Post Sale Payment Options - What's the REAL cost?

Post Sale Payment options may seem like a convenient option for you and your customers, but what's the REAL cost?
Your Business
by
Andrew Van De Beek
April 10, 2018

Do you use a lay-by type payment solution for your customers (like Afterpay)?

So, it will cost you what, 6% plus a transaction fee on every sale. Doesn't sound like all that much

BUT…

Have you thought about what it actually means to the cash you have left in your pocket at the end of the day?

If you have a profit margin of 10% (after all your expenses are said and done), it means that utilising such a payment service will cost you a massive 60% of your profit! In real dollars - for every $100 profit you make, you give $60 of it to a payment service.

60%! OUCH.

 

The kicker with a lot of these options is that they do not allow you to charge your customer for that charge. Double ouch!

No wonder a lot of retail/online stores are constantly chasing their tails (and don't get me started on debt levels from consumers).

How do you work out what the transaction will really cost?

Divide your net profit by the transaction cost. i.e. 0.10 (10%) divided by 0.06 (6%) = 0.60 (60%).

If you are running on low margins, this approach could break your business. The higher the margin, the more comfort you will have to use these services.

So, before you sign up and eagerly anticipate a heap more sales - just run the numbers quick to see if it is a smart move or not.

Andrew Van De Beek

Whisky connoisseur. Utah Jazz fanatic. Father of 2. Chief of passion