M&A Advisor Tip – When You Can’t Fix Customer Concentration Issues

As a general rule, no one customer should account for more than 20-25% of your company revenue. While having large customers can be good for your bottom line, it introduces risk to the next owner.

Our best advice: Anticipate the problem. Act now to grow your business with other customers and/or secure long-term transferrable contracts with your top accounts.

The backup plan: If you’re ready to move forward with a sale, and customer concentration issues are what they are, help buyers see:

  • Where you have multiple connections inside the customer organization, with more than one decision maker, influencer, and day-to-day contact
  • That you work with more than one customer location or division, with separate purchasing agents
  • How a disruption in the relationship would cause a disruption in the customer’s business
  • How the company relationship has lasted for many years

If buyers perceive a risk in customer concentration, they will probably allocate a certain amount of the purchase price to seller earnouts or other contingencies. Protect your interests by demonstrating where concentration issues are not as hazardous as they might seem.

What our clients are saying...

“BTS quickly located prospective buyers, obtained an excellent sales price, provided expert guidance and delivered it with a personal touch. Early on John Howe checked that I was prepared for life after the sale and that legal and financial council was lined up and ready to go when required. As necessary Ken Schaefer personally coached all players in the technicalities of the process, a team effort. I investigated several brokers before selecting BTS who exceeded my expectations in every regard.”

- Leander Nichols

Comptus