Starting a business can be one of the most challenging and most rewarding things you do during your career. Doing it the right way will set you up for future success and help you grow at your desired speed. From the colored diamonds sector to food truck franchises, there are a wide variety of industries with business opportunities. One of the fastest-growing businesses today is the online financial services industry which has lead to the growth of cashless payments around the world.
One way for entrepreneurs to break into the online payments industry is by starting a payment processing company. There are many different segments of payment processing; from development and programming to front-line sales with many different segments in between.
Establish the Business
According to exactly.com, opening a credit card processing business will require a variety of resources including knowledge, time, funding, banking relationships, and more. However, in order to secure those things, you first need to file for your articles of incorporation and secure a tax ID number from the IRS. If you are partnering with an existing company, they will have a defined process for this and additional corporate filings might not be necessary.
There are a variety of options available if you decide to incorporate them. Most small businesses start as either a sole proprietorship or a limited liability company (LLC). Using an LLC is recommended by many tax professionals as it provides more protection for your personal assets than a sole proprietorship.
As a sole proprietor, your personal Social Security number will be used as the tax ID number for the business and any claims against the business will be done directly against you. With an LLC, any claims made against the business will impact the business, but not your personal assets. This is an important consideration when deciding how to file your business.
In addition to your LLC, you will need the following:
- Merchant services provider account
- Payment processing gateway with a good payment dashboard
- Commercial insurance
- General liability
- Business property
- Errors and omissions
- Worker’s compensation if you have employees
Create a Business Plan
After establishing your business and filing for your tax ID number, you’ll want to create a business plan. Not only is this a smart way to do business, but it may also be required by your merchant bank or payment processing company. This can help them understand your plans and goals that you have for your business.
A business plan should include all of the following elements:
Executive Summary
This is an overview of the business for readers to get a snapshot of what you’re trying to accomplish. This gives them a quick synopsis of the business model and your plans for success without going through every single page in detail. It should include names and information about all directors and owners involved in the business, as well.
Company Description
This section is really important when trying to secure funding for your business. It should include all pertinent information regarding how the business is established and what your key objectives are. It should also provide a summary of your products and services.
Market Research
Successful market research will entail a wide variety of information from competitive analyses to potential clients and their specific needs. However, the two most important pieces of information in this section are the market demands and how your business can satisfy that need.
Other pertinent data in this section will include your target market segments and current marketing data to support that information. A marketing plan is also a great thing to include in this section. This needs to include digital, print, email, leads/prospecting, and other elements of marketing that are relevant to your business.
Niche
Your business plan should outline the specific niche in which you plan to do business. While it’s not necessary that you limit yourself to only one type of client, it can certainly help you become the expert in an area. In the credit card processing industry, there are many companies that focus on specific industries, whether its door-to-door sales or high risk merchant account services. Try to focus on providing credit card services for an industry in which you’re well-versed, instead of trying to be a jack of all trades; this will help you grow your business.
Target Market
Within your niche, you should also establish a target market of clients you want to attract. For example, if you want to be a credit card processor for health & wellness companies, you need to consider which types of companies you want to service. An online supplement company will have very different needs than that of a law office.
Management Team
In order to reduce internal confusion and help potential customers understand who they are working with, establishing roles will help clarify how the company operates. This introduction can include details about the team and what each member of the team brings to the table in terms of skills and experience.
Financial Plan
Last but not least, your business plan should include a robust financial plan with a budget and a contingency plan. If you have historical data, you can provide it in this section. Its usually recommended using a professional accountant to help you develop this section.
Partner with Financial Organizations
All merchant services companies will need to partner with one or more financial institutions to provide the banking relationships and technology to take on customers. Depending on the type of business, one or more banking relationships might be needed to accomplish what a credit card company needs.
Launch Your Business
When you make it to this step in the process, you’re finally ready to launch your business. If you wrote a solid business plan with a detailed marketing plan, all you have to do now is execute the marketing strategy. This may entail a mix of digital and print advertising, along with grassroots marketing and networking.
Pay close attention to this process and keep track of which methods work and which ones don’t. This will help you optimize your marketing strategy and launch successful campaigns in the future. As a small business owner, getting to know your business neighbors and your community is critical. A great way to do this is by joining chambers of commerce, business networking groups, and other agencies that bring business owners together.
How Much Does It Cost to Start a Credit Card Processing Company?
The cost of starting a credit card processing company can vary on a number of factors. Many times the cost is measured in sweat equity. This can change drastically based on your location, your marketing strategy, and your workforce. If you plan to build your book of business by going door to door, that can alter the cost verse a company launching through social media and other advertising campaigns.
How to Sell Merchant Services
Selling merchant services really isn’t much different from other types of sales. The key thing to remember is that you’re selling to businesses, rather than directly to the end-user. Other than that, the tried-and-true sales principles apply:
1. Identify good prospects and disregard the bad ones. Don’t waste your time on prospects that are outside of your niche or target market. Remember, stick to your business plan.
2. Secure a processing statement from all prospects. That’s your opportunity to evaluate their current services and show them why your services are superior.
3. Practice active listening skills. You should be talking half as much as your prospective client. Let them tell you all of their pain points and objections. Make the ask and then be silent. Many salespeople talk themselves out of business by not allowing the client time to think and respond after presenting the offer.
4. Don’t be desperate, hurried, or pushy. Allow them to make decisions on their own time. Credit card processing is a critical component of any business and it will take time for that business owner to build trust in you as a merchant services provider. Rushing them into a decision they’re not ready to make is a sure way to lose them as a client.
5. Be organized. Whether you’re using a CRM system, or just a spreadsheet, keep track of offers that you’ve made, follow-up appointments you’ve scheduled, and other promises that you need to deliver on. Again, this business is based almost 100% on trust. Be organized and follow through.
Final Thoughts
Starting a credit card processing company can be a very lucrative business, especially at this time when payment technology is shifting towards a cashless society. While it can require significant amounts of work to start in this industry, the end results can be very rewarding for anyone entering the payment processing space.
