The book “Four Hour Work Week” by Tim Farriss has taken really taken off since I first read it a couple years ago. There’s an entire 4hww community online swept up in the movement lead by Muse creation, Outsourcing and Automation. People from all continents are leveraging technology and the internet enabling them to proactively design their lifestyle and allowing them to have more time to explore things like traveling, working location independent and escaping their 9:00 to 5:00 cubicles to spend more time with family and do things they enjoy.
A lot of people in the 4HWW community are starting ecommerce ventures, finding a product they can sell, setting up a website and fulfillment system, outsourcing tasks like SEO and making plans to enjoy the fruits of their “hands off” systems. Like any startup, these businesses are especially cash-flow dependent for their growth. They need cash early and quickly after completed sales to purchase inventory, pay outsourcing partners, pay for website hosting and other service providers. The sooner they can reinvest their revenues on things like online marketing, the faster their businesses will grow.
4HWW businesses need to be diligent in their research when deciding on online payments providers. It’s important to calculate into their business forecasts items that will affect their cashflow:
1) How much of their annual revenue is dedicated to the total yearly costs of processing fees, including all setup, monthly and other charges.
2) Settlements are when the payment processor pays the company that sold the products; How long after a transaction is money settled to the merchant?
3) What is the settlement frequency, How often do they get paid by their processor?
4) What is the reserve amount and period? Some processors keep 5 or 10% held for 180 days.
5) Merchants need to be aware of what chargebacks are, how they can impact their business and the fees and penalties associated.
Articles warn that some 4HWW businesses that aren’t diligent in their research and follow the path of least resistance end up using someone like PayPal for starting their ecommerce ventures only to become frustrated when they have a question or require support. Even worse, there is growing frequency of reports that businesses large and small find themselves victims blindsided by changing reserve policies and unwarranted chargebacks.