Your Customer List is Lying to You

💣 You'll learn: How “perfect” customer spread can be dangerous concentration, why industry experience matters, and how payment terms can break a business

⏱️ Read time: 3 minutes + freebie at end

🔍 Real deal analyzed: My property services acquisition

THE REAL DEAL

When I bought my property services business, the billing report looked beautiful. Hundreds of different properties, each representing a tiny percentage of revenue. Zero concentration risk, right? Wrong.

What I didn't know (but every industry veteran did): In our region, a handful of property management companies control most buildings. Those different property names? Many rolled up to the same decision-makers.

My "perfectly distributed" customer base actually had 15-20% concentration among a few major players. Still manageable, until one of them changed their payment terms from 15 to 45 days.

Suddenly, I needed a massive cash injection to cover the gap. A simple payment term change from one "small" customer nearly broke our working capital model.

DEAL DETECTIVE

Let me tell you what happened next…

We scrambled to secure additional working capital, get AR factoring, line up a line of credit while our largest "customer" (really a cluster of properties) held all the cards. We survived by building relationships with the actual decision-makers at these management companies, not just the property managers. Sometimes (maybe always) the real solution isn't in the contracts but the connections.

Don’t play checkers when you should be playing chess.

VALUE VAULT

Here's what this means if you're thinking about selling in the next few years—>

Start by mapping your real power structure. Not just who pays the bills, but who makes the decisions. I learned that our "client" Janet at Building A actually reported to Regional Manager Tom, who controlled 15 properties. One relationship, not fifteen.

As a solution, we could have offered early payment discounts to properties under different management companies. This diversification would have saved us when the big players squeezed. You need options before you need options.

For the buyers out there, here's what I wish I'd known before writing that check—>

Yes, paying for industry expertise stings. But you know what stings more? Learning about customer concentration after you own the business.

Get someone who knows the players, not just the numbers. Map payment terms by management company, not property. Chart decision-making authority across customers. Track historical payment term changes. Calculate working capital needs under worst-case scenarios. Look for industry-specific customer groups.

Stay rebellious,

kinza

P.S. Use this free guide to learn what buyers actually care about, and what might be killing your value without you knowing it. Buyers, this helps you spot opportunities others miss.

P.P.S. Share this with someone who needs to hear it. Growth through acquisition is awesome... when you know what you're looking for.

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