Giving Rip-Offs the Kiss-Off
Shady credit card processors. Fly-by-night Web marketing "experts." Useless extended warranties. Bogus travel expenses.
These and other classic rip-offs have one thing in common: They cost small businesses billions of dollars a year -- and they probably cost your business more than you realize. Even when they're legal -- and most of them are -- they're like a lead weight dragging down your company's bottom line.
To help you fight back, we've called out the 10 worst offenders when it comes to typical small business rip-offs. Some of them may be familiar to you, but others probably aren't. The bad news is that we can guarantee you're losing money on these scams. The good news is that we'll show you how to fix these problems, and save big bucks in the process.
1. Picking the Wrong Credit Card Processor
Accepting credit cards from your customers doesn't involve black magic or goat's blood. It just feels that way.
That's because the credit card processing game is fiendishly complex. It involves hundreds of companies, issuing banks, and processing networks -- some of them legitimate and honest, others fly-by-night. According to one study, only 21 percent of retailers said they understood their payment processors' fees.
Protect yourself by learning how credit card processors operate and what to expect from them. FeeFighters.org publishes the best guide we've seen on the topic; read it before you sign a deal with any processor. Another site, the Merchant Bill of Rights, is also packed with great information.
2. Leasing a Credit Card Payment Terminal
If you're a brick-and-mortar retailer, you'll need a terminal, or point of sale, system to accept credit cards. Most payment processors are happy to lease this hardware for a monthly fee.
It's a great option -- if you enjoy getting robbed blind.
Do the math: A typical terminal lease fee may cost you $20 a month and run for 48 months. That's nearly $1,000 in lease payments for something you can buy for less than $200. Plus, when you own the hardware, you can switch to a new credit card processor whenever you want -- a big plus in a market where so many retailers are unhappy with their credit card processors.
3. Buying an Extended Warranty
Whether your company is purchasing a PC or a paper shredder, you're likely to get a high-pressure sales pitch for an extended warranty or service plan. More often than not, these plans are a rip-off.
Here's the truth: Retailers, distributors, and consultants often make more from selling extended warranties than they do from selling the actual products. If a product is going to break, it's more likely to break either right away, when it's still covered by the manufacturer's warranty, or after the extended warranty expires. And other plans refuse to cover accidental damage or certain types of repairs.
If you really want some extra insurance on an item like a laptop or a smartphone, first check whether your company credit card offers an extended warranty on purchases -- many of them do. Also, consider a third-party service like the highly regarded SquareTrade, which offers extended warranties on tech items for less than you'll pay at most retailers.
4. Buying Identity Theft Insurance
There's only one way to benefit from identity theft insurance: Avoid it like the plague.
Sure, identity theft costs small businesses up to $8 billion a year, and the problem is getting worse. But the typical identity theft policy is so riddled with gotchas and loopholes that the coverage is unlikely to ever pay for itself.
You're far better off taking active steps to protect your company's private information, monitor your credit reports and bank accounts, and secure your business data. You may also benefit from the anti-fraud protection that most credit card companies already provide their customers -- at no extra charge.
5. Hiring a Shady Online Marketing 'Consultant'
When a small business wants to get found online, it may hire a search engine optimization or search engine marketing consultant to do the job. That's why search marketing is now a $20 billion industry -- and why many SEO/SEM "experts" aren't who they claim to be.
The problem: Most small business owners know little about SEO beyond the vague idea that it's important and they need it. That sets them up for all kinds of trickery and lots of technobabble -- none of it terribly useful for marketing their businesses online.
Here's our advice: Never, ever, accept an unsolicited offer of SEO services. If you do need SEO help, seek out a consultant on your own, do a thorough background check, and get multiple references from reputable businesses. While you're at it, spend some time learning the basics of SEO and online marketing. These days, it's the kind of knowledge that every small business owner needs to have anyway.
6. (Over)Using Inkjet Printers
Back in 2008, a test by PCWorld found that some inkjet printers force users to replace "empty" black ink cartridges when they're still nearly half full. Combine that with printer ink that costs the equivalent of nearly $5,000 per gallon, and you've got the makings of a royal rip-off.
These printers and their pricey ink cartridges are a necessary evil when your company needs to print photos, presentations, or graphics. But if you're cranking out plain old text files on the office inkjet, you're throwing away hundreds or even thousands of dollars a year.
The alternative: an entry-level laser printer. Depending on the model you purchase and the cost of replacement toner, laser-printed pages can cost anywhere from one-third to one-sixth as much as those printed on an inkjet. Laser printers also generally have higher duty cycles, making them more suitable for daily, constant use.
Don't give up on that inkjet -- it does some things really well. But when you can buy a quality, business-class laser printer for less than $300 these days, why not have the best of both worlds?
7. Buying Low-Deductible Insurance
Nobody likes to pay an insurance deductible. But it sure beats getting ripped off with sky-high premiums, doesn't it?
Your business will pay more -- often a lot more -- for a property insurance policy with, say, a $100 deductible versus one with a $1,000 deductible. A typical policyholder will go years without filing a claim, so if they chose the lower deductible, the higher premiums will more than eat up that $900 difference.
That doesn't mean it's always a good idea to pick the highest deductible. Look at the difference in the premium, research the likelihood that you'll file a claim, and run some rough cost-benefit calculations. Then make an informed decision.
8. Employee Expense Account Abuse
Padding an expense report is a crime. But it's also ubiquitous -- over four times more likely than other types of financial fraud.
But let's be honest. You don't really want to throw your employees in jail for padding their expense reports. You just want them to stop, and help them make the right decisions.
There are lots of ways to avoid expense account rip-offs, such as putting in place written policies, formal reviews, and the use of corporate charge cards. Some of the best tools, however, are online expense-management products such as Concurand Certify, which make it easy for even small businesses to track and manage employee expenses.
Whatever you do, make sure your employees know your expense policies, as well as the consequences for violating them. When everybody knows the rules, they're far more likely to play by them.
9. Overpaying for Mobile Service
Wireless service providers are notorious for nickel-and-diming their customers. That includes all kinds of taxes, fees, and surcharges that tack about 14.5 percent onto the average bill. Multiply that by the number of employees at your company, and you've got the makings of a huge rip-off. Even worse, you're likely chained to a plan that offers either too much or too little coverage for your needs, meaning you're either overpaying for your plan or getting stiffed by overage charges.
There are lots of ways to ensure that you don't pay too much for your employees' mobile service, but two of them are especially helpful. First, all of the major providers offer discounts to employees of companies that use their service. That could save up to 20 percent a month -- big money if you subsidize employees' mobile plans.
Second, check out services like BillShrink and Validas, which will actually analyze your company's monthly mobile bills and recommend the least expensive service option based on your needs. It takes just a few minutes, and it could save you thousands of dollars a year in mobile-service costs.
10. Business Travel Rip-Offs
U.S. companies now spend more than $200 billion a year on business travel. Too much of that is wasted on a wide variety of rip-offs, including the following:
- - insane hotel room telephone charges
- - minibars and food trays that charge you for even touching them
- - airline fees that can add up to 50 percent of the cost of your ticket
- - the rental-car damage waiver very few business travelers will ever need, especially given that coverage is most likely available from your own insurance or your credit card
There are probably as many of these scams as there are business travelers to fall for them. The irony is that low-cost airlines and hotel chains are often less likely to stick you with crazy fees and hidden surcharges, making them even better options for business travelers.
And whatever you do, don't even think of asking a hotel to accept a UPS package for you.
-- Matthew McKenzie
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