LeapZipBlog: Vicki Brown's blog: Factors to Determine the Potential of an Account for Merchant Portfolio Analysis

Factors to Determine the Potential of an Account for Merchant Portfolio Analysis

November 15, 2019 by Vicki Brown  

Portfolio analysis of a merchant involves simple and easy steps to access diverse key accounts. Accordingly, the first step associated with merchant portfolio analysis involves identifying the potential of each account based on its ability achieve the organizational objectives. Secondly, the analysis is done in accordance to the ability of the organization to avail benefits from the identified opportunities.

Preliminary Steps to Accomplish the Analysis Procedure

However, before you should start the analysis procedure, it is essential for you to take a few of the preliminary steps. These are-

  • Scoring each of the available data or information profiles for all of the key accounts
  • Determine the specific scoring period, where experts involved in credit card portfolio analysis recommend 3 years period
  • Assurance about the availability of sufficient data for scoring the factors
  • Assurance of the availability of updated sales related forecasts for each of the products or services combined with any latest product or service.

Identification of the Frequently Used Factors to Define Accounts’ Attractiveness

Account attractiveness can be determined easily based on the following frequently used factors-

  • Stability or regular workflow
  • Matching of business strategies and promptness in the payment delivery
  • Identification of specific group of customers, who always see value in broad product offerings
  • Finding of opportunities related to cross-selling of products
  • Objective behind doing any business
  • Reference value or status
  • Network hub or focal company present in a network
  • Importance to a sister company
  • Requirement of any international coverage
  • Working hours at the top priority
  • Requirement related to total responsibility
  • Requirement related to primary strategic alliances
  • Need for managing various complex issues, which include multiple Work forces and industrial relations
  • Handing over the total responsibility to customers, also known as abdication
  • Financial guarantees for customers
  • Clients willing work with listed companies
  • Need to bring innovation on repetitive work profiles

Additional Parameters to Determine the Attractiveness of Merchant Accounts

Along with the aforementioned factors, there are a few of the additional parameters to determine the merchant accounts’ attractiveness. These are accessible value or volume, growth rate and potential to earn profit. Accordingly-

Growth i.e. Yearly Growth Rate
Growth in this case indicates the average yearly growth rate of the total revenue spent on any relevant good or service by a key account. In most of the cases, credit card portfolio analysis consider and use the compound growth rate.

Accessible Value or Volume
Attractive key accounts are not only large but they are accessible. Thus, according to the definition, accessible value or volume refers to the total spend of any key account in t+3 less amount of revenue, which is almost impossible to access irrespective of the made investment.

Potential to Earn profit
The factor associated with the potential to earn profit is relatively more difficult to handle, as it varies significantly in accordance with the specific industry or area of operational sector. According to experts conducting merchant portfolio valuation, you have to estimate the margins available to your competitor to access the profit potential.

Determination of Business Position and its Strength

Business position and its strength refers to the measurement of any organizations’ actual strengths present in each of the key accounts, while it differs according to a specific account. These critical success factors are available as a combination of any organization’s relative strengths Vs the strengths of its competitors in terms of customer-facing requirements. In simple words, strengths determine all those things required by the organization’s customers, which you may summarize as-

Product and pricing requirements
Diverse service requirements
Promotion requirements