M&A Insights – The Power of Customers
Technology may be at the heart of your business, but most acquirers will be at least as interested in your customers as your technology (unless of course it is nascent technology). A good mix and spread of customers will naturally be more attractive than having one or two major clients whose potential loss would greatly affect the business, avoid having all your eggs in one basket!
Having a strong customer base is great, but there is far more to it than that. Can you demonstrate that your customers are happy, how long they have been customers, how long are your contracts with them and how easy is it for them to move to a competitor? If your services are embedded into your customers’ systems, the barriers to exit are higher .
Consider gathering testimonials and undertaking quality checks to ensure your customers are happy… Being able to effectively report this to potential buyers can prove very powerful.
Look also at the length of any customer contracts. Can these be extended in return for a price freeze for example, or even better as an alternative to a price rise! The risk for an acquirer falls substantially if the customers are guaranteed to stay for at least 2 or 3 years.
Remember… the technology may be important but never ignore the power of the customer.