Case Study - Square



The company was founded in 2010 by Jack Dorsey and Jim McKelvey.

Square is a listed company and is required by the SEC to publish its financial information. The company has not been profitable since its inception, but the losses are getting smaller. Analysts anticipate the company being profitable sometime in 2019.

The company name (Square) is thought to be derived from the first device, the Square Reader, which was square. Another idea is that the company was first going to name it Squirrel, but brainstormed around that word and came up with Square. The company’s website is This is another possibility for the name in that transactions need to be squared up.

How the Company Started

Jack Dorsey (also CEO of Twitter) felt the frustration of his friend Jim McKelvey when McKelvey could not transact a $2,000 charge for his company. McKelvey did not accept credit cards at the time. Dorsey then came up with the concept of creating a device that can be attached to a smartphone. The concept took off and is still a popular option among smaller and transient vendors (like vendors in flea markets and farmer’s markets).

The company has raised over $590 million since its start. In 2015, its IPO raised over $2 billion, and the company had a valuation of over $6 billion at one point.

Initial Problems

The company no longer allows gun sales to be transacted via its devices. The company also joined several other payment processors is no longer accepting payments for marijuana. This is likely a result of a Trump presidency and the administration’s attempt at cracking down on marijuana sales.


Why it Works

The company was the early adopter of portable payment processing devices. When companies are early adopters, they often become the brand of choice. The company has used its proceeds to develop other payment processing devices, including point-of-sale, and cash registers, etc.

On the company’s About page, they state that everyone should have the means to participate in the economy. The devices make this a reality for even the smallest of business owners.

The equipment that Square offers is attractive to small business owners. It runs from free to small one-time charges. The company does not charge a monthly subscription for most of its services, and the payments are only one-time in most cases. This is different from other payment processors who have a tiered fee structure that can significantly add to the costs of processing transactions.

The company offers a point of sale (POS) that is integrated with its merchant system. This makes it easy to coincide with the reports of both systems. Many companies must manually reconcile these which is time-consuming. Access to data is available from any location, which is a welcome change from other systems that require it to be local.

The systems are easy for customers to set up and use. This too is a departure from most payment processors and POS systems. This makes training easier for employees with less downtime because of it.

Square has made it possible for small business owners to bypass the complicated approval process and application procedures associated with traditional payment processors. The company also makes eCommerce features available for people who don’t want to create their own solutions.


Being an early adopter of the technology, the company enjoys word-of-mouth advertising. When other business owners (or potential business owners) see the capability of devices that attach to a smartphone and offer payment processing, they are likely to inquire about such devices.

Square gives its users the option to accept American Express. Many business owners know that isn’t possible with competing payment processors. Customers like to use American Express because they earn points. When this option is given by merchants, customers will likely use the services repeatedly.

The company is considering permitting transactions to take place via cryptocurrencies and the blockchain. If this happens, it will be an early adopter of doing this which could provide a huge advantage.


The company receives high ratings on These ratings are four and five stars (out of five). Several of the reviews specify how the product offerings are easy to use. Some stated that the fee structure was simple and saves on fees over other companies.

The company has customer loyalty and feedback systems built-in. This means its clients can learn quickly what customers respond to and comment about. These features can make switching costs for the company lower.


On the review website, several recent reviewers rated the company poorly. Many of the complaints center around payment problems where Square is holding the transactions for further review. Several of these reviewers state that the company is unresponsive to inquiries about the holds. Some mentioned their accounts were deactivated.

One reviewer stated the company violated its own terms of service with regard to chargebacks. The reviewer ended up having to pay a customer the amount of the charge and then the company issued a chargeback, which meant this reviewer paid double. This was done without the reviewer’s authorization. The reviewer tried unsuccessfully to contact customer service to resolve the issue. He created a detailed document on the issue and threatened the company with legal action. At that point, the company finally answered him due to the threat. reviewed the Square Point of Sale product. It rated the product as excellent with 4.5-stars out of 5. The pros for the review state that the system is easy to use and inexpensive equipment. The cons were that the company’s clients complained about account freezes and shutdowns. The review suggested that the product may not be well suited for big businesses. However, this is not the company’s intended audience.

An article on showed average reviews and confirmed that the customer service of the company is bad. The overall rating was 3-stars out of 5.

Lessons Learned By The Business

When Dorsey was obtaining money in the early years of Square, he created a document that highlighted how Square would fail. The document was appropriately titled, “140 Reasons Why Square Will Fail.” The content of the document was to address any objections investors may have had with the concept. The document is believed to be responsible for much of the company’s funding.


Although Square is considered by many to be a disruptor, Dorsey says the company is not looking to replace banks or put them out of business. He suggests that Square wants to make the credit aspect of banking available and accessible to everyone.


To state that Dorsey has a lot on his plate is an understatement. He is, after all, the CEO of Twitter and Square. He realizes this presents challenges and knows that he must rely on his team of talent to handle many tasks he cannot.


How Other Businesses Can Learn From This

Big companies don’t often cater to small businesses. They feel that the processing involved for the businesses is not worth the cost. However, when you can create your business model so that small businesses can benefit, and you can make a profit, you will make a fan out of the small business owners. When this happens, you can bet that these small business owners will recommend your company and products or services.

We hope that you are enjoying these case studies and learn how top companies were formed. The obstacles they overcame to find succees is tremendous. Yet, they found a way.