Square’s Next Play: A One-Stop Shop for Small Businesses

Steve Ziganti, co-owner of 3 Steves Winery in Livermore, Calif., often dreaded payday, but not for the reason you might expect. He was happy to pay the the 30 to 40 workers who made his small winery possible. What he took issue with was the process of paying them.

His existing system was a drag. The winery's part-time employees clocked in and out each day by scribbling on a printed Excel spreadsheet. When it came time to pay them, Ziganti tallied up the hours each person worked, figured out how much overtime he owed them, calculated the amount of tax he had to withhold for each employee, and crossed his fingers he didn't make a mistake in the math.

When he was approached with a potential solution by a young payments company called Square -- founded by Twitter co-founder Jack Dorsey -- he jumped at the opportunity to beta test it.

Ziganti was already a Square customer -- he'd been using Square Register, a credit card processing tool, for two years -- and liked the flexibility it offered. Now he was trying Square Payroll, a new service Square rolled out Tuesday in California that automates the entire process of paying workers and their taxes. Businesses pay $20 a month for the service, plus $5 a month for each employee they process.

Four months in, he's a convert.

"I can't imagine changing from Square," Ziganti said.

In the highly competitive payment processing and payroll space, this is the way Square is hoping to carve a place for itself. Step one: sign people up to use its credit card reader. Step two: offer those customers services it can charge for.

Square has done a good job with step one, according to James Wester, research director at IDC Financial Insights who specializes in global payments.

"They've been aggressive in the...

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