Tiny transactions, GIANT DREAMS

Tiny transactions, GIANT DREAMS

An entrepreneur seeks super-sized growth through puny margins. It's a tough task.

Gino Kauzlarich thinks big, but he runs a company that does something tiny - processing credit card, debit card and gift card transactions for other businesses, focusing mostly on small independent retailers.

The company gets a fee for every transaction, but on a per-transition basis it's literally pennies on the dollar, even hundreds of dollars.

"We live on skinny margins," says Kauzlarich, a native of the Seattle-area whose family is Croatian.

Given that and the sour economy, it would be logical to assume that Kauzlarich's Sarasota-based company, www.merchantservice.com, would be rail-thin these days. First off, there are fewer transactions to process in just about any industry, meaning fewer opportunities for the company.

Plus, Kauzlarich laments that he lost five possible clients over the past few months because they couldn't get financing to grow their own companies - a common situation for many small businesses.

But while 2008 was a tough year for merchantservice.com, including a 30% decline in fourth quarter revenues, Kauzlarich isn't giving up on 2009. In fact, he's projecting his company's revenues will grow by as much as 100%, from $1 million in 2008 to $2 million in 2009.

Kauzlarich also plans to open a few new offices, including ones in Seattle and San Diego, through licensing agreements with other entrepreneurs. The company currently has about 15 employees, eight of which work out of the company's headquarters in an office park off Fruitville Road, near Interstate 75.

The new offices involve a fee-based system where Kauzlarich provides working capital, equipment and software to independent dealers, who market the service to a wider base of potential customers. Those independent dealers can then earn their own commission on each transaction.

Growing like that in spite of the economic downturn is part of a larger move by Kauzlarich to upgrade his client base. "In the past we've been only with mom-and-pops," he says. "Now we are starting to go more mid-market."

One of the company's biggest steps into mid-market land took place last month, when it signed up Napa Valley, Calif.,-based e-winerysolutions.com as a client. Merchantservice.com now handles all the online credit card transactions for the popular wine Web site, a process that Kauzlarich says includes integrating his company's software into e-winery's sophisticated Web site.

Kauzlarich plans to grow the other divisions of his company, including his ATM rental service, although his thoughts are more modest in that department. He currently rents out and monitors ATMs for events and fairs in the Sarasota-Bradenton market, a system he thinks he can duplicate in other markets.

The business of selling a service to help other merchants grow their own margins is something Kauzlarich has been tinkering with for more than 15 years, since he lived in and around the Seattle area during the beginning of the Internet bubble. He initially started a predecessor company to merchantservice.com in the Pacific Northwest, only to move to the Gulf Coast a few years ago to pursue his lifelong boating habit more regularly.

Kauzlarich says his time in Seattle was full of entrepreneurial lessons. For example, after working for a few failed Internet startups in the area, Kauzlarich says he realized the biggest lesson he learned was about timing. Says Kauzlarich: "Never join an industry at its peak and ride it into the trough."

-Mark Gordon