The other day I spoke with a new small restaurant owner who had just started his business a few months ago. After talking a bit about the credit card processing industry he opened up to me about the struggles he was having and things he wished he had known before they became issues.
The owner had signed up for a Clover POS system with his local bank. Now, I have no problems with the Clover system so long as businesses understand what they are getting into (locked in credit card processing, potential monthly app fees, in most cases a 1 – 3 year contract, possible leasing costs). For many businesses Clover is a good choice to organize transactions and inventory. But this owner simply had it recommended to him, signed a contract on a touch screen tablet without receiving a copy of it and spent $1500 on a system he can’t figure out how to work properly. Not to mention he has no idea how much he is paying in processing fees. Now he is looking to get rid of the Clover because he can’t get it to do what he wants and will have to start over 3 months later and $1500 out. What can be learned from all this?
1. Always get and file a copy of any contract you sign right when you sign it. Whether it’s a physical, faxed, or emailed copy, make sure you get it in the moment of signing otherwise you will be apt to forget and may not have it when you need it. Refuse to sign any contract unless you receive a copy.
2. Even more importantly – read the fine print in your contract. You may think that this concept should go without saying, but I have spoken with many business owners who enter into agreements without understanding the full terms of the contract. If you are too busy to do so then be sure protect yourself by asking questions such as:
What is the length of the contract?
Are there any early termination fees?
Are there any additional fees?
What exactly is being provided and do I need the full service? Or could I use a smaller package starting off?
This last question came up in our conversation because the owner had also mentioned that he had signed up for trash collection services and cable television for his customers to watch while they ate. He later found out that cable TV in commercial locations is more expensive than home subscriptions and that the waste collection company was picking up his garbage twice a week when he only needed the service once a week so he was being charged double what he should have been. The company had neither asked him what level of service he needed or tried to learn more about his restaurant to meet his needs. This is how many businesses operate. Just like you they are interested in their own business’s success and will do what is beneficial to them. If they want your repeat business they may help guide you, but it is your job to ensure that the relationship is beneficial to you as well.
Lastly, the owner had no idea that credit card processing fees are variable and that he was paying more per month than he needed to. With all the other worries about opening your first business, it is an easy issue to ignore since the industry is little understood and most banks will offer you a terminal when you open a business account. Instead of explaining the industry to new business owners though they simply tell owners to sign on the line. It’s convenient for the owner and the bank, but it will not necessarily provide the best value to the business. Often it only ever becomes an issue months or years later when owners look into reducing their expenses or speak with a credit card processing sales rep.
By speaking with other experienced business owners, educating yourself about industries and services you will need, and consulting with small business groups or chambers of commerce, you can avoid many of the common pitfalls new business owners face and often don’t even know exist.
If you would like to learn more about how payment processing works or what options might be right for you, check out our YouTube channel or schedule a consultation.
And most importantly – read your contract.