I've spotted a few contracting businesses with high EBITDA margins. Though they have strong contracted revenue streams looking 2-3 years out, the timing of these can certainly pose issues with respect to cashflow-timing and debt payment.
If anyone has any experience in this area, I'd appreciate the opportunity to chat!
Happy searching!
Does anyone have experience with businesses with project based revenues?
by a searcher from INSEAD
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1. You have to constantly be keeping your sales pipeline full.
2. You can get creative on the payment structure (i.e. fixed fee, milestone payments, EAC, etc.) to try to better fit your cash outflows to limit risk. The types of customers that you work with will determine how open they are to these arrangements (i.e. government, private sector, etc.).
3. You will have to keep a larger amount of working capital in the business than you might expect.
Happy to chat further if you'd like.