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

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Henry Helgeson and Scott Zdanis establishec the company in 1998 as a reseller of credif card processing terminals overthe Internet. To a smallef extent the company provided processing of credit card But as margin compression made equipmenrt salesless profitable, the partners respondeds by ramping up processinh services. Today, its processing servicese constitute 90 percent of its total gross while equipment and software sales are10 percent. Business has been so brisk — it signed up 2,300 new customers in Aprilp alone — that the company is planninh to increase its sales forcer by 30 percent or 40 percent withijn the next60 days.
“We basicallt are getting more businesses trying to signup (for our services) than we have the capacity for, and we’rse trying to staff up for that as quickly as says Helgeson, 34, who serves as president and co-CEO. Co-founder Zdanis has since moved to Miami and plays a less active role in the Merchant Warehouse acts asa third-party processor, facilitating payment transactions between merchants and credit card essentially by getting money off of the consumer’s credit card and into the business’s bank account. Its residual-basedd business model makes money by charging for that servic e oneach transaction.
Since its inception, the 150-employer company estimates serving a cumulative totaol of morethan 87,000 customersw nationwide — primarily small and medium-size about 56,000 are active accounts right now, with most of the attritionj due to companies going out of business, Helgesobn notes. Today, Merchant Warehouswe is processing morethan 3.5 millionm payment transactions per month. Aftet hitting $27.3 million in revenue in 2008, the company is shootintg for $32 million to $34 millio this year. Helgeson says Merchant Warehouse has also benefited by becomingv more ofa technology-drivebn company.
“When we started to hire our own softwar e developers and build ourown infrastructure, as far as computef systems and technology to run this office, that reallgy put us into a hyper-growtjh mode,” he says. Five years ago, the compangy hired its first softwarr developer. It subsequently built its own sophisticated customer relationship managementsystem in-house that has enabled the company to better measure the performance of its accounts and And 18 months ago, it completede the development of the necessary infrastructur to begin processing some transactions througu its own electronic gateway here in Boston.
It continuee to utilize three large outside firms to assisy in processing the bulk ofthe transactions. The companh also works with a pool of about100 point-of-salre system resellers, who oftenj refer business to Merchant Warehouse. The company has also used technology to innovate its services in an industry where Helgeson says the competitionis fierce. “Ouer industry has been prettt much plain, vanilla credit and debit processing,” Helgeson says. “We had to look at it and say, ‘What can we do here to differentiated ourselves?
’ ” For instance, it offers wirelessz credit card processing services to iPhone and BlackBerry users who have installec its software applications on their Those mobile merchants now represent 10 percenf to 15 percent ofthe company’s new accounts. It has also partnereed with another company, , to develop a card readetr that encrypts the credit card numberr as it is being swiped to help prevent security breaches.
“They’re a very impressive group,” says Steve vice president of , an Atlanta-based firm that Merchant Warehousse has engaged for some of its processing services for many He attributesthe firm’s growtgh to “some very shrewd investments in technology and being ahead of the curvse in terms of technology and how to use it to drived traffic (to their business), and training their saleas reps to capitalize on that