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heidi459

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Reply with quote  #26 

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Originally Posted by peachygreen98

Yes it is the cost of doing business but it is considered when setting fees.  Yes you put it as an expense on your taxes.  But it is part of the overhead the same as paying for the building, electricity, music use fees, computers.  No you don't break those charges down to the client but it is included in the fees you charge.  If it costs $10000 a month to run a studio + the cost of instructors, that is what you set your rates by.  There is a break even # of students required at a certain rate to cover those overhead costs.  No they don't pass it down where you see it just like you don't see the costs to print flyers, operate the studio website, buy office supplies.  But if you don't include those costs in your overhead costs that you have to cover every month to breakeven then you aren't going to make a profit and likely won't be able to keep your doors open for long.  


For many though, it's not about breaking even.  It's about pulling a profit...  hopefully a rather nice profit.  And at that point they decide what costs will be absorbed & what costs will be passed on.  Unfortunately, there's no way around it... owning a business (& I do speak from experience) involves a personal investment of both time & *$$$*.  You simply can't make it without spending it.  And a smart business owner who values the customer first & foremost?  He doesn't just add up what he spends & then charge the customer accordingly.  He's determines a competitive rate for his product/services... & then spends accordingly.   

I can actually think offhand of a couple local businesses that add on a fee for cc transactions... & many more that do not.  But interestingly, the fees for their products/services are comparable.  Could it be that those who are passing on those fees have made decisions that have resulted in their having to pay more than their competitors... for things like rent/insurance/payroll/ advertising/ supplies/whatever?  And that they therefore need to pass on the fees to keep their heads afloat?  Sure.  But those of us who take issue w/this practice would say that's not your customers' fault.  That your customers come in to purchase a product/service.  Not to keep your business afloat.         

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dave9988

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Reply with quote  #27 
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Originally Posted by momcrew

The last company I worked for did not pass along any sort of credit card fees. It was the cost of doing business and as with any expense, brought down our taxable income. 


Nothing is in a vacuum.  Just because it's an expense doesn't mean it wasn't figured in when setting rates or prices.  Of course they passed it along.

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momcrew

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Reply with quote  #28 
Quote:
Originally Posted by dave9988


Nothing is in a vacuum.  Just because it's an expense doesn't mean it wasn't figured in when setting rates or prices.  Of course they passed it along.



I was the controller and was involved in setting prices. But this isn't worth arguing over.

ETA, a large corporation won't feel the credit card fees as a small business owner would. Thus why a dance studio tries to avoid paying those fees, especially for something that goes in and then goes right back out. That's the bottom line. 
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peachygreen98

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Reply with quote  #29 
Quote:
Originally Posted by heidi459



For many though, it's not about breaking even.  It's about pulling a profit...  hopefully a rather nice profit.  And at that point they decide what costs will be absorbed & what costs will be passed on.  Unfortunately, there's no way around it... owning a business (& I do speak from experience) involves a personal investment of both time & *$$$*.  You simply can't make it without spending it.  And a smart business owner who values the customer?  He doesn't just add up what he spends & then charge the customer accordingly.  He's determines a competitive rate for his product/services... & then spends accordingly.   

I can actually think offhand of a couple local businesses that add on a fee for cc transactions... & many more that do not.  The exact same type of businesses.  But interestingly, the fees for their products/services are comparable.  Could it be that those who are passing on the fees have made decisions that have resulted in their having to pay more than their competitors... for things like do rent/insurance/payroll/ advertising/ supplies/whatever?  And that they therefore need to pass on the fees to keep their heads afloat?  Sure.  But those of us who take issue w/this practice would say... that's not your customers' fault.        

I agree, but as a business owner you have to set competitive fees.  Obviously you can't charge a lot more than the going rate even if you are the "Best" because you won't get any customers.  But if it takes 100 students at XX Rate to break even, your goal is to have 125 at the same rate to make your desired profit and if you get 150 students you can do something else with that profit (reinvest it, hire another instructor, etc).  And I'm using #'s just for discussion point not saying it would take that. 

And yes I agree some make choices that for the same price they don't have to charge that fee and other feel the need to.  I don't know what their profit margins are.  I also know I choose to not shop at places that charge me a fee above their published price to use a CC.  On the other hand for small local businesses that don't charge me that fee, I will make the decision to use cash sometimes to not have them get hit with a fee for my CC (not because they ask but because that is my choice).  It's amazing how many places don't take cash these days though.  

But one way or another we are paying for the fees.  A smart business owner isn't going to set up a model that causes them to lose money.  You have to figure out a way to make your profit in a competitive environment.  If you are giving away services that cause you to consistently lose money you won't stay in business long.  And maybe you choose to take less profit.  

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dave9988

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Reply with quote  #30 
Quote:
Originally Posted by heidi459
For many though, it's not about breaking even.  It's about pulling a profit...  hopefully a rather nice profit.  And at that point they decide what costs will be absorbed & what costs will be passed on.  Unfortunately, there's no way around it... owning a business (& I do speak from experience) involves a personal investment of both time & *$$$*.  You simply can't make it without spending it.  And a smart business owner who values the customer?  He not supposed to just add up what he spends & then charge the customer accordingly.  He's supposed to determine the going rate for his product/services... & then spend accordingly.   

I can actually think of a couple of local businesses that make it clear that they are passing on their cc fee... & many more that do not.  The exact same type of businesses (convenience store, hair dresser).  But the fees for their products/services are comparable.  Could it be that those who are passing on the fees pay more in rent, or insurance, or whatever?  Sure.  But that's not their customers' fault.      


I had to re-read a few times, but in the end I believe we agree.

In my mind I simplify into two buckets: revenue, and expense.

If profits are low (and yes negative is low), then I need to either cut back on some expense, or bring in more money.  Bringing in more money might be accomplished by raising rates (typical govt tax model), but it might also be accomplished by lowering rates and bringing in more business (a sale or coupon, for example).  Conversely, if I'm too busy, then maybe I want to raise rates and discourage business. 

And as you point out (bolded), those rates can't be set in a vacuum. Charge above average, and you better be offering a premium product or service.  Just starting out?  You might need to undercut, which might really stink: because your revenue is likely low, while your expenses might actually be higher.

The only part where I struggle a bit is the part about "And at that point they decide what costs will be absorbed & what costs will be passed on."  I'm not sure the mindset should necessarily change at the "profit point."  If a new expense pops up, or a fee is increased?  It only makes sense to constantly evaluate rates and fee structures relative to the market, and that includes anticipating the reaction of your customers.

BTW, the legality of charging "extra" for cc fees has the subject of legislation & court fights (a NY law was challenged by Expressions Hair Design, went to SCOTUS).
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dave9988

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Reply with quote  #31 

Quote:
Originally Posted by momcrew


I was the controller and was involved in setting prices. But this isn't worth arguing over.

ETA, a large corporation won't feel the credit card fees as a small business owner would. Thus why a dance studio tries to avoid paying those fees, especially for something that goes in and then goes right back out. That's the bottom line. 


Yes, and to some extent I'm contradicting myself in that rates are more correctly set by valuing the market (and market's reaction) than by examining expenses.

But a large corporation has a myriad of differences in how pricing, invoicing, and collections are handled.

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heidi459

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Reply with quote  #32 

Quote:
Originally Posted by dave9988

I had to re-read a few times, but in the end I believe we agree.

In my mind I simplify into two buckets: revenue, and expense.

If profits are low (and yes negative is low), then I need to either cut back on some expense, or bring in more money.  Bringing in more money might be accomplished by raising rates (typical govt tax model), but it might also be accomplished by lowering rates and bringing in more business (a sale or coupon, for example).  Conversely, if I'm too busy, then maybe I want to raise rates and discourage business. 

And as you point out (bolded), those rates can't be set in a vacuum. Charge above average, and you better be offering a premium product or service.  Just starting out?  You might need to undercut, which might really stink: because your revenue is likely low, while your expenses might actually be higher.

The only part where I struggle a bit is the part about "And at that point they decide what costs will be absorbed & what costs will be passed on."  I'm not sure the mindset should necessarily change at the "profit point."  If a new expense pops up, or a fee is increased?  It only makes sense to constantly evaluate rates and fee structures relative to the market, and that includes anticipating the reaction of your customers.

BTW, the legality of charging "extra" for cc fees has the subject of legislation & court fights (a NY law was challenged by Expressions Hair Design, went to SCOTUS).


I actually do agree with you 100%... I was just trying to give something to those who staunchly disagree.  In the hopes that they would be more open to what I was selling there.  [biggrin]

 

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heidi459

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Reply with quote  #33 
Quote:
Originally Posted by peachygreen98

I agree, but as a business owner you have to set competitive fees.  Obviously you can't charge a lot more than the going rate even if you are the "Best" because you won't get any customers.  But if it takes 100 students at XX Rate to break even, your goal is to have 125 at the same rate to make your desired profit and if you get 150 students you can do something else with that profit (reinvest it, hire another instructor, etc).  And I'm using #'s just for discussion point not saying it would take that. 

And yes I agree some make choices that for the same price they don't have to charge that fee and other feel the need to.  I don't know what their profit margins are.  I also know I choose to not shop at places that charge me a fee above their published price to use a CC.  On the other hand for small local businesses that don't charge me that fee, I will make the decision to use cash sometimes to not have them get hit with a fee for my CC (not because they ask but because that is my choice).  It's amazing how many places don't take cash these days though.  

But one way or another we are paying for the fees.  A smart business owner isn't going to set up a model that causes them to lose money.  You have to figure out a way to make your profit in a competitive environment.  If you are giving away services that cause you to consistently lose money you won't stay in business long.  And maybe you choose to take less profit.  



I don't really disagree w/anything that you "say".  I more disagree w/what I feel is being implied during these types of discussions.  Which is that ALL studios who charge these extra fees (whether it be for cc transactions, upcharges, travel, whatever) are doing so based on necessity.... to keep afloat.  And that it is somehow absurd to think that a business should ever give without a corresponding take.  IDK  It feels so naive to me. And discourages critical thinking. A business wants to make more money this year.  Let's see, what can they do... they can do the hard work to increase their customer base.  They can do the hard work to expand their offerings.  They can rack their brains to figure out how they can cut their expenses.  Or... they can add more fees!  Which is the easiest?  That path of least resistance is, in fact, hard to resist for some.   

All that said, the bottom line for me is simply that a business, any business, is there to serve it's customers NOT the other way around.  My husband loves to talk about the Law of Abundance.  Give... and you will receive tenfold.  And he practices what he preaches.  It's a concept that is lost on many these days.... and perhaps why so many small businesses fail.       

   

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