In the debt collections world, Purchase Price Multiple (PPM) is often used as a simple but powerful metric to evaluate the return on investment (ROI) from acquiring a portfolio of delinquent accounts. But while it's a starting point, looking at PPM in isolation can be misleading, especially with the rising delinquencies, litigation risk, and operational costs of today.

In this blog, we uncover:

1. What PPM really means?
2. What a “good” multiple looks like?
3. How to adjust PPM to reflect real profitability?
4. What investors and operators should do next?

What is a Purchase Price Multiple (PPM)?

PPM = Total net collections / Original purchase price of the portfolio

For example:

You buy a portfolio for $10M
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Over time, you collect $22M
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Therefore, your PPM = 2.2x

A 2.0x PPM means you’ve collected twice the amount you paid for the portfolio. It’s the industry’s shorthand for profitability, underwriting success, and operational strength.

What PPM doesn’t show you?

A PPM is gross, not net of operating costs. It does not account for:

1. Cost-to-collect (agent wages, dialer, QA, tech stack)
2. Litigation & compliance costs (legal threats, suits settlements)
3. Time value of money (collections stretched over years)

It can give a false sense of success, especially when:

1. Litigation risks are rising
2. Cost-per-contact is high (manual workflows, non-automated systems)
3. Portfolios are underperforming against original forecasts

True multiple: Adjusted for cost-to-collect and litigation

Let’s walk through a simple example:

Original PPM = 2.2x (Gross collections = $22M / Portfolio cost = $10M)

Now subtract:

Cost-to-collect: $5M (agents, QA, dialer, training, tools, etc.)
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Litigation/compliance cost: $1.2M (legal counsel, settlements, operational compliance overhead)

Adjusted PPM:

= (22M – 5M – 1.2M) / 10M
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= 15.8M / 10M
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= 1.58x Net PPM

That’s a meaningful difference, especially for investors, CFOs, and strategists who are forecasting recovery margins.

What should PPM ideally be?

1. Most portfolios aim for >1.8x PPM
   
2. After costs, a Net PPM of ~1.4x–1.8x is considered moderately successful
   
3. Below 1.3x Net PPM, portfolios often underperform after factoring in risk and time
   

The more automation, segmentation, and smart workflows you apply, the closer your Net PPM stays to your Gross PPM. That’s the key to long-term scalability.

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So what can debt buyers do?

Conclusion: From vanity metric to real indicator

PPM is a useful metric, but not a sufficient one.

To truly measure portfolio performance, investors and operators must:

1. Compare actual vs. estimated PPMs over time
2. Adjust for cost-to-collect and compliance risks
3. Prioritize systems that lower cost while protecting consumer experience

In a space where margins are tightening and complexity is rising, the smartest organizations are asking not just “what’s the multiple”, but “what’s the real return after the cost of doing it right?”

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