Strategies to Minimize Payment Processing Fees
Aug 01, 2024In today’s episode, Shannon dives into the topic of minimizing payment processing fees, a common frustration among early-stage business owners. These fees, usually around 3%, charged by companies like Stripe, Square, and PayPal, are often seen as annoying expenses cutting into profits.
Shannon offers a straightforward solution: if you want to avoid these fees, accept cash. However, she highlights that accepting credit cards and paying the associated fees is essential in today’s business landscape. Similar to how brick-and-mortar stores invested in physical card-swiping machines years ago, today's businesses must pay for the digital equivalents offered by companies like Stripe, Square, and PayPal.
Unlike most software services that charge a flat monthly fee, these payment processors use a pay-as-you-use model, charging based on the percentage of transactions processed. Shannon points out that this can benefit businesses with fluctuating sales because costs are incurred only when sales are made.
Shannon encourages viewing these fees as an investment in your business’s ability to make sales. Accepting credit card payments increases your customer base by offering convenience and flexibility. Many customers prefer using credit cards to earn rewards or manage cash flow, and businesses that don’t offer this option risk alienating a significant portion of their clientele.
Focusing on the 97% of revenue retained rather than the 3% fee, Shannon shares an anecdote about PGA golfer Scotty Scheffler, whose caddy earns 10% of his winnings. This example highlights how small percentages become trivial when viewed in the context of overall success. For businesses, the 3% fee is a small price to pay for the ability to process credit card transactions, which facilitate larger and more frequent sales.
By embracing these fees as part of the cost of doing business and recognizing their role in facilitating sales, businesses can shift their focus to maximizing efficiency, improving customer experience, and driving profitability. Shannon reminds us to view these fees as a necessary investment for delivering greater value to customers and achieving sustained business success.
For more insights and actionable tips on financial management, check out Shannon's CFO On Demand service and stay tuned for the next episode of Keep What You Earn. If you found this episode helpful, please leave a rating and review on your preferred podcast platform; your feedback helps us reach more business owners like you. Check out the show notes for more information and ways to connect with Shannon. See you next time!
What you'll hear in this episode:
05:27 Encouraging credit card use for online businesses.
07:27 Payment processing fees are part of business costs.
If you like this episode, check out:
Is Productivity the Same as Profitability?
Building a Business with Exit Strategy in Mind
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