Launching any business is a challenge, and doing what it takes to make it flourish is even more complicated if you are in a high-risk industry.
If your fledgling company has been deemed to be a “high-risk business” by conventional payment processing companies such as PayPal and Stripe, you can hardly be blamed for being discouraged and overwhelmed.
Take heart: We’re here to ease your mind by plotting each step in your high-risk business’s birth and ultimate success.
1. Do your risk assessment homework
There are unknowns involved in starting any new venture, but high-risk businesses have more than the norm.
This is, after all, why conventional lenders are wary of partnering with retailers in certain industries, companies who are likely to have an above-average number of credit card chargebacks, owners with limited or bad credit histories and sectors that are highly regulated or which operate legally but just on the margins.
If you are contemplating dipping your toes in the world of high-risk businesses, you need to understand all facets of your industry.
Take a deep dive into your business type to learn just why it has been placed in this category, and make it your mission to learn about the legal and regulatory issues, higher costs and added expenses that you will encounter.
Only after you have made a clear-eyed assessment of each and every one of these factors should you move to the next step.
2. Find your audience
Your next job is to research your potential customer demographic to find out who they are, what they prefer and areas of lack or pain that your business can be positioned to satisfy. Furthermore, it is crucial that you learn who your competitors are and what they are offering so that you can find products, services or approaches that set you apart from the rest.
With this information in hand, you can come up with your own unique and compelling business model and brand complete with the merchandise or experiences that buyers have been craving.
3. Search for a high-risk payment processor
Although conventional lenders tend to avoid businesses like yours, you can find a dedicated high risk payment processor who is much better suited to meet your needs.
That is because these companies have direct experience in your industry and have spent years establishing relationships with high-risk-friendly banks and other financial institutions.
Because of their familiarity with your specific industry, they also understand the unique security risks you face and can assist you with services that combat fraud and chargebacks.
Payment processing for hard to place businesses also enables you to take the multiple forms of payment your customers will demand. Especially in the high-risk arena, you need to provide your clients with varied and flexible options when it comes to how they submit their payments. For some sectors, guaranteeing discreet billing is also crucial.
High-risk merchant account providers have the knowledge, relationships and customer service team necessary for you to provide this extra tier of services to your customers.
As you may have suspected, you will have to pay a price for the faith these high-risk processors are extending to you. In most cases, applying takes longer and requires more documentation and scrutiny.
What’s more, you can expect to pay higher transaction fees and may be slapped with additional charges and contractual obligations.
However, the benefits associated with these companies far outweigh these traits, especially because a high-risk lender with expertise in your industry can also provide added anti-fraud and other security measures as well as reporting tools and incident management in the event that you experience a data breach or business interruption.
4. Write a comprehensive business plan
A well-constructed business plan is the dynamic compass that will guide your high-risk business from inception to launch and far beyond.
This should be a document that covers how much capital you will need to get started, your estimated ongoing expenses, your target market, the products or services you plan to offer and a description of all legal or regulatory concerns that you will encounter in your industry.
Finally, you should describe the steps you will be taking to market your business and brand to your target audience.
5. Use technology to streamline your processes
One fact of life about high-risk businesses is that they tend to cost more to run due to their regulatory constraints and the added chargebacks they encounter. Incorporating technological solutions can help to minimize these added expenses by simplifying customer service and payment processes through automation.
Consequently, tasks can be prioritized, leaving you with more time to address the needs that require the human touch.
6. Reach out for help
It is foolhardy to take the full burden of starting your high-risk business solely onto your shoulders.
Collaborating with peers in your industry as well as getting support from family, friends and other well-wishers can give you the added knowledge, morale boost and listening ears that are so important in helping you to learn, reduce stress levels and remain passionate and creative.
That assistance also should extend to collaborations with professionals such as attorneys and accountants. High-risk landscapes can be filled with complex regulations and requirements that you must understand in order to be in compliance with state and federal laws.
Furthermore, an accountant can be your best friend as you work to stay on the right side of Uncle Sam when tax time rolls around as well as to help you to determine the best structure for your business.
7. Come up with a risk management strategy
With the right payment processor, a full set of protocols and a well-trained staff in place, you have taken the steps necessary to stay protected from data breaches and other security events. In spite of your best efforts, however, bad things can and do happen.
Therefore, it is crucial that you plan for the worst with a risk management plan. It should include actionable strategies for dealing with legal issues, natural disasters or data breaches. Be sure to specify who is accountable for every step of your plan, and prioritize training all members of your staff to promote a security-aware environment.
Although launching and growing a high-risk business comes with its own set of unique challenges, the rewards can be spectacular.
With planning, passion and a little help from friends and professional associates, you have all the tools you need to make your entrepreneurial dreams come true.
