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Thinking Like An Entrepreneur
Table of Contents

Chapter 3
Men Are Cheaper Than Guns

Chapter 4
Intellectual Capital And Bootstrapping

Thinking Like An Entrepreneur


Accepting Credit Card Sales On The Internet At Low Cost

  There is a tremendous and growing interest in Internet commerce. Many smaller or ultra-small companies have wondered how you can accept credit card sales over the Internet. They wish to do so at very low cost and without a lot of hassle.

  One low-cost option is to use a shopping cart service provider like or These companies will give you some html code you can add to your web site to create a link to their secure server. This allows you to use pretty much any web hosting company to display your web pages to the public. And, you will not need to pay your web host any extra money for a secure shopping cart. This is a very good option if you aren't sure how many sales your site will generate. Or, if you anticipate only a few online sales. Or, if you are starting your company on a very low budget.

  Typically, for shopping cart service such companies will charge a small percentage of the revenue you generate per sale., for example, charges about 9.5% of the sales value. So if you are selling a $100 product, will deduct $9.50 as its reseller's commission, and will pay you $90.50 per sale. only charges a couple percent, but you must already have merchant credit card status, and that will cost you a couple more percentage points. also has no annual fees. You probably want to shop around as many new companies are now providing competitive services for shopping carts. I choose and as representatives of the service.

  Merchant credit card status typically costs $10 per month, 2% or so of your sales as a commission, and usually there is a small transaction fee for each sale you make. Be sure to distinguish between those shopping cart services which require holding and paying for merchant credit card service and those which do not.

  As your sales grow at some point you will want to set up a shopping cart on your own (or your web hosts) server and pay a fixed monthly rate in addition to your merchant status fees. You can calculate how many sales you will need to be getting to justify making the switch.

  When your annual sales times the commission you pay per sale is greater than the lower commission of merchant status plus the extra fixed costs of having your own shopping cart, you probably want to have your own shopping cart.

  For example, suppose you sell $1,000 worth of merchandise per year from your web site. If you are using, you are paying $95 per year for the shopping cart service with no other fixed costs. Because, merchant credit cart service costs at least $120 per year, you are better off using a shopping cart service which doesn't require your having merchant status.

  However, if you are selling $50,000 a year in merchandise, at 9.5%, you would be paying $4750 for the service. With, you would be paying closer to $120 + 4%($50,000) = $2,120. But, with a shopping cart set up on your own web host's server, you might only be paying $120 + 2%($50,000) + (12)($15) = $1,300. Where the last term is the extra monthly amount you need to pay your web host to have your own shopping cart. We have neglected the merchant status transaction fees.

  Some web hosting companies will allow you to run a PERL script that sets up a shopping cart on your site without charging any more for this. Many web hosts will expect you to pay more if you are running a shopping cart. But, you should be able to find a reliable web host with full shopping cart capability for your site for $25 a month or less.

  If you are comfortable installing PERL scripts on a web server, you could do this yourself, otherwise have your web host do it. Some web hosts have a standard shopping cart which must be used.

  In addition to offering direct online buying, you should also give the customer the options of ordering through the mail, or over the telephone. Many consumers still are not comfortable with online buying of goods.

  Many small businesses want to accept not only credit card sales over the Internet, but also telephone sales without needing to staff the phones themselves. The option here is to find a fulfillment company that will provide you with a 1-800 ordering number. However, the cost for this is much more than the cost you will pay for an online shopping cart service, because humans need to be employed to people the telephones.