtube.com/channel/UCMlIuZsrllp1Uc_MlhriLvQ

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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.