Case Study: Napa Valley Winery
Business Type: Napa Valley Winery (specific name withheld)
Initial Status: To the untrained eye this merchant account statement looked just fine; here are a few of the problems that stood out to me:
- One merchant account for both their tasting room and wine club
- 25% of there Visa transactions going to a “non-qualified” status
- Transactions being grouped into “mid-qual” and “non-qual”
- No rebate given on debit card transactions
- Effective rate of 2.76%
- Base rate of 1.77%
- Mid-qual rate of 2.35%
- Non-Qual rate of 3.35%
- Transaction fee broken up into two line items on the statement totaling $.30
- Old Tranz 330 terminals in the sting room
The controller of this winery very was very committed to their local bank and satisfied with the fees. In other words, I was privileged to even get a look at their merchant account statement.
Solution: Here is what I did to get this merchant account in shape:
1. Split up the account into to accounts, one for the tasting room and one for the wine club. I did this because it will help to reduce the amount of wine club transactions that end up coming in at a higher rate. Also it will give the winery a clearer picture of how each profit center is performing.
2. Removed the broad and expensive categories of “mid-qual” and “non-qual” and replaced them with transaction specific categories that have no hidden profit added to them.
3. Gave them the following rates:
Tasting Room – Retail account with a base discount rate of 1.90% + $.15 per transaction and straight pass through on all their surcharged transactions.
Wine Club – MOTO account with a base discount rate of 2.21% + $.15 per transaction and straight pass through on all their surcharged transactions.
4. Provided a brand new VeriFone Vx570 terminal for the tasting room.
5. After receiving the first statement I reviewed it and found that one of the tasting room employees was skipping the prompt for an invoice number when a customer called in an order. The result was some transactions coming in at a higher rate. I was able to talk to the tasting room manager and prevent that from happening any more.
Results: We brought down there effective rate from 2.76% to 2.32%, a .54% reduction. Dollars wise, the winery ended up saving $665.02 per month or $7980.25 a year.
The controller accepted my offer and told me the hardest part of the whole process was calling her bank to let them know about the switch.
If you would like to see how I would get your merchant account in shape click here.
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