Selling your Business

For our Downloadable Guide to Selling your Business, please click below. For a longer read, see our detailed sections.

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Customer Due Diligence

Buyers conduct customer due diligence to understand the level of risk that lives in your customer base. Things that raise alarm bells amongst buyers are when a disproportionate amount of revenue comes from a small percentage of customers.

If 80% or more of your sales comes from less than 20% of your customers then that’s going to cause concern amongst investors. That concern can be mitigated if your relationships are strong, but you’ll need to be prepared to explain why this isn’t something that an investor should be unduly worried about.

Buyers conduct customer due diligence to understand the level of risk that lives in your customer base. Things that raise alarm bells amongst buyers are when a disproportionate amount of revenue comes from a small percentage of customers.

If 80% or more of your sales comes from less than 20% of your customers then that’s going to cause concern amongst investors. That concern can be mitigated if your relationships are strong, but you’ll need to be prepared to explain why this isn’t something that an investor should be unduly worried about.

We’ve put together this list of the typical questions you’ll be asked not just so that you can prepare the paperwork, but that so that you can start identifying the risks that might be flagged when you’re going through a formal due-diligence process. And start mitigating those risks early on.

 

The Customer Base Due Diligence Top 4 Questions

  1. Client Base: Top-10 clients over the last [3-5] years, on a no-name basis but with the indication of the type of clients and the amount of Revenue contributed by each.
  2. Services: What services have you provided for these customers and at what price points.
  3. Contracts: Copies of contracts or a general example of a contract.
  4. New Activities: Comprehensive description of business development and/or identified development projects.
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