This is part of a mini-series taking us back to the basics of merchant services. I’ll answer questions such as: What is merchant services? How does...
Hardware-as-a-Service: A New POS Paradigm
POS hardware-as-a service is a fantastic model that everybody in merchant services should be considering.
Jul 14, 2023
Remember the days of purchasing software? Maybe you downloaded a purchased copy, or if you’re older you may have received a floppy disc (or other storage medium) containing a specific version of the software. Whatever way you got it, the software (or more precisely, a version of the software) was loaded it onto a computer. But that version of the software at some point became obsolete, or perhaps you purchase a new computer requiring the purchase if a new copy of the software.
Over time, of course, technology companies found a better way: offering software-as-a-service, or SaaS. With SaaS, you don’t actually own the software. Instead, software is provided as a service – usually via the cloud – and the user pays a small monthly fee to the provider. Users also get the updates and the benefit of new software features automatically, and it becomes the software company’s responsibility to fix any problems with the software.
Well, we have reached a similar inflection point with respect to hardware. I’m talking about POS hardware-as-a service. It’s a fantastic model that everybody in merchant services should be considering.
Think about fine dining establishments, large bars, night clubs and similar restaurant verticals that need feature-rich POS systems. Think of all the hardware they use: touch-screen monitors, card readers, receipt printers, cash drawers, and barcode readers, purchased for one or multiple locations. That can require a lot of upfront money.
HaaS puts a whole different spin on selling to these establishments, by transforming a significant upfront capital expenditure (hardware) into a manageable ongoing operating expense (monthly user fees).
HaaS also makes for better decision making. Restaurant owners who might look for ways to save money by skimping on equipment are less inclined to do so when paying small monthly fees instead of large upfront amounts, and knowing that if a piece of equipment breaks it will get fixed quickly, or swapped out for a new one, promptly.
Lavu, sponsor of this Merchant Sales Insight, has adopted the HaaS model for its restaurant management solutions. And since doing so, Lavu has seen sales go through the roof, because, frankly, HaaS is a much better deal for business owners, and creates amazing residual opportunities for merchant sales reps.
Not only can a sales rep eliminate upfront costs for the restaurant owner, many also are eliminating hardware costs, completely. When an agent is selling dual pricing, for example, there’s a lot of margin built in. Under the circumstances, eating the merchant’s monthly hardware fee becomes a viable option.
In this new reseller model, hardware becomes a Schedule A cost.
Consider the example of a restaurant that needs a POS system with 3 payment terminals, two printers, a cash draw, and a bar-code scanner. All-in the hardware costs $12,000, or $350 a month when provided as a service. If the agent is working with Lavu, that $350 gets added to the agent’s monthly Schedule A costs. In most cases, the agent passes on that $350 fee to the merchant. But not always.
Let’s say that restaurant has three locations doing a combined volume of $300,000 a month. And let’s say the agent sold them on dual pricing at a 4% flat rate. The agent can expect $6-7,000 a month in margin.
Working with Lavu, which offers an 80-20 lifetime vested residual split, the agent is in a great negotiating position. If the restaurant owner seems to be dragging their feet, and hardware is a sticking point, the agent can offer to take the monthly hardware fee off the table, and seal the deal. So now, instead of $7,000 in monthly residual, for example, the agent can expect $6,650, which is still a nice residual.
Talking with Saleem Khatri, the CEO of Lavu, I’ve been amazed at how many resellers in our industry have brought deals to them for fine dining restaurants and similar types of businesses with complex needs, and by the residuals these deals are generating.
So, if you are looking to sell fine dining restaurants and other complex food service businesses that need robust POS systems, head over to ccsalespro.com/lavu to learn more about Lavu’s reseller program, and about offering your merchants hardware-as-a-service.