Due Diligence: Sales and Marketing–Customers

Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision. We’ve put together a list of items that buyers will want to investigate when talking to a seller.

This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.

The next step in the Sales and Marketing portion of your Due Diligence is Customers. The purpose of this section is to understand the customer set and its future impact upon the business.

B. Customers

– How concentrated are sales among the top customers?

– What is the distribution of sales among the various products and services?

– What is the current sales backlog by customer?

– What is the seasonality of sales? Are sales unusually subject to changes in the business cycle?

– What is the financial condition of key customers? Does it appear that their businesses are sufficiently robust to continue supporting purchases from the company?

– How long has the company had sales relationships with its key customers?

– Which new customers is the company actively pursuing, and how much potential revenue and profit do they represent?

– How profitable is each of the key customer accounts? Do any customers require a disproportionate amount of servicing, or require special terms and conditions?

– Itemize any customer contracts that are coming up for renewal and likely changes to the key terms of those agreements.

– Is there a history of complaints from any customers? How profitable are the customers who appear to be the most dissatisfied?

– Obtain a list of all customers who have stopped doing business with the company in the last three years.

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