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36 August 2015 | beautystorebusiness.com START LOCAL Of course, shopping around must be done the right way. It's tempting to start negotiating with all of the merchant account providers that are battering down your door and advertising on the Internet. Before you go too far afield, though, take a look in your own backyard by making an appointment with your regular financial institution. "My advice is to start with your local bank where you already do business," says Mike Shatz (themerchantsguide.com), a Boston-based merchant account con- sultant. "This is especially the case if you have an outstanding loan or line of credit." A bank with which you have a lending arrangement has a vested interest in mak- ing sure you have a merchant account agreement with a competitive rate. Once you have an offer from your bank you can search for a better deal from merchant account providers, often referred to as Independent Sales Organizations. Just be aware that price comparisons can be tougher than you think. "ISOs can set prices and terms on a per case basis," says Ben Dwyer, president of CardFellow (card fellow.com) in Middletown, Connecticut, an online merchant account marketplace where credit card processors compete for business. As a result, Dwyer says, "You can call an ISO and get one quote, then call back a few minutes later and get another quote that is completely different." By the same token, you can call two ISOs and get quotes that are widely divergent. The reason? For one thing, ISO salespeople commonly test different offerings to see what the market will bear. For another, because there is no accepted standard for merchant contract terms the two quotes may be for radically different packages. The lower quote, for example, may come loaded with a lengthier contract and a hefty early cancellation fee. AGGREGATING ACCOUNTS Because performing the work required for underwriting a new merchant account can be expensive and very time-consuming, small businesses are sometimes shunned by ISOs. Hence the rise of organizations called "aggregators" to serve the small business market. Aggregators share one merchant account (or a few) with hundreds or thousands of client businesses. The largest of such aggregators are Square. com, PaypalHere.com and Intuit Merchant Services. Aggregators might be good choices for businesses with low volumes of credit card sales and therefore might either be spurned by ISOs or charged high markups. Another benefit is the lack of a monthly service charge common with ISO merchant accounts. "Aggregators might be a good choice for businesses [that] have sporadic (and in some months, no) credit card transactions," says Dwyer. Aggregators, however, are often more expensive than competitive merchant accounts. That's because aggregators usually bundle all merchant account fees into one flat charge, often consisting of a percentage and a flat fee assessment. The result is that you might end up pay- ing more for merchant services than you otherwise would. "As a rule of thumb, if you are transacting more than $2,000 per month in credit card sales you probably do not want to use an aggregator," says Dwyer. Instead, look for an ISO that offers a "cost-plus" pricing model. This term will be explained next. COST-PLUS PRICING For decades merchant account contracts have called for a simplified rate struc- ture called "tiered pricing." Also called "bundled pricing," this model lumps all of the retailer's sales transactions into a few buckets of general pricing tiers with specified percentage charges. Retailers are gradually learning that tiered pric- ing arrangements are costly because they end up requiring retailers to make payments that are far higher than what is charged by the banks issuing credit cards. Now becoming more common is a much better rate structure in which the ISO charges a specified percent- age and flat fee markup for each of a retailer's transactions. Because the ISO's percentage and fee are added to the bank's fee, which is passed through as a cost, this arrangement is called "cost- plus pricing," or "pass-through pricing." Quotes for cost-plus pricing vary widely. To some extent they are affected by the size of the retailer. "Processors will often raise or lower certain markup to tailor costs to a business's specific situation," says Dwyer. "For example, a processor may quote a business with a low average sale amount a markup of Unique Designs Make Me Wet! C h s e f r m U n i q u e D e s i g m 1 6 g n s 6 s 360º 360º Spraying Angle Spraying Angle Ergonomically Designed Stylist Sprayers for Continuous Spraying at Any Angle! .com For More Details Visit stylistsprayers.com or Call (800) 555-8895 Now Available: 144 Piece Rotating Floor Display Make Me Wet! Mak W et! W e t ! 360º 360º Spraying Angle Spraying Angle Erg ylist Water Sprayer