Starting up a business is not easy and once you have taken the plunge there is a tremendous pressure and need for it to succeed. You’ve convinced yourself that the idea is great enough to take this risk, and if only you could get some more exposure you know that people would buy it. The results are so low because you just don’t have that extra cash to push it as far as you can. This business idea is great and it will make it!

The truth is that if your business isn’t succeeding then your problems are far more internal than a simple need for more money or for a feature on Oprah. Your business plan itself needs re-evaulating and tweaking so that you hit the right formula and it becomes viable. Ignoring this fact is a sure recipe for failure and how I learned this lesson in the first place.

Based on this I’ve come up with a rule of thumb for evaluating the difference between a business that needs more time to become profitable and one that is dead in the water. It’s very simple:

A business that has the potential to succeed with time is working hard to make the improvements and changes required for market success. A dead business continues to operate on the same weakly performing ideas and methods.

As long as money doesn’t run out first the above should guarantee the success of any business, although in extreme cases the successful venture would have no resemblence to the original. It’s a very intuitive rule that operates on the idea that if you can measure results and continue to improve them then at some point you will reach your goal. You don’t need a whole lot to be able to do this except a measurable way of defining positive growth and enough of an open mind to be willing to accept that your original ideas are not the key to owning your own Trump Tower.

This blog is an example of a venture that is not earning a lot of money, but it’s doing extremely well due to the rapid growth rate of the earnings it’s generating. The growth has so been quick that in just several months it has gone from earning pennies a day to averaging $1-2. It’s hardly impressive cash, but try calculating the percentage on that. To accomplish this I have worked on many aspects of this site, from the topics and style of what I write about, to the layout and features I present, to the way I position my ads. I know I need to generate high amounts of traffic and be able to realize revenue from this free content model in order to make it work, so I actively put effort into these things and measure my results.

A position like this one is where many good and highly profitable businesses go bad. The excited entprereneur has poured a lot of time and effort into building the business, but the results are just so low. How can anyone justify operating something that is earning $2 a day? Logically you must look at a realistic growth forecast and be able to determine if contined improvements can generate enough changes to steadily bring abouta profitable business. Or perhaps there is an amazing market you need to break into or a big corporate customer that you need to acquire, after which the serious money will start coming in. If you have a realistic plan to make it happen and are showing real progress on achieving it, then don’t quit because the initial earnings aren’t impressive!

On the other hand if your earnings are $2 a day in your venture and you have no plan for improvement then don’t expect to earn more than that. Big or small, something has to change. In cases like this blog its a matter of incremental small improvements. In other case its something more drastic, like a coffee shop that needs a better location or a way to service more customers in its current size. Maybe the change is so drastic it means closing down the business and starting over with a different product or business model.

It can be extremely difficult to make these larger changes as it can be seen as admitting failure or that the fantastic idea just wasnt that great. That’s really a flawed and damaging perspective to take on though. To me it’s changing course until you find the right path for achieving the results you desire. Even deciding to exit entrepreneurship entirely is not a failure, if you have genuinely found that it’s not the right path for you. The only way to really go wrong in an unsucessful situation is continuing to do the same thing that you are now, hoping that your results will somehow change.

This article is part of the Secrets of Creating and Growing an Online Business series. All week you will find articles that demystify what’s involved and what the secrets are to success.

When I first started selling online I only offered PayPal and cheque payments. Credit card processing was a mystery to me that I could not wrap my head around. I held the misconception that I would somehow have to get the credit card numbers myself and pass them on to the merchant software, something that I really didn’t want to do. Eventually I learned what kind of options really are available, and through some good old fashioned experience I learned what works and what doesn’t.

I’m going to spare you some mistakes and research by outlining your payment processing options and how to go about putting it all together.

Three Common Ways of Accepting Payments

There are many ways to accept payments, but a typical online business will find itself examining the following:

• Credit Cards
• PayPal
• Cheques & Money Orders

Which should you use? As e-commerce continues to evolve the popularity of using credit cards for everything will inevitably increase. However people are rightfully wary of using their credit card number on just any site, which puts small unknown businesses at a disadvantage. It is in your best interest to offer payment options through trusted third parties known to your customer.

Until last year my orders for CustomBar were split roughly 50/50 between PayPal and credit card. This year the number of credit card orders has far outweighed PayPal, leading me to believe that people are both more willing to use their credit card numbers online these days and that the length of time that CustomBar has been on the net has increased trust. I have received a total of only two cheques for this product, and with a $19.95 price tag I can see people not wanting to pull out their checkbook. I was hoping that with the cheque option I would hit the younger market which doesn’t have credit cards. I was proven wrong; young people are using parent’s credit cards, PayPal, pirating the software, or are just plain not interested in it.

My experience with cheques was very different when it came to my web hosting business. I have many clients that pay by cheque, and many of them are businesses in Ontario. It can be easier for a company to pay by cheque than credit card due to how the purchasing process is setup. I also encouraged cheque payments since the money saved on each transaction was significant.

Processing Credit Cards Using a Payment Gateway and Merchant Account

This is the holy grail of accepting money online, allowing customers from around the world to buy your goods and services with just a credit card. You require two components for this to work, but you can often get both at the time time. A merchant account is the entity which allows both online and brick and mortar stores to accept credit cards and other forms of electronic payment. Virtually everything you do with this account has a fee attached to it, including a monthly fee, a fee for processing transactions, a fee for chargebacks, and potentially much more. In addition to a merchant account you need a way to actually obtain credit card information and have it charged to your merchant account. In traditional stores this is handled through the point of sale terminal. The online equivalent is a payment gateway, which takes care of the pesky problem of entering the credit card number and having it processed. This of course includes more fees.

Risks: fraud is a major concern when processing credit cards and this setup offers you little isolation from the effects. Credit card companies tend to be consumer biased in handling fradulent transactions, which means that if a stolen credit card is used (or the customer claims that you have not honored your side of the transaction) you will likely have to refund the money. What’s worst is that unless you are highly proactive in this area you risk the customer initiating a chargeback, which when ruled in their favor will cost you a hefty fee (about $20-$40). If too many chargebacks occur you run the risk of losing your account.

I found out the hard way that it’s very difficult to choose a reputable provider. In my first experience with obtaining a merchant account I had unknowingly chosen a reseller for another payment provider. None of this was mentioned until the forms were supplied. This provider tried to slip in new fees after documents were signed and denied having ever sent the previous documents (which we had received, signed, and faxed back!). After hours of talking on the phone I found myself passed from person to person until I was back to the person who had originally answered my call. The blatant lieing was amazing. Luckily the reseller offered a 30 day money-back guarantee and was honest enough to honor it. Otherwise that would have been over $300 lost.

Minimizing Risks: most payment gateways provide you with some say in how credit cards are verified. You may have the option to turn on additional verification procedures, ban cards from countries with high fraud rates, disable free e-mail accounts, and other risk mitigation functionality. Each of these has the potential to cost you sales, and it’s up to you to find the right balance of fraud and lost legitimate sales. In the case of shipped items you may wish to require the billing address to be the same as the shipping address or to verify every order received by phone. You can also refund orders that appear suspcious and not provide the product, which is a great way to avoid a likely chargeback later on.

Be very careful in choosing payment processors. When I finally selected my first non-fradulent payment gateway I actually hunted down approximately 20 merchants that were using the service and e-mailed asking for feedback on the service. Nearly everyone responded and was happy to help me out. With the positive reviews from people actually using the service I was much more confident in signing-up.

Cost: depends on the deal you get and the product type that you are selling. Due to the amount of fees and the reluctance of vendors to disclose them all, your best weapon is knowledge. I have already explained the merchant account/payment gateway relationship, and how each will result in costs to you. Here are the kinds of fees you need to check before putting ink to paper (by the way never sign this kind of contract without fully reading and understanding it). Remember that most fees can come from the merchant account and from the payment gateway. I have listed common ranges.

• Setup Fee ($50 to $400)
• Monthly Fee ($0 to $80)
• Transaction Fee (2%-5% + $0.10-$1.00): may vary based on credit card used
• Withdraw Methods and Fees (be very careful here, a $40 wire transfer could really hurt)

Popularity: young people aside, credit cards are extremely popular in North America and represent the e-commerce standard. However in other countries it is less unusual to not own a card so make sure you do some research on your intended market.

Vendors: your first stop should be your bank. With e-commerce maturity some banks do actually offer reasonable electronic payment processing packages for small businesses. This will help you avoid out-right dishonest companies, but you still have to watch carefully for hidden fees and terms.

If you do not choose a bank that’s perfectly OK. There are many other payment gateways out there. You want to select one that is in your own country (to avoid expensive withdrawing of money) and which has been in business for a long-time. Be sure to speak with other customers of the service before signing up.

I’ve decided to not intentionally list specific services, except to say that I’ve had good results with InternetSecure. I don’t think it’s fair to comment on a payment service that I haven’t used.

Accepting Credit Cards Without a Merchant Account

Another class of payment processor has arisen that is a middle ground between credit card processing directly and PayPal. This arrangement consists of a service that has its own merchant account and which “resells” your product for a commission (or uses some other terminology to get around not using separate merchant accounts). These tend to be more expensive and have stricter terms, but they also have their own unique and useful features. Such services are popular amongst shareware authors and sellers of information products, where simplicity of getting started is highly valued.

Risks: there is a history of such services have their merchant account closed due too many abuses and consequently collapsing. If this happens you are generally out of luck and will likely not receive any owed money. If this isn’t a well-known and trusted vendor then you are potentially opening up yourself and your clients to the risk of stolen financial information.

Minimizing Risks: choose a well-known vendor with a very long history of being in operation and strict controls to minimize the abuse of the service. To keep operating they must be able to protect their merchant account.

Cost: Varies on the vendor and services. Expect anywhere from 5% to 20% of the transaction, which makes it very expensive if you have high volumes. There are often no monthly fees however, and the start-up fees can be low or non-existant.

Popularity: shoppers can still pay with credit card, and often times cheque and PayPal processing are included as well. Some services even offer phone orders!

Vendors: some examples of services are 2checkout.com (reseller style), eSellerate (for shareware), and iKobo (PayPal style). I don’t have significant experience with any of these services so I can’t provide any rating.

Using PayPal

PayPal has a tremendous user base in its own right, and it happens to be full of people that want to shop online but don’t want to give their credit card number out all over the place (or they don’t have a credit card). I get enough sales through it to justify using it, and the process as a whole is pretty painless. If you sell primarily to corporate customers then this may not be useful to you, unless they are smaller online companies too.

Risks: there are many stories on the net about PayPal locking accounts for arbitrary reasons and making it difficult or impossible to recover any funds in the account. PayPal is also not a bank and thus doesn’t have the government regulations that would normally apply.

Minimizing Risks: do not keep large amounts of money in your PayPal account. Avoid having PayPal as your only payment processing option or a locked account can stop your business cold.

Cost: PayPal rates at the time of this writing are 2.9% + $0.30USD with discounts available for high volume sellers.

Popularity: very dependent on your target market. You are likely to get good results amongst people that shop online frequently and purchase products from smallers online vendors. PayPal is the preferred e-Bay payment method, so e-Bay shoppers are immediately a great source of users.

A Note on Google Checkout

Google has recently released its own checkout service, promising low rates that are further discounted for AdWords users. I haven’t had a chance to try it out and for now I can’t as it’s US only. Still it requires mention as an option because with Google behind it there will definitely be an effect on the e-commerce world. Feel free to post comments with your own experiences with Google Checkout (or other providers).

Putting it All Together

All electronic payments tend to work the same way. The customer selects an item from your site and through some sort of order form is presented with a checkout option. Pressing checkout takes the customer to the payment service which then handles the tricky business of securely taking funds from the customer’s chosen form of payment. This means that a lot of the work is done for you, but you still need that checkout button to connect your site to the payment gateway. You will typically have three options to do this:

Copy Paste HTML Code: most payment services provide a way to create products within your account and to generate HTML code with this information that can then be copy-pasted to your website. This is the easiest way to handle payments and great for sites with a very limited amount of products.

Shopping Cart Software: many paid and free shopping cart products provide built-in support for certain payment services including popular credit card payment gateways. Your payment service may also provide a shopping cart, but this may lock you into only using that service. Shopping carts are important to have if you wish to allow the customer select from a wide range of products in your catalogue and to purchase multiple different items at a time.

Custom Coding: if you have the programming talent this is a great way to go. You can create exactly the order procedure that you desire and have it work seamlessly with your existing site. If you go this route I highly recommend adding functionality to perform A/B split tests and to track areas in the order process that are losing you many potential sales (something could be causing people to change their mind about the purchase).

Never Store Credit Card Numbers Yourself

With the wealth of affordable and fully-featured payment processing options available there is no excuse for a small merchant to store credit card numbers. Doing so exposes you to tremendous liability, hurts the security of your customers’ data, and has disaster written all over it.

Happy selling!

This article is part of the Secrets of Creating and Growing an Online Business series. All week you will find articles that demystify what’s involved and what the secrets are to success.

Having clients is a great thing, but you must be able to provide support for your product or service to keep them happy. Rather than seeing this as a burden and extra expense, you should look at this as an opportunity to best the large corporations who still haven’t figured out that outsourcing to giant offshore call centres with long hold times is not the way to help a customer. I’m going to share some strategies on how to pull this off without setting unrealistic expectations or going crazy in the process.

This article assumes that you are a fairly typical small online business owner with minimal or no staff. In short you are the one providing the majority of support in between the million other business related tasks you have and possibly part or fulltime work elsewhere. If you are large enough to have a dedicated support person then my only plea is that you train them in your product and provide enough authority to actually fix something.

Establishing How Support is Provided

I favour using e-mail whenever possible for support communications and I encourage it highly on my sites. E-mail provides tremendous advantages since it can be answered in many more situations than a phone (think meeting, lecture, bus, noisy mall) and doesn’t require you to stop in your tracks to pick it up immediately. The net result is that if you are properly organized and have an internet-enabled PDA, it’s actually easier to respond quickly to support inquiries. E-mail also removes issues with poor connections (quite frequent with the advancement of cell phones), difficult to understand accents, and gives you time to think about the problem before responding.

I wouldn’t recommend removing the phone number entirely as having it listed has a positive effect on customer confidence and sometimes it’s reasonable for someone to wish to call you. I like to include it on the bottom of the support form, and make note that regular inquiries will be handled faster through e-mail. Don’t have a support number that can’t be found - certain large companies do this and the customer response is overwhelmingly negative. I wonder why.

Leverage the Personal Touch

Dealing with a product or service issue can be extremely frustrating when a call centre is involved. Waiting on hold, being transfered to three different people, and having to constantly retell your story gives plenty of reason to avoid contacting support. As a small company you have a chance to change this by providing personalized support. Knowing who your customers are, how they use your product, and remembering what their past issues were makes it possible to respond effectively to support queries with minimal annoyance for the customer. As the owner you have the actual authority to solve a clients problem by providing creative solutions that would normally be disallowed by a strict support script.

One mistake that small online business owners make (I’ve made it too in the past) is robbing themselves of this personal touch by trying to sound like a big corporation. Yaro Starak writes about this problem in greater depth.

24/7 is for Convenience Stores

When I first found myself in a situation where I had to regularly answer support issues I was determined to provide the fastest response times I could. I would always answer e-mails as soon as I received them, often interrupting other work and throwing myself offtrack. I would even answer e-mails in the middle of the night if I happened to wake up. The support times were indeed great, but this strategy completely interrupted anything else I was working on and set unrealistic expectations in customers for future support queries. It also contributed to much unnecessary stress. I have since discovered that I can get the same level of customer satisfaction answering non-urgent requests once or twice a day, as people are very happy to receive the Personal Touch mentioned above.

Depending on your business you may need to work out a different support schedule. Whatever you setup be sure that you have plenty of time to devote to the rest of your business without being interrupted by support. In some cases you may need to be able to respond to urgent issues so be sure you have a way to identify these without being bogged down by non-urgent requests.

Staying Organized

There’s no right way to organize your support system, and how you do it depends on the request volume and level of communication required to solve an issue. You may find helpdesk software useful, but be wary of implementing systems that make it difficult to access support on the go, or which make submitting a support ticket harder. After trying a number of systems I finally put together a simple support contact form that e-mails the issue to a support e-mail address. This address then forwards the mail to me or someone else I have on support. Since it’s e-mail I can deal with support issues whenever I want from any internet-enabled device.

Do be sure that you have an easy way of referencing past issues that a customer has had. I can view past communications simply by sorting my mailbox using the From column, and I can make notes about a customer’s account through a customer manager application that I have developed. I am also sure to mark issues that aren’t resolved with a Follow-up flag (you can use the red flag in Outlook or the star in Gmail) so that a query not resolved immediately isn’t lost.

Minimizing the Need for Support

Support queries should be exceptional issues. If you are frequently being contacted about the same thing then it’s time to address the root cause of the problem by either automating the task being requested, providing the information requested in an easily accessible place like a FAQ, or improving your user interface. This will not only save you time, but also increase customer happiness. No one really wants to have to contact support over something they should be able to do or read about themselves.