Debit cards, digital wallets, and contactless payments continue to outpace cash in acceptance and popularity. Offering convenient payment methods benefits customers and businesses that set up and use merchant services accounts to accept electronic payment methods.
Agents and independent sales organizations (ISOs) can build considerable portfolios and residual streams when they accumulate business accounts that rely on merchant services. There’s no denying that these portfolios and residual streams are valuable. But how much is my portfolio worth? We’re here to help.
You’re about to learn:
- What merchant services portfolios and residual streams are
- How to value your merchant services portfolio or residual stream
- Determining when it’s a good time to sell
- The legal considerations of portfolio sales
What Is a Merchant Services Portfolio?
This type of portfolio contains businesses that accept e-commerce or card transactions, such as debit cards, credit cards, and other types of non-cash payments. Agents or Independent Sales Organizations typically manage these portfolios.
On the surface, a merchant services portfolio is a simple collection of companies. However, it’s much more. These portfolios also generate vital residual income that agents and ISOs can grow, reinvest, or use for other purposes.
Essential Factors When Valuing a Merchant Services Portfolio and Residual Streams
You know what a merchant services portfolio is. It’s now time to learn about determining the value of a portfolio. So, how much is my portfolio worth? Use the factors below to find out.
- Monthly Recurring Revenue (MRR) is a crucial metric that measures the revenue generated monthly by a merchant services portfolio or residual stream.
- Diversification: Unlike MRR or attrition rates, a portfolio’s diversity isn’t pinpointable with a percentage or ratio. However, most buyers can spot a diverse portfolio from one that isn’t.
- Account Attrition: This metric focuses on the number of business accounts lost during a specified period.
- Revenue Attrition: While account attrition focuses on account loss, revenue attrition concerns the amount of business revenue lost from lost accounts.
- Portability: Most buyers are attracted to portfolios that feature easy-to-transfer merchant accounts. However, we keep the merchant account with the existing processor. Merchant accounts that are in different industries, have sticky add on services and great rates which may be worth more when you are ready to sell.
Sell Your Credit Card Processing Account Portfolio
How to Value Your Merchant Services Portfolio
Gather Your Information
Answering the question, “How much is my portfolio worth?” is impossible without looking at information about this collection of merchant services accounts. Supporting documents can include residual reports, merchant agreements, and other relevant information.
It’s also advisable to prepare portfolio-related calculations that buyers want to know about, such as attrition rates and monthly recurring revenue.
Look at Current Market Conditions
External conditions can determine the value of a merchant portfolio. Regulatory changes and ever-changing payment technologies are two factors that can affect the value of a merchant services portfolio.
Why do you need Velocity Funding? Because we maintain in-depth and up-to-the-minute knowledge about market conditions for those with merchant services portfolios.
When Is a Good Time to Sell My Merchant Services Portfolio?
In a perfect world, every seller would know the ideal time to sell their portfolio. However, that’s not possible. While there’s no universal sale date or time, several indicators can help you distinguish between favorable and unfavorable selling periods.
If valuing your merchant services portfolios shows that monthly recurring revenues and transaction volumes are at all-time highs, now could be the peak time to sell.
Your reason for selling is also a time-related factor. In this case, your circumstances help determine when it’s a good time to sell your portfolio. For instance, someone facing emergency expenses is likely more inclined to sell their portfolio quickly than someone merely curious about their accounts’ worth.
Legal Considerations of Portfolio Sales
Valuing a merchant services portfolio is vital before selling it. However, clearly understanding this account collection’s worth isn’t the only step required before selling a portfolio. Portfolio sales also involve legal considerations.
Reviewing Contracts
Many legal-related issues stem from contractual obligations and the fallout when these requirements aren’t followed. However, you can avoid these problematic situations by reviewing your portfolio’s merchant agreements and ISO / Agent contracts before placing your portfolio up for sale.
Any Current Legal Disputes
If your business faces current legal issues, selling a portfolio can be difficult. You also want to ensure you have the legal right to sell your accounts. If legal restrictions exist, they often require further investigation.
Why Do I Need Velocity Funding?
We have over 25 years of experience purchasing credit card account processing portfolios and residual streams from agents and ISOs throughout the United States. We’ve successfully purchased hundreds of portfolios because we make maximum-value offers.
Our clients know they’ll always receive attractive offers made only after thorough valuations by industry experts. Plus, Velocity Funding buys portfolios made up of many types of merchants. We buy about 80% of the portfolios we evaluate.
Working with Velocity Funding means:
- Getting a portfolio offer in under 24 hours
- Guidance throughout valuation and sales processes
- A competitive, maximum-value portfolio offers
In conclusion, valuing your merchant services portfolio or residual stream is a crucial process. A clear understanding of your portfolio’s worth helps ensure you don’t accept a lowball offer during selling time. However, someone inexperienced with valuing portfolios can slow down the selling process. Make things easy. Contact the professionals at Velocity Funding for a free merchant services portfolio valuation.
Get a Free Portfolio Valuation
Dean Caso is a Managing Partner at Velocity Funding, which he founded with this company’s other Managing Partner, David Caso, in 2006. Caso graduated in 1983 from Babson College with a Bachelor’s degree in Finance and Investments. With over 35 years of experience, Caso has acquired over 300 credit card processing portfolios. He has a superior eye for opportunity and an unwavering commitment to excellence. Caso’s leadership instills confidence, fosters innovation, and inspires those under his professional command. His decades of industry experience and proven track record of success continue to drive Velocity Funding’s growth and industry-leading presence.