101: Payment Processing for Small Hardware Manufacturers

Product Startup
Episode 101: Payment Processing for Small Hardware Manufacturers
With Nic Beique, CEO of Helcim

00:00 | Kevin Mako (KM): Hello product innovators. Today, we learn from the founder of a company that processes $4 billion in transactions a year on the importance and the methods of payment processing for small product businesses.

00:13 | Voice-over: You’re listening to the Product Startup podcast. The show that helps bring your product idea to life, by chatting with successful inventors, product developers, manufacturers, and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves. We’re taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America’s leading experts on hardware development for small product businesses. Now, on to the show.

00:49 | KM: Welcome back everyone. Today, I’m very excited to introduce Nic Beique to the show. Nic is the Founder and CEO of Helcim, a North American payment processing company that has over 10,000 small business clients, and processes over $4 billion in transactions per year. In fact, Mako Design is one of their clients.

01:03 | KM: Today, Nic is going to share some valuable knowledge on how inventors, startups, and small manufacturers should understand the importance of payment processing, and how to best use it to improve the experience for both your end customers and your business-to-business wholesale transactions. Now on to the episode. Hey Nic, welcome to the show.

01:19 | Nic Beique (NB): Thanks for having me.

01:20 | KM: Much appreciated. Happy to have you on. We’ve been working with you for years now, that’s Mako Design using you guys for our payment methods. And I thought it was quite important to bring you on the show today to talk about this. This is one of the things where a lot of small manufacturers, especially inventors, as they are starting and getting their business off the ground, they don’t think about it until they need it.

01:38 | KM: And payment processing is a part of the equation for getting a business, especially a hardware business, off the ground. So, I appreciate you joining the show.

01:46 | NB: Oh, thanks for having me. I love talking about payments all day. I live in breathe payments. And on the surface, payments don’t always sound super interesting, but you pretty quickly realize that it’s really like the heartbeat of how a business functions. If you think about Maslow’s hierarchy of needs of a business, payments are pretty low on the bottom before you get into fancy software or things like that, right? So we get to come in pretty early, which is great.

02:15 | KM: Yeah, that’s great. And you’ve got a lot of things to kind of improve and enable and smooth that whole process out. Especially for small businesses, this is key. It’s amazing that you focus on that, much like Mako Design focuses on global caliber design for small businesses and startups. You do the same thing with payment processing, and that’s why we’re really happy to have you as a partner, and of course, to invite you on the show here.

02:36 | KM: First and foremost, let’s just talk overall, what is payment processing? And then we’ll talk about why it’s important. And then tips and tricks for people setting that up for their businesses.

02:44 | NB: Yeah, sounds great. Businesses need to get paid, it’s part of your cash flow. You can build the most amazing product, have the most amazing idea, but you’re going to get to a point where, all of a sudden, somebody finally says yes and wants to do an order from you. However that looks, whether that’s online or a wholesale order or whatever is the case. Right.

03:06 | NB: And you’re going to sit there going, okay, wait a second. How do I make this transaction actually happen and be smooth?

03:14 | KM: It’s the glue,once you have the agreement and the payments are there, you want to bring those two together. The key is, you want to do it as seamlessly as possible. You don’t want to make it difficult for your customer, who has agreed to purchase from you, to actually make that transaction take place.

03:28 | NB: Exactly. You don’t want any type of friction, it is an excuse for the agreement to fall apart, right? When you’re a small business, you also get into, I don’t know if you’ve heard, like small business posturing. You’re trying to kind of establish yourself maybe a little bit to seem a little bigger or more reliable than you are. Because you’re trying to portray a certain amount of element of trust, right? Let’s say that the customer’s taking the first 20,000 order from you.

04:00 | NB: You don’t necessarily want to tell them, hey, I’ve never done this before. I don’t know how to accept payment from you. That might send some jitters, right? So you want to have a smooth process, including the way you’re accepting your payments, so it looks like you’ve done this 1,000 times before, and it brings that certain comfort.

04:16 | KM: Yeah. Absolutely. It makes it quick and easy, it looks great, professionalism, all the rest. And we’re going to talk about the different types of it today as well. Nic, why don’t you just run through the difference between direct to consumer online purchasing, direct to business, like B2B transactions that occur in your business? And then the difference between, obviously, credit card payments, non-credit card payments, and of course in-store payments across all of those.

04:38 | KM: Just kind of break it up and give a description of all. And then let’s jump into each of them and describe some of the best practices and the things that you, as a hardware startup or as a small manufacturer, should really be making sure that you’re doing to smooth that lubrication. Smooth the joints between a customer agreeing to pay and that payment actually going through.

04:56 | NB: If you zoom out a little bit, the lines are getting really blurred between what is a kind of B2B, B2C business on that front. I think that everyone expects to be treated like a consumer in a sense. Everyone expects a really smooth experience, regardless if they’re making a business purchase or a purchase as a consumer. Right? And then also the line between what is an online transaction, and what is an in-person transaction? Like, for example, if you walk into a store, and you make a purchase, that’s pretty obvious, right?

05:26 | NB: But what if somebody sends you an invoice on your phone. Is that in-person, is that online? Or you make an e-commerce purchase, but you’re not actually paying on the spot, you’re just doing like a purchase order. What is that, right? And so what we found with our customers, and we service over 10,000 small businesses across North America, 80% of them are doing transactions from multiple points.

05:54 | NB: So that’s like a mixture of in-person online invoicing, recurring, it doesn’t matter. And it doesn’t matter what the industry is, so that includes builders. We’re seeing that whatever is the best payment method or the best flow that you can create in the moment for that particular customer, just go for it, right? As opposed to, we only do transactions this way.

06:17 | KM: Yeah. There’s nothing more frustrating, especially if it’s a small ticket price item, and there’s only one very specific method that you can use. And that’s quite common in the startup world. Because, as a small business, the first thing that you do is accept a check, and that’s if you’ve got your banking even set up and all of that to accept inbound payments, and you’ve set up your QuickBooks for it, or whatever else.

06:39 | KM: And it can become very difficult for purchasers, especially if you’re doing the smaller tickets or regular purchases for them, to understand, why? Not only are they taking a gamble on you as a newer product in the market as, a less known brand. But why are you making the payment process difficult? And the unfortunate thing there is it’s so easy to set it up properly if you plan for it in advance, which is obviously what we’re talking about here on the show.

07:04 | KM: As a user, you can easily be given all of the options. And as a small business, as long as you plan for it in advance, and you’re working with a company like Helcim, they can manage all of the different payment methods for you so that you just focus on selling and allow the customer to purchase in whatever way is easiest or most convenient for them at that time.

07:27 | NB: Exactly. And I think for us, we really started off offering credit card payments, and then we started offering debit card payments. And then we recently started offering bank payments as well. So that means that you can automatically debit payments out of your customer’s bank account, whether they are in Canada or the US it doesn’t matter, it’s automatic.

07:45 | NB: Because, in the end, you’ll be surprised, especially if you’re a maker, and you’re dealing more on the wholesale side and bulk orders. You’ll be really surprised about how some purchasers are going to be like, oh, we only do credit cards. And then some of them are like, we don’t do credit cards, we only do bank payments or whatever. And you’re like, oh. I had it set it up because it was simple for me, but now all of a sudden, my customer is asking for something different.

08:12 | NB: And once again, I don’t want to add friction to that sale. I just want it to be smooth. I want to get my cash so that I can make this order and get it sent out, right? So, having a payments partner that can offer a wide range of payment types, not just the way that you accept them but even the payment types themselves, is crucial. You would think that even for in-person payments, the little card reader, and things like that, you’re like that’s not for me.

08:39 | NB: I’m going to do wholesale or whatever is the case, right? And all of a sudden, you have this opportunity in front of you there’s a trade show, there’s something. And you’re like, you know, it would’ve been really good to have a little machine on the spot there just to do little orders or things like that. And what we’ve done with our service is that you’re not bottlenecked. When you go with the traditional processor, like when you think about the old school kind of banks, right?

09:02 | NB: They kind of bottleneck you into one account. They’ll ask you right upfront. The first question they ask is, hey, are you a retail store? Or are you online? You’re like, I’m not sure yet, right? But they make you choose, and then you can’t process payments in anything but that very narrow way, versus with our service where you just have a Helcim account. And however you want it, all those tools are included.

09:24 | NB: You can order a little card reader, anytime you want. You don’t need to set up a different account or anything like that. And anytime you’re ready, just accept payments, whatever works for you that day. And I think the world is going in that direction. You don’t want that friction anymore.

09:39 | KM: Oh, absolutely. You want to make it easier for your customer. At the end of the day, as well, most of the listeners here have a product that’s proprietary, that’s unique, that’s high-value, generally higher margin. They’re not competing strictly as a commodity where shaving 1% here is going to make the difference between a sale or no sale. And in fact, we said it a lot on the show, you should be selling value.

10:02 | KM: Your product should be premium if you’ve got new and proprietary features, which is the case with most inventors and most of these new innovations. So I think it becomes increasingly more important not to be cheap and to try and shave that money, especially if it’s a small ticket price. If you’re talking $20 to $200 or $300 orders, and it’s to the end consumer, absolutely, you should not be concerned about the small number of fees.

10:30 | KM: And I think we should get into that and talk about that a bit too so that people understand where the fees come from. But even if you’re looking at the wholesale transactions, especially as a startup, as you get going, it costs you a little bit of money, a tiny fraction of that order to get it and have the money in the account. And for that to be seamless, even if it is a $100,000 order, and that couple of percent or whatever it ends up being is a fairly substantial size that they want to pay on a credit card.

10:56 | KM: Well, what’s the cost of obtaining that capital early? Or ensuring that deal went through? Or just making the customer feel like you had a level of professionalism? Or that you’re not trying to penny-pinch on every order? If you’re so pinched on your first production runs on margins that tight, then you’ve got other problems that are much bigger than your payment processing. Think about the order. And what would happen if you’ve lost that order?

11:19 | KM: Especially if it’s the first order with a new customer or whatever else? Or maybe the first order of a new product for an existing customer. The easier you can make that transaction, so that as we all know in business, sometimes it comes down to tilting the odds by just a tiny fraction of a hair, which was the difference between a goal and a no-go.

11:38 | KM: And that’s where I really like the idea of making it as smooth as possible for your customer to pay in whatever way they want possible. Since I brought it up in any case, let’s just jump into the fees. And just kind of explain B2C fees, B2B, bank versus credit cards, different types of credit cards, and so on

11:56 | NB: Yeah. So the fees are something we don’t shy away from. So, for us as a payments company, there are three big pillars that we felt we need to really stand out and be the best. Our mission is to be the world’s most loved payments company, right? And there are three big pillars we have to meet. We had to have exceptional customer service because it matters, right? If you’re processing a $100,000 order, this is your business, this is a financial service.

12:23 | NB: You want to know that you can pick up the phone and talk to somebody competent, that cares, that is engaged with your business, right? A lot of times you see these kinds of Fintech companies where customer service gets in the way of their growth. So they don’t really bother. And you’re like it kind of really matters to the SMEs. It’s their livelihood, right?

12:46 | NB: So customer service is one of our pillars. The second one is digital-first. So we want to make a service with no paperwork, it’s instant, feels great, has all the tools kind of cooked in, right? Not like those old-school kinds of bank services, right? And then finally it was low rates. That really matters to us. The way we were able to achieve that, like how do we offer really low processing rates to our SME customers while still having margins where we can operate our business?

13:14 | NB: And the way we did it was that we built all of our technology right on top of the rails directly, without needing third parties, right? Rates matter. Because I completely agree with what you said, in terms of if you get too restrictive when trying to process that transaction. Like I only take cash, or I only take a check or things like that. You’ve got to put yourself in the shoes of your customer and be like that person. However, they order from you, he or she is going to think, hey, that was really smooth.

13:48 | NB: Maybe next time I’ll go with them again because it was just the easiest. They didn’t make me jump through all these loops. They just let me make a purchase. Right? But on the other side, with the SME, it is still their cash flow, it matters. They want to feel like they are paying something affordable, and they’re not being nickeled and dimed. You see that a lot if you think about the PayPals and things like that.

14:11 | NB: You’re paying 3% or 3 ½ % of things, and you’re like, okay, this is getting a little bit, hairy, right? So we really focus on offering low rates, and we do that through something called interchange plus. So, essentially, we actually show you the true cost with Visa, Master Card on different payment methods. And then we actually show you our margin. And the more you process, the more our margin goes down.

14:33 | NB: So it’s super transparent. You know what our cost is. You know what our margin is. You know exactly what you’re paying. And that’s actually one reason why we brought on bank payments too, is because bank payments are a lot cheaper. They’re half of a percent versus the average credit card transaction that will be in the 2 to 2 ½ %. Right?

14:50 | NB:  So it allows you to have another payment method if your customer is happy to do a bank transaction, where you can get to reduce, your transaction fees even more. And we see that used a lot with big orders. Like you said, 50,000, 100,000. And then all of a sudden you’re paying a lot less for a transaction. Yet, you’re still making it very smooth, very seamless, very digital.

15:12 | KM: Yeah. The nice thing is you can also have your cake and eat it too. You can start, like we were talking about earlier, new customers or maybe new orders or initial deposits or whatever else. You could maybe allow that to be on the credit cards and whatnot. And then of course, once you’ve built up the trust, and you’ve got the time or whatever else, especially on the bigger orders, then maybe you switch over to the bank method or whatnot.

15:32 | KM: But just keep in mind that sometimes your customers have certain restrictions. For instance, a credit card is just that, it’s providing the buyer with actual credit. So although it may seem easy to you to ask for a bank wire because it’s slightly less expensive than it would be for a credit card, know that on the other side, maybe they don’t have that access to cash at this exact moment.

15:53 | KM: Maybe they’re using the credit card as a 30 or 45 days buffer in order for them to get their payments on the other side. So you have to really think about the reason why you’re paying those fees. And also, I think something that’s really important for those who don’t understand it is that the credit card companies take most of the profit, especially when you get into the AMX and that sort of stuff.

16:14 | KM: They charge a fee to the payment processors, which obviously has to flow through. And the fee is pretty substantial, as you see, once you’re dealing with all of these agreements on the backend. And of course, that’s for the credit card companies to assume their risks, both for them to run a business. But for them to also assume the risk of the default on their credit and obviously marketing and all the rest and the technology that goes along with it.

16:35 | KM: The point is that you really need to think about your customer. And make sure that if that is a pillar, if you’re going to push back on to require one thing or another, maybe think about doing it further down the pipeline. Further down the trust cycle with them, as opposed to upfront. Especially when you’re looking at your B2C, your direct customers, because they expect the same treatment on your website that they get on Amazon, when it comes to payment processing.

17:00 | KM: Amazon gives you every option under the sun. So, they expect if they’re ordering directly through your website, they expect the same in return. The beauty of that too is if you are doing it directly through your website, you’re not paying all the fees that go through an intermediary or a marketplace like Amazon. So, although, yes, you might be paying a couple of percent for that credit card. You’re paying a heck of a lot less than you might be paying through a reseller.

17:23 | NB: Exactly. I think what’s lost about credit cards is that they are credit like you said. If you have a small business on the other side that is making that order for you. I recently did it, and we certainly did it for many years when we started this business as a small business. And we were using our credit card as a way to try to manage our cash flow. And it was essentially a loan, right?

17:44 | NB: So if we had to purchase a bunch of computers, or whatever is the case, we put it on there, and then we paid it off. So you have to understand that by offering that to your customer, you might make that sale possible. Otherwise, they might be scrambling to make it happen. You might still be able to make the sale happen, but you have to think. Nowadays, they’re thinking about that next time they do an order going like, oh! That was really tough to try to squeeze enough cash so that we could write a check.

18:13 | NB: I really wish we could have done a credit card order or something else. And it’s something to keep in mind. Because the person, if they have an option that’s next to you where they can go. They might go with that just because they’re trying to manage and grow as a small business as well, right?

18:31 | KM: That’s a good point. And the other side too is especially later stage when the trust is built, you can always offer it as an option. Say look, if you really need to play with a credit card, just pay our fees, and we’ll be square. Or if you want, it’ll cost you. Or even look at the other way. Say, maybe we’ll shave a couple of percent off if you pay by the bank method as opposed to the credit card method.

18:50 | KM: So there are options. But again, that’s up to you to think about as the business owner. Like I say, always lean on the side of the customer. Really think about what the customer needs first, and then you figure out how to manage that on the backend. Always good advice, it does no matter whether it’s B2C or B2B, whether it’s in-person or it’s an online transaction.

19:07 | KM: All of that theory really just resonates, especially when you’ve got a high-quality product, which generally, most new inventions are, right? They’re an elevation of your product, and therefore they have inherent value baked in.

19:18 | NB: Exactly. You brought up e-commerce and Amazon, another thing I think about is that we saw a big kind of revolution. And especially covid accelerated that with people shifting their habits towards purchasing online, right? And I think the next of revolution, the next wave is coming. And I think this applies to makers and, especially if you’re in that kind of wholesale B2B mode, it is what I would call e-commerce BD or B2B e-commerce. Right?

19:51 | NB: Because, if you think about it as a consumer, it’s pretty easy to think about a product, go online, and purchase it, right? But if you think about it from a business transaction standpoint, it’s actually still quite rigid. A lot of times, for a lot of people you have to still call them, do a purchase order, then they send you something, then you sign it. And we haven’t seen as much of that shift towards that B2B e-commerce.

20:15 | NB: For example, we offer a hosted online store, similar to Shopify, right? But it’s actually more geared towards that. So you can password protect the whole site. You can offer different wholesale rates to different customers. You can make it so that they don’t necessarily have to pay for the order at the checkout, they can generate a purchase order or an invoice.

20:40 | NB: But I really started to think that wave is coming, where all of a sudden, if you have gotten used to it as a consumer, hey, it’s really easy for me to go online and reorder anything I want. Well, every business needs to think about their customers and be like, we should be able to offer that same convenience to them as well. And why is it that they have to email us if they want to order more from us? Shouldn’t we make that seamless?

21:06 | KM: Nic, I really liked that you brought up that wholesale, let’s call it B2C or B2B online because that definitely is an emerging trend. And you can think about it on smaller levels. Whereas, if you’ve got a new product, a gadget, whatever else, and you’re selling B2C on the website, a lot of the time, you also have interest in selling wholesale to stores, which then will resell it either online or in actual stores themselves.

21:30 | KM: It’s very difficult for those small retailers to find a lot of products in an efficient way and place orders in volume. And this is coming. So I love that you address that because we’ve had a number of communications on the design and development side, especially as we’re working with clients to start building up their e-commerce stores. Or even just their entire platform of how they plan to sell. Or the options that they plan to sell on.

21:52 | KM: Wholesale sales with a click of a button is a big one because what better way is there for a store to go to all these emerging marketplaces? And obviously one of the early ones is Alibaba or even AliExpress, where you can go on, and you can place an order for 50 units of something to then resell on your store.

22:09 | KM: So not only do you provide a service that authorizes and encourages stores to buy wholesale from you, as opposed to, maybe reaching out to a product they like directly and trying to cut a deal. You give it to them. You make it very simple. And you say, look, if you want to order 50 pieces, it’s at a reduced rate, and we give you the authorization to sell it.

22:26 | KM: And here’s maybe the parameters or your retail distribution license agreement, or whatever else, click a button. And like you said, whether it’s an instant payment or it’s an invoice generation, or it’s a later stage bank payment, whatever it might be, you make it smooth and easy, that is obviously a reoccurring theme in this talk today.

22:44 | KM: But making it really easy for those folks to buy 25, 50, 100 units of your product, and you’d be surprised. Imagine if you could build up 20, 30, 50 of those types of resellers who were just ordering from you on a regular basis. It might be easier to do that than it is to try and get a handful of larger retailers and go through the six, eight-month vetting process just to get on the shelves.

23:06 | NB: Exactly. And I think the litmus test for that is to think about you as a small business owner. You’re sitting on your couch at say 11 at night, on a Saturday. You’re trying to decompress, right? You should ask yourself, if one of my customers, including wholesale customers, wants to make an order right now, can they? Or do they have to wait for Monday and contact me or whatever is the case kind of thing, right?

23:33 | NB: And if that test doesn’t pass, then they might be inclined to go. We all need that smooth access to the products that we need, regardless of what it is, right? So I would really ask myself that question. And be like, how can I make that happen? And it doesn’t actually need to be an online store. But there needs to be a process that they can feel in that moment that they can make that order from you and move on to the next task.

23:59 | KM: That’s really a good point. Nic, I appreciate it. Before I let you go here, just give a quick overview of how folks can get in contact with Helcim if they want to reach out to you to at least get the discussion going about how they plan for, or set up payment processing for their products as they evolve.

24:16 | NB: Yep. So our website is helcim.com. I would encourage anyone. So our customers can sign up instantly on the website. There’s no need for paperwork or anything like that. But a lot of times people will call in and want to talk to somebody. We have an amazing team, and they can ask any question. There’s no pressure.

24:33 | NB: There are no commissions. And just ask a million questions. What if this happens? How do the rates work? How does the Visa work? Things like that, right? So we’re always happy to take those calls. And they can get started from there. The other thing, too, is that for me, I always love talking to entrepreneurs and small business owners.

24:51 | NB: And helping them pick my brain, I get to learn a lot from them as well. If you go to my LinkedIn, I’m sure you can find my name from the podcast, I accept all connection requests, and I’m always happy to chat.

25:03 | KM: As always, I’ll put all the links in the show notes as well. Nic, thanks again for being on the show. Much appreciated.

25:08 | NB: Thanks for having me.

25:09 | Voice-over: Thanks for tuning in to this episode of the Product Startup podcast. The show that teaches you what it really takes to bring your product to market and turn it into a big success. This podcast series is brought to you by MAKO Design + Invent, the original and leading firm in North America to provide global caliber end-to-end physical consumer product development to startups, inventors, and small product business clients. If you’re looking for product development help on your invention, head over to makodesign.com. That’s M-A-K-O design.com, for a free consultation from one of MAKO Design’s, four design studios from coast to coast. Thanks for listening and see you next time.