When selling a small to mid-sized business where a business has many accounts but the revenue comes from primarily one or a few could be a problem when you go to sell it. I am consulting with a client now who is selling a manufacturing business, has many great clients but one of his clients accounts for over 30% of his total revenues and adjusted net income.
He has assured me that the client has been with him for a very long time and that there is no way they would ever "pull their business". Well a lot happens in this world. First of all such a high degree of "account concentration" should be looked at in the valuation of the business and also there may be an issue when it comes to getting financing for the business.
Most lenders on such a deal would pass & too risky. However if you dig a little deeper in this scenario this particular client of the seller has been doing business with him for a long time. Also there is not a lot of competition in this particular specialized industry, and he is growing the business over the last couple years over more clients and diversifying.
Business owners/sellers, brokers/agents, and business buyers should be aware of account concentration and how it affects not only the purchase price but also the chances of getting business purchase financing!•
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