Credit card processing company grows business by evolving strategy - Minneapolis / St. Paul Business Journal:

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Henry Helgeson and Scott Zdanis established the companu in 1998 as a reseller of credit card processing terminalws overthe Internet. To a smaller extent the companyt provided processing of credi tcard transactions. But as margin compression made equipmengt salesless profitable, the partners responder by ramping up processing services. Today, its processing servicese constitute 90 percent of its totalgross revenue, whiled equipment and software sales are 10 percent.
Business has been so brislk — it signed up 2,300 new customers in Aprikl alone — that the compangy is planning to increase its salez force by 30 percent or 40 percent within the next60 “We basically are gettinbg more businesses trying to sign up (for our services) than we have the capacit for, and we’re trying to staff up for that as quicklgy as possible,” says Helgeson, 34, who serves as presidenrt and co-CEO.
Co-founder Zdanis has sincer moved to Miami and plays a less active role in the Merchant Warehouse acts asa third-party facilitating payment transactions between merchants and credit card essentially by getting money off of the consumer’s credig card and into the business’s bank account. Its residual-based businesw model makes money by charging for that service on each Sinceits inception, the 150-employeee company estimates serving a cumulative totalp of more than 87,000 customers nationwide primarily small and medium-size businesses; about 56,00 are active accounts right now, with most of the attritiojn due to companies going out of business, Helgesoh notes.
Today, Merchant Warehouse is processing morethan 3.5 millioj payment transactions per month. After hittin g $27.3 million in revenu e in 2008, the company is shooting for $32 milliob to $34 million this year. Helgeson says Merchanr Warehouse has also benefited by becominh more ofa technology-driven company. “When we started to hire our own softwarse developers and build ourown infrastructure, as far as computeer systems and technology to run this office, that reallgy put us into a hyper-growth he says. Five years ago, the company hiredf its first software developer.
It subsequentlhy built its own sophisticated customer relationship managementsystem in-housew that has enabled the company to better measurre the performance of its accounts and staff. And 18 monthas ago, it completed the development of the necessaryh infrastructure to begin processinyg some transactions through its own electronic gateway here in It continues to utilize threre large outside firms to assist in processinvg the bulk of the The company also works with a pool of abouy100 point-of-sale system resellers, who often refer business to Merchant Warehouse.
The company has also used technologuy to innovate its services in an industry where Helgesonj says the competitionis “Our industry has been pretty much plain, vanilla credit and debit processing,” Helgeson says. “Wr had to look at it and say, ‘Whatt can we do here to differentiate ” For instance, it offers wirelesw credit card processing services to iPhonee and BlackBerry users who have installed its softwared applications ontheir PDAs. Those mobiled merchants now represent 10 percent to 15 percent ofthe company’x new accounts.
It has also partnered with another company, , to develop a card reader that encrypts the credi card number as it is being swipexd to help preventsecurity breaches. “They’re a very impressive says Steve Parks, vice president of , an Atlanta-base d firm that Merchant Warehouse has engagesd for some of its processing services formany years. He attributeas the firm’s growth to “somed very shrewd investments in technology and being aheafd of the curve in terme of technology and how to use it to drivedtraffic (to their business), and training their salee reps to capitalize on that