Maximize Your Portfolio With a 50x Merchant Residual Buyout
You’ve worked hard to build a merchant portfolio that provides you with a healthy stream of residual income. But have you considered other ways you can put that asset to work for you? A merchant residual buyout can be a smart financial decision.
The healthiest merchant portfolios are diverse, with a mix of industry types and businesses that utilize software to manage their day-to-day and run payments. For example, they may include brick-and-mortar retail stores, restaurants, business-to-business companies, e-commerce/online stores, and vertical market focus.
Agreeing to a merchant services residual buyout can result in a lucrative deal that provides you with a lump sum that you can reinvest in your business or add to your profit. You can also take advantage of a buyout when you’re ready to make a payment company partnership change or instead of opening a new line of credit. Whatever your reasons, SPS will work with you to maximize your funding.
Picking The Purchaser
When you sell all or a portion of your residual portfolio, the next step is researching potential buyers. Independent sales organizations (ISOs) and payment companies are the most likely to be interested in the purchase since it allows them to build their customer bases.
Once you find prospective buyers, you’ll need to compare their merchant residual buyout offers to find the best return for your investment of time and resources to build your portfolio. Purchasers will offer you a multiplier – common offers in the industry range from 10x to 30x your portfolio’s valuation. SPS, however, offers an industry-leading 50x merchant residual buyout for select partners.
Factors That Influence Portfolio Valuation of a Merchant Residual Buyout
Whether you are considering a buyout from a partner that offers 10X or 50x, the amount you’ll receive depends on your portfolio’s valuation. You don’t have to go into those negotiations blind. Knowing your portfolio’s value is wise before you get an offer.
Your buyer will request documentation about your portfolio’s history and consider several factors when determining the value of your portfolio, including:
A prospective purchaser will look at the rate of account loss as a percentage of your total portfolio. While some account attrition is inevitable as businesses close or change course with payments, a highly valued portfolio will have a high account retention rate. It’s an indication that accounts have received good service and are well-managed. Purchasers know that means there’s a greater chance that customers are happy with their merchant services and are more likely not to churn.
Age of Accounts
How long your customers have used your merchant services is another factor in portfolio valuation. Quickly trying to board new accounts to increase your portfolio’s valuation could backfire. New accounts need more historical data to show how profitable or stable they are. On the other hand, older accounts with a track record of good processing volume and a stable relationship with your company are more likely to result in a better valuation. But continuing to build your portfolio even if you intend to sell can be a good strategy, especially if you’ve built a sales engine that will keep running after the buyout. You could see a higher valuation if the purchaser believes they’ll be able to generate additional revenue from the new merchant accounts you’re bringing in.
Once a potential purchaser collects all necessary data, that company’s team will systematically review it. In addition to reviewing account data from your merchant portfolio and comparing it to industry averages, they’ll also look at trends and other factors that could impact the value of your book of business. Then they’ll provide you with their assessment of your portfolio’s fair market value and apply a multiplier on monthly residual averages to determine their merchant residual buyout offer.
The Benefits of a Merchant Residual Buyout From SPS
The process is similar regardless of whom you ask for an offer, but there are significant differences when you work with SPS. We regularly analyze portfolio purchases and understand the realities of the industry so that we can offer you the best value for your portfolio. We base valuation on a range of factors rather than the outdated parameters that other companies use. SPS also believes that a significant contributor to value is the relationship between the portfolio purchaser, the seller, and their merchants, which makes a 50x multiple reasonable for us and beneficial to our partners and their customers.
Suppose it’s time for you to field offers for a merchant residual buyout, make partnership changes, or set a new course for your business. In that case, SPS offers the best buyout offer – 50x – in the industry in addition to a competitive partner program with upfront bonuses, free equipment, and support.
You’ve worked hard to build the value of your portfolio with successful clients with good business outlooks and healthy processing volumes. Talk to us about making that hard work pay off.