Monday, November 16, 2009

Sales Dominated by One Customer

One of my recent blogs discussed a printer who has one customer that accounts for approximately 52% of total sales. What makes this situation even worse (at least in my opinion) is that all the work that is done for this customer is brokered to an outside trade-printer.

Brokered or not, the most dangerous aspect about this situation is that very few if any buyers will buy a business that relies on one or two customers to produce a majority of its sales. You can rationalize all you want about how great the customer is and how you will never lose the customer, etc., etc. but the facts remain no one will buy a business so heavily dependent and reliant upon one or two accounts.

Therefore, while you may be making money in the short run, it is also quite likely you are losing money in the long-run, since most valuation formulas rely on a multiplier or "capitalization" rate to determine value and that multiplier will be much lower than normal due to the heavy reliance on one customer.

Labels: ,


Post a Comment

Subscribe to Post Comments [Atom]

<< Home