How can I tell if a sign shop’s work comes mostly from a few contractors?

Concentration is easy to see once the invoices are sorted. Request sales by customer for the full period available, and add up the top names. Look at the share they hold, and whether it is growing or shrinking. Watch for one contractor that grows quickly, since it may be a short project rather than a lasting relationship.

Then look at the terms. Is the work awarded by tender, by repeat purchase orders or by a standing agreement? Are prices fixed in advance? Contractors often pay slowly, so check their unpaid invoices too. Compare how each one pays against the terms agreed. Ask the owner why they chose the shop and how the relationship started. If it rests on one project manager’s goodwill, it could vanish when that person moves.

Finally, ask what the shop does to find other work: walk-ins, web leads, municipal and commercial accounts, or referrals. A buyer should meet the biggest contractors before closing. Ask your lawyer and accountant how reliance on a few customers should affect the terms you negotiate. Look also at how many different people at each contractor place orders, since that spreads the risk better than a single contact.

Key takeaways

• Rank customers by sales and see what share the top few hold.
• Find out whether work is contracted, tendered or won job by job.
• Meet the largest contractors before closing.
• Ask what the shop would lose if the largest contractor stopped ordering.