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An entrepreneur's guide to the different forms of customer payment

Many small business owners just starting out find that banking enough sales to simply survive can provide more than enough to worry about, so concerns about the different ways customers might pay your business once you do make a sale often get overlooked. But understanding the myriad options for payment-and the advantages and disadvantages of each-can be an integral part of achieving long-term success. And make no mistake, consumers do have a lot of choices these days in how they choose to make purchases.

In fact, according to the Federal Reserve's most recent Survey of Consumer Payment Choices (SCPC), released this past January, American consumers now can choose from among nine different payment instruments for making purchases and paying bills each month. What's more, that same survey found that the average American has already adopted five of those nine options for purchases and uses four out of the five at least once a month. So, if your business's potential customers are clearly picking and choosing how they would like to pay, so too should your business think about how you'd like your customers to pay you.

Helpful Tip: To see the entire Fed SCPC survey online, go here:, or for a nice statistical roundup of the survey's data, check out

Advantages: Cold, hard cash has for centuries been the preferred way to pay for purchases and, thanks to its convenient nature, it still outstrips all other methods when it comes to use in face-to-face retail transactions. Paying with cash immediately completes the purchase-an attractive benefit for the customer-while the business gets the flexibility of being able to immediately use that cash elsewhere. For financially struggling small businesses, the liquidity afforded by cash payments can be a critical means of survival, allowing them to quickly re-purpose today's sales revenue into tomorrow's inventory, payroll, or profits. What's more, thanks to its straightforward nature, cash lets heavily cash-based businesses enjoy the benefit of having to spend less time on bookkeeping since cash-based accounting is relatively simple. And though counterfeit currency does exist, fraudulent cash payments are relatively rare when compared to the number of illegitimate electronic and credit card-based purchases made each year.

Drawbacks: At first blush, the idea that cash payments could be an inconvenience or even a hindrance for small business owners might seem counter-intuitive. But cash does have its faults, some of which are closely related to its benefits. Its unparalleled liquidity, for example, makes it a popular target for thieves, so any heavily cash-based small business must also make special accommodations for things like physical security, rigorous point-of-sale cash vs. receipts reconciliation, revenue chain of custody, and weekly (if not daily) bank deposits. Likewise, cash payments can act as a kind of self-limiting device on product or service prices, since, according to the SCPC's latest findings, American consumers carry an average of $79 in cash on their person. As a result, customers can reasonably be expected to make cash purchases at, say, a restaurant or dry cleaners, but if your small business's prices rise much beyond that per-person average, you might find you're losing some business if you insist on cash payments.

Helpful tip: For more pros and cons of cash-based payments, go to

Advantages: Though the usage of paper checks has significantly waned in popularity thanks to the rise of debit cards, checking accounts continue to be a favorite payment instrument among a broad swath of American households and the number-one way consumers pay recurring bills. In fact, besides cash, which essentially has a 100% penetration rate, checking accounts are the next most common payment instrument of consumers, having been adopted by more than 91% of Americans. This number still stands substantially higher than the adoption rates for online banking bill payment (52.5%), credit cards (78.3%), and even debit cards (80.2%). So, even though check payments don't offer business owners the same flexibility as cash, you should strongly consider the potential for lost customers before implementing a no-checks payment policy. This is an especially critical point for small wholesale or business-to-business operations, as many business customers only pay vendors via invoice and company check. And even if your business is more retail-oriented, letting customers pay by check--just as with debit or credit cards--means their potential purchases won't be limited by the amount of cash on hand in their wallet or purse. Plus, with the advent of new Check 21 regulations, the several-day wait for funds that once was a major drawback of accepting payment by check is a thing of the past. As a result, almost all checks can now be processed and paid within one to two business days and, occasionally, on the same day the check was written.

Drawbacks: Despite the digital advances that have made check processing faster and more efficient, businesses must still wait some amount of time before they actually receive payment for a sale or transaction. Because of this time lag, payments by check expose the payee to a greater risk from bounced checks and fraud, situations that can be particularly devastating for small businesses with tight cash flow. To mitigate these risks, an entire industry of check-processing service firms has sprung up. These firms allow their business clients to scan in customer checks instantly so they can be verified as legitimate. Some of these check processing firms will even eat the cost of a bounced check for you, should it occur, thereby eliminating almost all of the risk entailed with accepting checks. But these check-processing services aren't free, of course. As an industry standard, most check-processing service firms levy a 1.0% to 1.5% fee on all transactions plus an additional $0.15 or $0.30 per-transaction fee. In addition, some check processors also charge things like monthly minimum and statement fees, which can quickly add up. For small businesses with especially thin margins, like a mom-and-pop grocery store, these fees could eat up almost all the profits on a transaction.

Helpful Tip: To get free quotes on check processing services and compare prices, you might try BuyerZone's online comparison tool here,
SBC Team

Going (Semi) Viral

Posted by SBC Team Apr 19, 2010

By Max Berry


Advertising has come a long way since the Mad Men of Madison Avenue. The Internet and so-called viral marketing have revolutionized the job once done by newspaper, radio, and television spots. But, while your small business probably doesn't have the resources for online video clips, adver-games, or mass text messages, that doesn't mean you can't employ some savvy, semi-viral strategies of your own.

First Things First

"If it's different, it will create a buzz. If it's generic, it won't," says Harris Brown, President of Long Island's HFB Advertising. "That's how you get to viral: with a product that fills a void."

Viral advertising, in a nutshell, is a marketing strategy that relies on pre-existing social networks to increase brand awareness and promote word-of-mouth buzz. It encourages people to pass along a marketing message voluntarily. Big-league examples of viral marketing often come from the film industry. The Vote Harvey Dent Internet campaign that preceded the arrival of the 2008 summer Batman blockbuster The Dark Knight is a prime example. Harvey Dent, of course, is the fictional district attorney of Gotham City; the "campaign" in question was one to fill theater seats.


This is an awfully grand scale for a small business owner to operate on, but there are still viral tactics an entrepreneur can employ to increase sales. Small business home products company Blendtec recently created a smash viral marketing hit around its quirky "Will it Blend?" campaign, which simply involved videos of CEO Tom Dickson sticking various objects-from an iPhones to marbles to Silly Putty-into his company's blenders to demonstrate their churning power.

As Brown notes, this kind of tactic-demonstrating an innovative product or service that satisfies a consumer need-is the primary driver of a viral campaign. Next is an emphasis on aggressively targeting a specific market, ideally one that not only has a use for your service but also has high social networking potential-students, business societies, clubs, and social organizations for example. "There are plenty of local directories out there," says Brown. "Pinpoint your demographic to get a message out in the community."

But that's only the first step. Once you've found your audience, the way you approach them should still generate buzz. "Put a different spin on your campaign-go about it in a new and creative way," advises Brown. "You don't want to say, ‘I sell XYZ, come on down to the store!'"

New School vs. Old School

Once you have, as Brown puts it, "made a message" to herald your product or service, you'll need a delivery method. The Internet has revolutionized advertising. With so many interest- and demographic-specific sites, it's easier than ever to target a market. This may be especially true of your business if, like many urban communities, your neighborhood has a resident blogger who covers local goings on. A well-wrought press release or note to this kind of person-on-the-street dispatcher may build more buzz among those in the know than a standard newspaper or television ad. Also keep an eye out for local weekly e-mail lists that keep tabs on new things to do, see, and buy in your community.

The Internet however, is not the only tool at your disposal. "Everyone wants to spend money on the Internet and not on traditional mediums," says Brown, who advocates the use of those traditional mediums in tandem with the Internet. Local radio and television spots, for example, scheduled at appropriate times for the audience you're trying to reach, can be very effective. If you are planning on using a direct mail campaign, post cards will work well as they don't require an envelope (so a consumer is less apt to lump them in with junk mail) and they are just the right size for a punchy slogan or graphic. Whichever medium you choose, remember to be creative. Address the audience you want to reach, and don't be afraid to leave a little bit of mystery. The goal is to get people talking, not tell them every single detail about your business.

"Don't jam every product you have into a campaign," says Brown. "A lot of people jam it all in and the message gets lost." If you are just opening your small business, and are operating from a storefront, you can even use the space itself to broadcast said message. Simple and evocative slogans and graphics displayed this way constitute free outdoor advertising and, as they are on plain view to the public, will generate all kinds of talk.

Keep It Up

"You need to base your business on referrals. You'll go out of business if you're doing all advertising all the time," says Brown. Indeed, the objective of an advertising campaign, viral or otherwise, is to get people to try your product or service. It is then up to you to provide it with enough savvy to get them to tell their friends. It is on this kind of relationship that a successful business is built. The amount of time and resources you devote to advertising will diminish as you build a reputation and a customer base.

Still, there are always new customers to win, and resting on the laurels of one successful marketing campaign will keep you from winning them. Stick to the message that best represents your business, and let it evolve as your business evolves, but always look for new ways to put it across. "Small business owners can slow down, but never stop," says Brown. "You always want to have your message or brand out there. You always want to be testing markets. Even if you have a good campaign, you can always do better."


Some online viral marketing case studies and resources:
Will it Blend? Website:


NFIB viral marketing guide:
SBC Team

Weak Dollar, Strong Sales

Posted by SBC Team Apr 2, 2010
How to tap overseas markets for more sales

By Christopher Freeburn

For small businesses, one of the upsides of rapid globalization has been the ability to sell products in foreign markets. A confluence of technological innovations (telecommunications, the Internet), cheap shipping costs, and the spread of trade-friendly policies throughout the world has made it relatively easy for even the smallest businesses to sell their products abroad. Last year, the sliding value of the U.S. dollar against other currencies gave an added boost to U.S.-based small businesses struggling to compete in the global marketplace.

The currency yo-yo

National currencies are valued against each other on currency exchanges around the world. The values of individual currencies rise and fall based on a number of factors pertaining to the economy of each nation, including domestic interest rates, inflation, economic outlook and political stability. In recent years, as the U.S. federal deficit has risen, the value of the nation's currency has slid noticeably compared to the currencies of many other major economic currencies (the European Union's euro and Japan's Yen, in particular).

The dollar does not fluctuate against all currencies, however. Given the dollar's role as the world's reserve currency (the most stable money), some nations, including, most notably, China, as well as those in the Caribbean and oil-rich Middle East, have "pegged" their currencies' value to the dollar itself, which means that the value of these currencies-usually set at a substantial discount to the dollar-move roughly in tandem with the dollar. Other countries, like Afghanistan, Cambodia, and a few nations in central and South America, have adopted the U.S. dollar outright as their national currency.

While a weak U.S. dollar punishes Americans traveling abroad through higher costs for food, lodging, and sightseeing, it also benefits U.S. producers who are trying to sell products overseas, since the foreign buyers can purchase more American products with less of their own money. This economic ebb and flow was in full evidence in 2009, as the U.S. trade deficit experienced a record total dollar-value decline last year, a trend that has not abated in early 2010 as the amount of American exports continue to slowly inch up in comparison to the importation of foreign goods.

"For U.S. businesses, the falling dollar means that their products cost a lot less in other countries," says Robert Berman, a Providence, Rhode Island-based business consultant and CPA. "In some places, less than the goods produced domestically in that country. It's an opportunity small businesses should not ignore." Of course, the value of the dollar, relative to other major currencies, may well reverse course, and in recent months the dollar has rallied a bit as more positive news about the economy appears. Still, taking advantage of the dollar's current diminished value offers the chance to build permanent benefits for your business. "Getting your products into the hands of overseas customers raises your company's profile and can provide a beachhead for your company in that market," Berman notes, even if the dollar rises back to levels where it was three or four years ago.

Taking advantage of the dollar's fluctuating fortunes

A weaker dollar also represents an opportunity not only for small businesses that produce goods that can be sold abroad, but also for many others that do not. It reduces prices for U.S. products sold abroad, and also makes the U.S. a tempting venue for foreign tourists who can take advantage of low prices for American products and services during their visits to the U.S. Thus small businesses that provide hospitality services, or market products aimed at travelers, are well positioned to prosper when the dollar is weak, particularly against European and Asian currencies.

Small businesses that produce products that can be marketed and sold overseas, can take advantage of a weak dollar by partnering with other companies already selling in markets where the low dollar gives their products and advantage or by attending trade shows and conferences, usually hosted by various U.S. government agencies or the Chamber of Commerce, or even foreign governments. These shows are often frequented by representatives from foreign firms eager to import American products.

Using the World Wide Web for World Wide Sales

Aside from seeking partnerships to export your products abroad, or visiting trade fairs organized by foreign governments, the easiest way for small businesses to sell products abroad is online. If your business doesn't have it's own website, it's time to get one started. Websites can be easily and affordably created and maintained through web-hosting companies, which take much of the effort out of the process. Adding e-commerce capabilities to your website, including electronic payment options, is equally simple.

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