This article are provided for information purposes only, and are not intended as legal advice.


Buying a business – what do you look out for?

November 11th, 2008

What percentage of revenue do the top 10 customers make?  Often there is the 80/20 rule, 80% of your revenue comes from 20% of the customers.  If the revenue is more concentrated than this, you may have economic dependence on a few key customers.  What risks are you going to take over?  You can mitigate your rists by having the old owner provide you a vendor take back financing and the purchase price is a formula based on the retentenion of the large customer. 

 

I have seen cases where the revenue from one large customer was generated from the fulfilment of one contract spanning over 2 years.  You have to make sure if this is a reoccurring customer or just a one time customer with a special order or contract.


Filed under: Buying a business — Gary Landa @ 9:32 am


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