When you sell a business, buyers worry about customer concentration. If your biggest customer is more than 15% of revenue, or your top five to ten customers are over 25%, they'll cut the valuation. Diversify your customer base before you sell.
You know, so when looking at it from the viewpoint of a buyer of a business, they're obviously going to look at the financial performance of the organization. They're going to look at the trajectory of growth. What is the likelihood that this company will continue to grow at its current pace? And if not, you know, even stronger. Mm-hmm. We also look at, you know, the dependency on any one customer or any one employee or any one vendor as well. When there's too much customer concentration with your highest valued customer, that's a red flag for a business. And so usually we want to see no more than 15% customer concentration at your highest level, and preferably no more than 25% customer concentration, let's say, with your top 5 or 10 customers, depending upon the type of business that you're in.
How Can You Maximize Your Business Value Before Selling? with Randy Katz Video
