Small Businesses are said to be the life and blood of the American economy. According to the Small Business Association, in 2011, 48.5% of all private sector employment came from small businesses, defined as a company with less than 500 employees. These businesses are also responsible for 65% of net new jobs since 1995. It’s easy to see just how much our economy relies on these businesses, including over 22 million Americans who are self-employed.
However, the failure rate of these new businesses is discouraging. Some of the experts say that 8 out of 10 new businesses close within 18 months of opening. Imagine seeing your life savings vanish on your failed business venture.
That’s just not right. And that is why we will be posting weekly tips and ideas on how small businesses can cut costs and improve the chances of success. Posts will range from topics on business accounting and finances to ways to attract new customers, whether you run an e-commerce upholstery shop or a French cafe. So stay tuned.
Without further ado, the first weekly small business topic ……… CREDIT CARD PROCESSING FEES!!
It might sound archaic to most, but some business still don’t accept plastic as a form of payment due to the processing fees. It’s true that processing fees cut into profits, but the convenience of using a credit card will increase ‘impulse purchases,’ which will help offset those fees.
Have you ever been to a bar where they had a $10 minimum, meaning you were ‘forced’ to buy two beers rather than one? This is one popular way, made legal in 2010, for merchants selling in volume to protect themselves against transaction fees. While this technique will help lower costs, imagine if it were your local corner store implementing this $10 minimum. If all you needed was a $3 toothbrush, you might bring your business elsewhere. The happy medium here is to suggest a minimum of $10, but not require the customer to meet that minimum. This should result in not only customer retention, but also additional ‘impulse purchases’ for customers who are feeling guilty about staying under the $10 suggested minimum. These minimums can also be suggested on your website, for those of you in e-commerce.
Oh, and one last thing … These processing fees are 100% deductible when it comes time to file taxes.
Next Week: Extending Credit to your Customers … Good or Bad Idea?