Customer Concentration

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June 07, 2021

by a searcher in Branchville, VA 23828, USA

How important is customer concentration to your search? If most of your search criteria is meet but the customer concentration was heavily reliant on one contract to the tune of over 80% of the rev. Would that be a deal breaker? Could you with confidence close the deal anticipating future growth to reduce dependency on one customer? Would investors be willing to take the risk?

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Reply by an admin
from Stanford University in Honolulu, HI, USA
For an interview with someone who has operated through a customer concentration issues, please see our interview with ^redacted‌ on Be Wary of Customer Concentration: https://www.searchfunder.com/post/be-wary-of-customer-concentration
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Reply by a searcher
from Oglethorpe University in Atlanta, GA, USA
Agreed ^Thomas Schulz. During due-diligence, it would be wise to gather information around the contract terms and security (if any) of the customer accounting for such a high percentage of revenue. Any provisions to protect the contract are helpful, but if they don't exist your risk factor will increase dramatically!
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