By Craig Kaliebe
Software developers (ISVs) who hope to increase the valuation of their business, need to develop, release and market products that facilitate a recurring revenue business model. For both ISVs and Resellers the bottom line is to build a portfolio of customers using products and services that generate recurring revenue. That principle of business valuation has not changed very much over the years. However, the current high level of importance associated with a portfolio of recurring revenue accounts for the POS industry has taken an interesting journey.
Placing a value on a POS business entity has been an ongoing conundrum. Any value associated with “good will” or the value of the brand dissolved years ago. The value of the customer list is at best an educated guess, as some ISVs and Resellers list end-user customers that cannot be validated—some could be lost to competition or closed for business.
Today, many valuations of ISVs and Resellers are based on their recurring revenue and customer retention rates. SaaS and Payment Processing residuals, along with traditional support/maintenance agreements, provide a clearer picture for business valuation. Over the past few years, both ISVs and Resellers have seen the value of developing a strong portfolio of payments customers.