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Education

• Portfolio size. Too small, not good. Too new, not did make sense. We had to come up with several levels of
good. multiples. That is where our accountant came into play.
• Whether portfolio is weighted. If one or two ac- Getting a two-year forecast based on both payments that
counts make up more than 25 percent of the in- would come into the company and estimated expenses,
come, it is not good. If those accounts changed pro- made it easier to determine what the multiples could be.
cessors, the portfolio would lose 25 to 50 percent of
the value. MLS versus bean counter
• How portfolio is weighted. If the sales office There is always difficulty when partners try to establish
moved a few accounts would that cause a large multiples to be paid out. Even though the math is there,
portion of attrition for the office? and you open up statistics for review, MLSs always believe
• Degree of activity. Has there been zero new pro- we should pay more, whether warranted or not. The
duction in, say, three months or one year? accountant always wants to prove out the numbers now
• Portfolio growth. Does the sales office appear to and plan for the future.
be building or in hibernation?
• Attrition. What is the portfolio's level of attrition This can lead to a breakdown among company partners.
over the past 12 months? No one wants conflict; the way these issues get solved is
• Gains versus losses. Were more accounts added through compromise. MLSs must listen to the accountant
than lost due to attrition? and the accountant has to believe MLSs know their people
• Portfolio age. Is the portfolio brand new? well.

There were some surprises, but in general, once we assigned It must be fair, but fair market and fair pricing are subjective.
names to portfolio evaluations, with some tweaking, it The value should be placed on agents who have a
good size book of business, work primarily with
that ISO and continue to be productive. Dead
books are fine, but without new production, their
value continues to decline. New production is also
fine, but until you've had a few years of experience
with someone, you don't know them well. Books
of business based on one or two large accounts are
scary, because after payment, moving just those
few accounts can be a killer.
Will there be another sale?

Getting paperwork together for a portfolio sale is
an enormous task. One question that continually
popped up during our sale was, will there be
another sale? This is difficult to answer. One would
have to be blind not to see the consolidation going
on in our industry today. I'd like to guarantee that
my ISO will never go through a sale again, but
unfortunately, it isn't in my control.
The Conference for Branch & Retail It's possible to opt out of a sale given the right

Banking Innovators agreements, but certain questions must be
explored, for example: Will the new owners treat
my company and agents well? Will they have the
FUTUREBRANCHES.WBRESEARCH.COM same or better level of support? Will we get lost in
the shuffle? If the buyer brings valuable benefits,
the worst outcome would be that MLSs resent a
decision not to participate in a sale once they see
what the new owner is offering.
Steven Feldshuh, President of Merchants' Choice Payment
Solutions East, has 18 years' experience in sales and ISO
development. Directly prior to joining MCPSE in 2012, he was
President of Payment Partners. In his current position, Steven
devotes the bulk of his time to assisting agents in building their
portfolios. Contact him by email at stevenf@mcpseast.com or
by phone at 212-392-9202.
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