Does this sound familiar? You start out with an idea for a product or service. You begin doing it yourself and, to your great surprise, discover that there is a great demand for what you have to offer. The business takes off. You are moving ahead with a good mix of customers, and then one of your customers goes through tremendous growth and starts sending you lots of orders. You think this is great: “My customer is doing great; I am so lucky.” Before you know it, this one customer becomes 50%, then 75% of your revenue. You are making lots of money from this customer. Then it is time to sell your business and you suddenly realize that now you have one customer that has complete control over your business. What do you do?

This is a very common trap that many owners of business fall into, and there is an easy fix. But first, you have to be aware of the risk. The easy fix is to identify the situation early and then start actively increasing the number of customers you deal with. Leverage the established relationship with your top customer to secure others. Ask for referrals, and use the extra profits to hire a new salesperson to gain more customers. You can also acquire companies that have more customers.

Another potential risk in business is having a large concentration in one industry. The astute businessperson recognizes trends before they happen. Look at your business. Do you have a large concentration in a few customers or a few industries? How about one or only a few vendors?

All buyers assume risk when they purchase a business, but the successful seller will decrease the risk for the buyer by always keeping their eye on the EXIT. If you are thinking about selling your business, please contact our office to speak with a broker who can help you start the process.