Chargebacks are among small business owner’s least-favorite topics. Your company can find itself faced with enormous financial loss, and the prospect of fighting what seems like an uphill battle to retrieve the revenue you’ve earned.
Dean Thompson, Owner of business services firm EnterprisingWorks LLC, has experienced firsthand a charge back.
After waking up to discover that 10% of his company’s revenue for the month had been pulled from his account due to a disputed charge by the customer, he informed the Wall Street journal that it took 12 hours of paperwork and phone calls to prove he’d provided the services to the client. Thompson stated “for a small business owner..it hurts my ability to perform for other clients.” They’re certainly no one’s favorite topic to discuss, but you need to know what you’re facing if you ever encounter one.
What Are Chargebacks?
Customers of major credit card companies have the power to dispute transactions, to protect themselves against fraud or unauthorized purchases. They can be caused by human error or miscalculations.
There are also dishonest consumers who make a habit of purchasing products and services online, and disputing the charges. While Heartland Payment Systems reports that less than 0.01% of all credit card charges result in chargebacks, if your business is facing the aftermath of a dishonest customer it can certainly make a difference to critical revenue.
Why You’ll Never Win
We can’t tell you whether disputing the chargeback is worth your time. However, we can tell you that winning a case is hard work, and it can require hours of your time. Is it possible to win a chargeback? Absolutely, but at what cost? We’ve highlighted several of the reasons that subscription businesses never really win a battle over a chargeback:
1. It’s Incredibly Time-Consuming
In order to retain the revenue that’s been pulled in the case of a chargeback, business owners need to prove to a merchant that the services were provided in the first place. It can be hard to do. While many major brands have dedicated team members who specialize in fighting chargebacks, you need to evaluate whether fighting the revenue will be worth as many as 10-12 hours of your time.
2. It Could Be Your Fault
Chargebacks aren’t always initiated by dishonest consumers.They can also be triggered when your customer don’t remember you when checking the credit card statement.
- Ensure your business is proactive about responding to the queries in case if the customer don’t recognize the charge.
- And do make sure that your DBA Name is clear.
- If there is a problem with the product, ensure that you fix the issue before fighting a chargeback.
It certainly won’t make you look professional if you attempt to fight a charge that was your fault in the first place.
3. The Client’s Unlikely to Result in Recurring Revenue
Even if you ultimately win the chargeback battle against a dishonest customer, the benefits to your subscription business will be limited to the total amount of their bill. It’s unlikely you’ll ever receive a positive recommendation or reference from them, and they’re incredibly unlikely to become an engaged promoter of your product.
Has your small business even been a victim of chargebacks? Please share your story with us using the comment section below.