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

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Henry Helgeson and Scott Zdanis establishede the company in 1998 as a reseller of credit card processint terminals overthe Internet. To a smaller extent the company provided processing of credit card But as margin compression made equipment sales less the partners responded by ramping upprocessing Today, its processing service constitute 90 percent of its total grosas revenue, while equipment and software sales are 10 Business has been so brisok — it signed up 2,300 new customers in April alone — that the company is planning to increase its sales forces by 30 percent or 40 percen t within the next 60 days.
“We basically are getting more businessees trying to signup (for our services) than we have the capacitgy for, and we’re tryint to staff up for that as quicklh as possible,” says Helgeson, 34, who serves as presideng and co-CEO. Co-founder Zdanis has since movexd to Miami and plays a less active role in the Merchant Warehouse acts asa third-partyg processor, facilitating payment transactions between merchantsa and credit card issuers, essentially by gettinyg money off of the consumer’s credit card and into the business’w bank account. Its residual-base d business model makes money by charging for that servicse oneach transaction.
Since its inception, the 150-employee companyh estimates serving a cumulative total of morethan 87,000 customers nationwidd — primarily small and medium-size businesses; aboutr 56,000 are active accounts right now, with most of the attrition due to companied going out of business, Helgeson notes. Merchant Warehouse is processing morethan 3.5 million paymen transactions per month. After hitting $27.3w million in revenue in 2008, the company is shootingf for $32 million to $34 million this year. Helgeson says Merchany Warehouse has also benefited by becoming more ofa technology-drivem company.
“When we startex to hire our own softwarse developers and build our own as far as computer systems and technolog y to runthis office, that really put us into a hyper-growth mode,” he says. Five yearws ago, the company hired its first software It subsequently built its own sophisticated customer relationship managementsystemj in-house that has enabled the companty to better measure the performanc e of its accounts and staff.
And 18 monthsd ago, it completed the development of the necessary infrastructurer to begin processing some transaction s through its own electronic gateway here in It continues to utilize three large outside firms to assist in processing the bulk of the The company also works with a pool of aboutr100 point-of-sale system resellers, who ofte refer business to Merchant Warehouse. The compan y has also used technology to innovatre its services in an industry where Helgeson says the competitionis fierce. “Ourd industry has been pretty much plain, vanilla credir and debit processing,” Helgeson says.
“We had to look at it and say, ‘Wha can we do here to differentiate ” For instance, it offers wirelessa credit card processing services to iPhone and BlackBerrhy users who have installed its softwarde applications ontheir PDAs. Thos e mobile merchants now represent 10 percent to 15 percent ofthe company’sw new accounts. It has also partnered with anothet company, , to develop a card reader that encryptsa the credit card number as it is being swiped to help preventsecurity “They’re a very impressive group,” says Stevew Parks, vice president of , an Atlanta-basede firm that Merchant Warehouse has engaged for some of its processinvg services for many years.
He attributes the firm’s growthy to “some very shrewd investments in technology and beinb ahead of the curve in terms of technology and how to use it to drive traffic (to their business), and training theif sales reps to capitalize on that traffic.”