Credit card companies offer roughly 500 tiers of pricing, but until relatively recently that information was available only to credit card processing companies. Today, pricing tiers are available online. That’s made the industry more competitive, and driven down profit margins at businesses like TMC, Perry said.
Many small business owners have found themselves so overwhelmed by choice that they’ve opted for easy-to-understand payment systems.
Much of TMC’s work today involves educating merchants about the true cost of these allegedly easy credit card options, Perry said.
The 2.7 percent to 2.9 percent transaction fee that’s typical of well-known vendors like PayPal or Square might sound attractive, but businesses can lose a lot of money if they go for those flat rates, she explained.
“If you have a business where the average ticket hovers around $50 or $60, most consumers are going to use their debit card. Debit card rates can run from under 1 percent to maybe 1.6 percent. If you are using a Square product, your price started out at 2.7 percent. Now all of a sudden, that sounds like a lot of money,” Perry said.
But picking the best option can be confusing. A nonprofit that needs to accept payment for one annual fundraiser per year has different needs than a contractor who travels to customer homes, brick-and-mortar storefronts or online vendors.
“We spend a lot of time teaching merchants about interchange, and why one rate may not be the best fit, depending on the mix of cards they take,” Perry said. “Sometimes we tell people to stay where they are. There are enough other people out there who don’t have the right processor for us to stay in business.”
Perry said that a focus on honesty and integrity has been key to building the relationships that have kept the company growing. Today, Total Merchant Concepts receives referrals from 147 credit unions across the country.
Those referrals are fueling nationwide growth. The company now employs 17 people and is based out of an office, not a home. In 2011, for the first time, TMC did more business outside Washington state than inside the state.
The Perrys have hired business consultants to map out future growth.
“We’re treading in unfamiliar territory,” Cheri Perry said. “Margins are smaller, there is more competition, so we are looking for ways to increase the number of clients we work with. That would give us a chance to grow our staff. But we want to make sure that we don’t grow so fast that we can’t continue to deliver what we promise.”
The Perrys do know that they don’t want to sell their business, though they have received several offers.
“And no matter how big we get, I always want to remember how we maintained our growth: delivering the best pricing while keeping integrity,” she added.