As the world becomes increasingly technology-dependent, online payments have become many’s primary modes of payment. Credit card payments are at the top, followed closely by debit card payments.
Interested in starting your very own credit card processing company? Here are five essential steps you need to take note of!
1. Create a Business Plan for Your Credit Card Processing Company
A common denominator between a tiny bakeshop and a multi-million dollar company is that both started as a simple business plan. The only difference is how well it was created and executed.
A successful business runs on a solid business plan. Hence, you’ll need to spend ample time fine-tuning it until it’s almost flawless. Having a highly-detailed business plan lets potential business partners know that you are serious, reliable, and knowledgeable about the field you’re entering. Thus, increasing your chances of receiving support.
A business plan is divided into the following sections:
The first section is a brief but comprehensive summary of your entire business plan. This lets readers quickly understand what you’re trying to propose.
Next, introduce your credit card processing company. This includes your business name, history, goals, location, and the type of credit card processing services you offer (e.g., merchant account provider, payment processing services, etc.).
When deciding on a company name, keep it simple and memorable. Long titles are counterproductive; your customers will most likely forget about them even with good merchant services.
Credit Card Processing Industry Analysis
Present valuable information about the credit card processing industry. Highlight its significance to society and the trends that affect it.
Conduct Market Research and Analysis
Establish your target market. Present their age range, location, and how they will benefit from your credit card processing company.
Research other credit card processing companies that will be your direct and indirect competitors. Then, present your ‘upper hand’ and how you plan to keep up with these existing businesses.
Marketing and Operations Strategy
After presenting your research on competitors, target market, and industry, you can introduce your business strategy.
Starting with your marketing strategy, your plan should highlight the 4Ps — Product, Prices, Place, and Promotions. This will highlight the type of services offered, your rates, your location, and how you plan to market your products.
Also, you’ll need to map out your daily operations. This will include your staffing and short and long-term goals for your credit card processing business.
Finally, show how you plan to manage your finances all throughout the process. This section should cover your expected startup costs, how your merchant services company will profit, and where you plan on sourcing these funds. Additionally, it would be best if you also prepared a graph of your expected sales and expenses for the next few years.
Be as transparent as possible. Keeping too much private financial data will only shoo away potential investors.
2. Secure Sufficient Funds for Your Credit Card Processing Business
Once you have a comprehensive business plan, it’s time to secure your startup funds. A credit card processing company is a high investment, high return endeavor, and it will take at least $50,000 to start small.
Your most common financial sources are as follows:
- Personal savings
- Financial support from friends and family
- Bank loans
- Credit card financing
However, chances are that these still won’t be enough to start. Hence, you might need to partner with financial institutions to obtain as much as you need.
3. Register as One of the Credit Card Processing Companies
Let’s say you now have both a solid business plan and enough startup funds. Next, you must get registered with the Internal Revenue Service (IRS) and obtain an Employer Identification Number (EIN). As a merchant services provider, you’ll need an EIN to open a business bank account and hire employees.
To register, you have to decide on the legal structure of your credit card processing business. Here are five of the most common types:
- Sole Proprietorship
- Limited Liability Company (LLC)
4. Obtain Permits and Equipment for Credit Card Processing Services
Since you’ll need to accept credit card payments, you’ll need a license to assure customers of your legitimacy. The licenses you’ll need may differ from one state to another. So it’s best to contact your state government office.
In general, here’s a quick list of things you need to secure:
- State License
- Contract with a Credit Company (e.g Mastercard or Visa)
Getting a business insurance is also essential as this will save you from possible issues later on. For a credit card processing business, the most common insurance types are as follows:
- Professional liability insurance
- Commercial property insurance
- Workers compensation insurance
- Business Interruption insurance
Last but not the least, you’ll need equipment. Since this business is technology-dependent, then you’ll need several reliable computers and a high-speed internet connection to prevent mishaps.
Furthermore, you’ll also need an official merchant account, a payment processor, a payment gateway, and credit card processing software.
5. Run and Market Your Business
With many other credit card companies, your business won’t stand a chance without a good marketing plan. With that said, it’s essential to have a website that potential customers can refer to. This way, customers won’t have to visit your company personally to know whether or not you can meet their needs.
Here are some tips on how to effectively market your credit card processing business:
- Focus on your target market
- Highlight benefits and your upper hand over competitors
- Listen attentively to your potential customers before giving your input
- Keep track of your clients and follow up as needed
- Perform as well as you claimed
You’ll need a flawless business plan to boost your credibility as a credit card processor. Next, you need to get registered with the IRS and secure your startup funds, licenses, and equipment. When all those are done, you’re now ready to run and market your business.
Credit card processing companies have become one of the most profitable businesses in the finance industry. Just like any other business, it’s difficult to start with zero background. However, it’s not impossible. Keep up the grind and lead your company to success!
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.