The whole reason Single Source Vendor exists is to have a dialogue about value and economies of scale in purchasing. Here’s some thoughts on recent experiences from our own team on one of our businesses.
One way to establish value and scale for economy is to drop the fixed charges tied to every sale and payment that you take. We live in a world where the easiest transactions win, meaning a lot of business owners are forced to take payments via credit card over cash or bank wires.
When the majority of your customers run a credit card, you get used to seeing that automatic 3% charge off of your margins for the processing of the credit card. Some of us pay it for years, offer “cash discounts” to customers in order to avoid taking the card fee, or pass on the 3% charge to the customer with mixed results and reactions from them.
We looked at it recently on one of our businesses that routinely takes multi-thousand dollar credit card transactions, where a $3,000 credit card sale runs right around $100 in cost just for transactions.
When your business makes 40 of those types of sales and transactions in a month, you are giving away close to $4,000 that month in lost profits and ongoing fixed costs tied to taking that credit card. It really starts to add up quickly to big numbers if you’re having to take a lot of credit transactions that are larger in size.
We started trying to find a way of dropping that 3% down to as low as we could find. At current tally, after signing a new services agreement with a credit card processor we weren’t aware of, we are paying just 1% with a few pennies of extra costs per transaction. It’s enough to make it easy to brush off the costs of PCI compliance, an outside cost that has to be paid for annually.
We even found that same 1% processing fee being offered by one of the major processors that we had been with years ago, and that still openly advertises a 3% rate on their main marketing materials.
It just goes to show you, it’s not who you know, it is who you actually buy from, that makes the difference in saving big.