Customer concentration data for small businesses

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by a searcher from Harvard University
in Greenwich, CT, USA

2yrs ago

Customer concentration data for small businesses

I've encountered many businesses with significant customer concentration lately. Does anyone have research on customer concentration across all small businesses in the US? Across the population of retirement-aged-founder-owned businesses we're all looking at, what percent are unbankable / unsellable? (and are there trends in certain industries, etc...)

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reply by a searcher 2yrs ago
from Temple University

I would agree with this. Couple other things banks don't like: Large portion of government-sourced revenue (difficult to perfect on government revenue i.e. you can't MAKE them pay), foreign revenue streams (for the same reason), the aforementioned customer concentration over about 20-25%, and then to the extent you're basing the size of your debt on working capital, aged receivables overredacteddays. Banks will usually discount receivables on a sliding scale as they age. Won't typically consider anything over 90 days. They really like to see a nice, relatively current, broad distributions of clients. Also, the same goes for the business's SUPPLIERS, too, although with lesser importance.

reply by a searcher 2yrs ago
from Temple University

It really depends on the business model and industry. I've seen manufacturers that built an entire business around providing three parts to Apple. Then a B2C business is going to have a very different customer profile. Ask yourself what the customer profile looks like relative to the industry they serve. For example, government contractors, aviation, B2B automotive, large pharma manufacturers, etc, all probably have higher customer concentration because the number of potential buyers are large in size but small in number. Manufacturers selling to wholesalers or distributors probably have high concentration.