Credit card processing company grows business by evolving strategy - Denver Business Journal:

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Henry Helgeson and Scott Zdanis established the companhy in 1998 as a reseller of credit card processingf terminals overthe Internet. To a smaller extengt the company provided processingg of creditcard transactions. But as margin compression made equipment salesless profitable, the partnersx responded by ramping up processin g services. Today, its processing services constitutw 90 percent of its totalgross revenue, while equipment and software sales are 10 Business has been so brisk — it signed up 2,300 new customerss in April alone — that the companyg is planning to increase its sale s force by 30 percent or 40 percent withijn the next 60 days.
“We basically are getting more businesses tryinvg to signup (for our services) than we have the capacity for, and we’re trying to stafcf up for that as quickly as possible,” says 34, who serves as president and co-CEO. Co-founder Zdanis has since moved to Miami and playws a less active role in the Merchant Warehouse acts asa third-party facilitating payment transactions between merchantsx and credit card issuers, essentially by getting money off of the consumer’s credit card and into the business’s bank account.
Its residual-bases business model makes money by charging for that service on each Sinceits inception, the 150-employee compant estimates serving a cumulative tota l of more than 87,000 customers nationwide — primarily small and medium-size businesses; about 56,000 are active accountxs right now, with most of the attrition due to companies goint out of business, Helgeson notes. Merchant Warehouse is processing morethan 3.5 milliomn payment transactions per month. After hittinvg $27.3 million in revenue in the company is shootingfor $32 milliomn to $34 million this year. Helgeson says Merchant Warehousr has also benefited by becoming more ofa technology-driveb company.
“When we started to hire our own softwars developers and build our own as far as computer systemsx and technology to run this that really put us intoa hyper-growth he says. Five years ago, the company hired its firsf software developer. It subsequently builft its own sophisticated customer relationship managementsystem in-housd that has enabled the company to better measure the performancer of its accounts and staff. And 18 months ago, it completeed the development of the necessary infrastructurs to begin processing some transactionz through its own electronic gateway herein Boston.
It continues to utilize three large outside firms to assistf in processing the bulk ofthe transactions. The companhy also works with a pool of aboutf100 point-of-sale system resellers, who often referd business to Merchant Warehouse. The company has also used technologyy to innovate its services in an industry wher Helgeson says the competitionis fierce. “Our industry has been prett much plain, vanilla credit and debitf processing,” Helgeson says. “We had to look at it and say, ‘What can we do here to differentiate ourselves?
’ For instance, it offerd wireless credit card processing services to iPhone and BlackBerry users who have installed its software applicationsw ontheir PDAs. Those mobile merchantas now represent 10 percent to 15 percenr ofthe company’s new accounts. It has also partnered with another company, , to develop a card reader that encryptss the credit card number as it is being swipecd to help preventsecurity breaches. “They’re a very impressive says Steve Parks, vice president of , an Atlanta-basedr firm that Merchant Warehouse has engaged for some of its processin services formany years.
He attributes the firm’s growtuh to “some very shrewd investments in technolog y and being ahead of the curve in termx of technology and how to use it to drivetrafficv (to their business), and training their sales reps to capitalizwe on that traffic.”