Magazine Article | November 15, 2013

Take A "Pay It Forward" Approach To POS

By The Business Solutions Network

A retail POS merchant services provider rescues a pizza shop owner from a payment processing nightmare by implementing a subscription-based POS solution.

Dave Iava has experienced firsthand what it feels like to be taken advantage of by a payment processor. A couple of years ago when he was still an owner of three fitness gyms, he contacted his payment processor vendor after being approached by another processor with better rates and inquired about switching. He quickly learned that it was going to be much more difficult and costly than he ever would have thought to make that switch. “The customer management system I was using was owned by the payment processor, and I couldn’t use one without the other,” he says. “My first thought was ‘That’s really sneaky!’ But the more I thought about it, I realized that it could be a really smart business model if the processor had charged more reasonable fees.”

Iava began researching other payment processors, and during this process he became interested in starting his own business providing payment processing services at a fair price and earning a residual income that would sustain him well into retirement. Less than two years ago, Iava started Plymouth Rock Merchant Services. At first, he focused only on payment processing services, but eventually he added POS sales and service to his offering, which he also sold as a monthly service.

Subscription-Based POS Sales Yield Short Sales Cycles
Like many startup companies, many of Iava’s initial customers came through referrals from people he knew, including Mangia Pizza, a stand-alone pizza shop in Boston that was referred to him through a network of friends. When he first met with the business owner, Iava discovered that the pizza shop was using outdated cash registers, and its payment processor had the business owner on the worst possible plan. “He was paying 3.89 percent on unqualified credit card purchases, which represented 60 percent of his overall sales, plus he was being charged an added fee of 25 cents per transaction, which averaged $600 per month in credit card transaction fees,” says Iava.

Iava recommended an IT upgrade that included two Harbortouch POS Systems and Harbortouch Terminals, plus an upgrade to Plymouth Rock’s payment processing services — all for no upfront cost. “Unlike comparable POS systems that would have cost more than $6,000, the Harbortouch POS solution is sold as a bundled service, which includes the POS terminal, software, cash drawer, receipt printer, and credit card reader unit for $69 per month plus $59 per quarter for the service package,” says Iava. “So, for less than $90 per month, the business has a fully operational POS system that’s built on hardware that uses solid state storage [i.e. no fan], is completely sealed from humidity and dust, and has a lifecycle of seven to nine years.” The service contract includes free repairs and labor on the POS hardware and peripherals, plus a guaranteed 24-hour replacement on any hardware failure. “As an added protection, we include nightly POS data backup to a secure off-site location,” says Iava.

The one caveat with the Harbortouch POS system is that customers are required to use Harbortouch’s payment processing, which Plymouth has become an authorized agent to sell. “Unlike the previous processor that was gouging the small business owner with exorbitant fees, I was able to offer him a program with lower transaction fees, plus lower fees for unqualified purchases than he was previously paying,” says Iava.

The pizza shop owner liked the idea of paying for the new system as a monthly subscription — and lowering his credit card processing fees at the same time, and the deal was finalized within a few business days. Over the following month, the business owner experienced a $480 savings in his payment processing fees and not only shared the news with Iava, but other business colleagues.

Satisfied Customers Lead To Repeat Business, Upsell Opportunities
Within a couple of months, Iava received a call from his customer with some good news. “The client was in the process of franchising his business and had plans to open five more pizza shops on the West Coast,” says Iava. “What’s more is that he wanted me to be the exclusive provider of POS and payment processing services for all of those future pizza shops.”

Not only did the initial sale lead to five additional sales for Plymouth Merchant Services, Iava is now beta testing a couple of POS add-ons that have the potential to provide additional revenue streams over the next year as well. “We’re looking at adding online payroll and custom menu services, which will integrate with Harbortouch’s openarchitecture platform,” he says. “These new services have the potential to drive our monthly recurring revenue per customer up by more than 80 percent.”