What is Your Company Worth? Factor 2

Don’t Let Customer Concentration Put Your Business at Risk

Even good things can be too much of a good thing. Too much revenue from a single client, or a small handful of clients, can create hidden risk for your business.  This also includes key referral sources. What would happen if you lost your primary referral partner?

Why it matters:

• Buyers worry about losing a major client, especially early on after a purchase.
• A single “oops” with a key account can reduce business value or even threaten a sale.
• Most buyers see more than 30% of revenue from one customer or a strong referral partner as a red flag.

How to protect your business:

• Add new clients to reduce reliance on any one customer.
• Show that “large customers” are balanced with an equal value of multiple smaller clients with independent decision-making.
• Consider strategic acquisitions to reduce concentration risk.

Example:
Frank’s business was valued at $800,000 instead of $1,000,000 because one client accounted for 30% of revenue. By acquiring a competitor and reducing client concentration to 15%, Frank increased the overall value of his combined business by $400,000, even before factoring in economies of scale.

 Key takeaway: A diversified client base doesn’t just protect your business, it increases its value.

Stay tuned for more insights on the 13 key factors that determine what your company is worth and how quickly it sells.

Contact me now:

Pam Hargis
Phone: 386-847-8028
LinkedIn: www.linkedin.com/in/pamhargis
Email: phargis@focalpointcoaching.com
Schedule a Call:  Calendly - Pam Hargis
Website: https://pamhargis.focalpointcoaching.com/