How do I judge a surveying firm’s dependence on a few developers and builders?
Ask for revenue by client over several years and see how much sits with the largest few. Then find out how each relationship began, whether any contract binds them, and what happens if one stops. Heavy reliance on a few builders can be managed, but you need to see it first.
Ask for the client list ranked by billing, over a long enough stretch to show change. Do not stop at the biggest name; look at the top few together and at how they have moved. A client that grew quickly may leave as quickly, while a steady one may be more reliable than it appears.
Next, learn how each relationship works. Is there a standing arrangement, or do they call when they need something? Who deals with them, and would they stay if that person left? Builders and developers often follow a person, so ask which individual holds each account and whether you could meet them before closing.
Think about how the market affects them. Developers and builders tend to cluster in the same cycles, so several large clients slowing at once could hurt more than one slow client would. Ask the seller how the firm managed a quiet period before, and what other work it could pursue. Your accountant can test the revenue figures, and your lawyer can review any contracts. Ask the seller whether a new client has been added recently, and how, since that shows whether the firm can still win work.
Key takeaways
- Rank clients by revenue over time and look at the top few together.
- Find out who holds each relationship and whether they stay.
- Ask how the firm coped in quiet periods and what other work it could win.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentWhat are the steps to buying a business?
- 03Business Development Bank of CanadaGovernmentAfter buying a business, what is the next step?
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