Understanding the Value of Your Merchant Residual Portfolio

Understanding the Value of Your Merchant Residual Portfolio

Companies purchasing merchant residual portfolios will pay handsomely for those residual streams. Large merchant residual portfolios with low attrition rates can fetch upwards of 40-times average monthly residuals on active accounts. Even the smallest portfolios ($3,000 or less in average monthly residuals) can produce payouts of 6- to 15-times those monthly residuals.

In other words, a purchaser might pay as much as $600,000 for a merchant portfolio generating average monthly residuals of $20,000 (30 X $20,000). On the lower end of the spectrum, a portfolio generating $3,000 in monthly residuals might be fetch as much as $45,000.

So how are these payouts determined?

Size counts for a lot. A portfolio generating $3,000 a month in residuals from scores of accounts is going to attract a better multiple than one where 2 or 3 large accounts make up half that monthly residual stream.

And the larger the residual stream, the larger the potential payout. Merchant portfolios generating $10,000 to $40,000 a month in residual streams should bring at least 15X. Payouts on portfolios averaging over $40,000 usually involve more than just residuals – factors like ongoing sales, referral networks and technology. But if the stars align, payouts as high as 40-times average monthly residuals are possible in these situations.

Companies purchasing merchant residual portfolios will pay handsomely for those residual streams. Large merchant residual portfolios with low attrition rates can fetch upwards of 40-times average monthly residuals on active accounts. Even the smallest portfolios ($3,000 or less in average monthly residuals) can produce payouts of 6- to 15-times those monthly residuals.

In other words, a purchaser might pay as much as $600,000 for a merchant portfolio generating average monthly residuals of $20,000 (30 X $20,000). On the lower end of the spectrum, a portfolio generating $3,000 in monthly residuals might be fetch as much as $45,000.

So how are these payouts determined?

Size counts for a lot. A portfolio generating $3,000 a month in residuals from scores of accounts is going to attract a better multiple than one where 2 or 3 large accounts make up half that monthly residual stream.

And the larger the residual stream, the larger the potential payout. Merchant portfolios generating $10,000 to $40,000 a month in residual streams should bring at least 15X. Payouts on portfolios averaging over $40,000 usually involve more than just residuals – factors like ongoing sales, referral networks and technology. But if the stars align, payouts as high as 40-times average monthly residuals are possible in these situations.

It’s important to understand what goes into determining monthly average residuals. These averages are determined across time frames of between 3 and 6 months. Months during which annual fees are collected (e.g.: January), or those with unusually high transaction volumes (like December) are typically excluded from the calculations. Inactive accounts (e.g.: those with seasonal volume) and brand new accounts also are generally not included.

Merchant attrition plays an important role in the valuation process. A portfolio that lost 25%, or more, of its merchant accounts in the previous 12 months will receive a payout at the lower end of the multiple range. A portfolio with an attrition rate of less than 10% will attract a much higher multiple.

It’s also possible to boost payouts by structuring a deal where you receive half the money up front and half over the next 36 months. The end result is a residual payout at the upper end of the multiple range, provided attrition remains low.

Are you looking to sell your merchant residual portfolio? Get a fair offer from a company I’ve worked with and trust. Visit ccsalespro.com/offer today to learn more. And while you’re at it, click here to order your free copy of Guide to Selling Merchant Residual Portfolios, and discover more tips on getting the best payouts for your merchant residual portfolio.

It’s important to understand what goes into determining monthly average residuals. These averages are determined across time frames of between 3 and 6 months. Months during which annual fees are collected (e.g.: January), or those with unusually high transaction volumes (like December) are typically excluded from the calculations. Inactive accounts (e.g.: those with seasonal volume) and brand new accounts also are generally not included.

Merchant attrition plays an important role in the valuation process. A portfolio that lost 25%, or more, of its merchant accounts in the previous 12 months will receive a payout at the lower end of the multiple range. A portfolio with an attrition rate of less than 10% will attract a much higher multiple.

It’s also possible to boost payouts by structuring a deal where you receive half the money up front and half over the next 36 months. The end result is a residual payout at the upper end of the multiple range, provided attrition remains low.

Are you looking to sell your merchant residual portfolio? Get a fair offer from a company I’ve worked with and trust. Visit ccsalespro.com/offer today to learn more. And while you’re at it, click here to order your free copy of Guide to Selling Merchant Residual Portfolios, and discover more tips on getting the best payouts for your merchant residual portfolio.

CLICK HERE  to get your free copy!