Small Business Can

Hi Paul,

I think that this is a great question and unfortunately I don't have a simple answer.

I am in a similar position to yourself where I am involved in one business that wants to set up DD as the preferred method of payment for customers that we signup online. The problem is that as a startup it is very difficult to do so.

My understanding of the problem (as explained to me in a 3 minute conversation with my bank) is that a DD facility allows you to take varying amounts of money out of other peoples accounts (that's the point, right). This is ok, however the problem for the bank is that the people who's money has been taken can seek to have it returned within a certain period of time and if you have already gone and spent the money, or worse still taken lots of money and disappeared, then the bank is on the hook for the money.

Some alternatives that were mentioned to me were the setting up of some merchant facilities to allow us to get the money some other way initially - I don't know all of the details yet as I have to call into the bank to talk about it.

In general, I think that there is a great opportunity for some form of safeguarded DD facility here. From a business perspective DD's are a very effective way of getting paid on time and this is a huge advantage to you and your bank for cashflow purposes. Not having a DD facility from the beginning is adding more risk to the startup when there should be a way around it.

I will be very interested to see what other contributors have to say on the alternatives, thanks for raising this question.

Aidan
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I have been adopting a Lean Start-Up approach (although I hate the use of the word Lean) with a number of clients that I have been advising and frankly it is a no-brainer. In particular, blending this approach, with a strong customer development approach can significantly remove risk from any start-up and create a business with a significantly higher valuation (because you have engaged customers). When I get a chance I will write up a summary of my own experience in using this approach to launching a start-up very quickly, with less risk (and less stress).

There are lots of other sources of information related to this. Here are a few links:
successful-entrepreneurship

http://www.ashmaurya.com/
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