Where does your profit go?

There are many factors that can effect your bottom line, and if you are a first time business owner, it is a good idea to keep a running list of all of your expenses, small and big. Take merchant account rates, as an example. A customer purchases $500 worth of goods, and you forget to take into account your merchant cost which can range from 1.5% to 5%. Five percent is a very large number if you look at your year’s sales. Five percent can mean the difference between breaking even and making a little profit in the first few lean years. There are trade associations which you can join which allow you much better rates, even if it costs a fee to join the association. It is best to do a quick calculation on your expected revenue and the best rates that your credit card provider has given you. Most associations have bargained the account provider down to 1.5% or less. Particularly if you are a small business owner and you don’t have the revenue to bargain with, you will be looking at close to a five percent credit card fee. Which is significant over the fiscal year.

When projecting your initial cash flow, look at your short-term and long-term expectations. When when you are making important decisions in the beginning of your business, it is too eay to look short term only. If your trade association fee is $500 for the first year and you are counting every penny, you may not be able to see the benefit immediately. Check into the credit card rates though, because the fee might be able to pay itself back within a few months.

As well, the software needed to run a merchant account for a retail application may cost you more money than you had anticipated. Some providers offer free software, so it’s worth it to check out as many providers as possible. Some banks do not give you a choice of providers. If this is the case, you must sign up with whomever they offer.