The financial diligence tells you what the business earned. This tells you whether it will keep earning it once the owner has gone.
Start a private conversation with the Acquisition Concierge, already scoped to commercial & customer diligence. Pick a starting point, or describe your situation directly.
Financial diligence looks backward with considerable precision. Commercial diligence looks forward with much less, and it is where the findings that genuinely determine an acquisition's outcome tend to live. The recurring pattern in private-company transactions is a business whose revenue is more personal than it appears: a handful of large customers, relationships held by the owner rather than the company, contracts that are informal or terminable, and a competitive position that depends on a reputation attached to a name that is about to leave. None of this is visible in the earnings. All of it determines whether the earnings persist. This is also the area where a buyer's own industry knowledge is worth more than any adviser's, you are frequently the best-qualified person in the room to judge whether these customers stay.
Each of these asks the same underlying question: how much of this business is the company, and how much of it is the person selling it?
How much revenue sits with the largest customers, how long they have been there, and what the relationship actually rests on.
Whether key relationships, technical knowledge or pricing authority sit with the owner personally rather than with the business.
Whether revenue is contracted or habitual, what the termination and change-of-control provisions say, and what renews automatically.
Actual customer retention over several years, distinguished from the retention the seller describes.
Why customers choose this business, whether that reason is durable, and what a competitor would have to do to take them.
Who else the customers deal with, whether they are staying, and what is contractually keeping them.
How commercial diligence is conducted.
These are the findings most likely to be discovered after closing, which is why they belong in the structure rather than only in the price.
Either alone is manageable. Together, where the dominant customer's relationship is personal to the departing owner, they are the most reliable predictor of a private-company acquisition disappointing, and they belong in the structure, not just the price.
There is no threshold that works across businesses, which is why writing your own into the acquisition thesis is worth doing before you meet a company. What matters more than the percentage is the nature of the dependence: a customer at forty per cent of revenue on a long contract, with several people on both sides and switching costs, is a different risk from a customer at twenty per cent whose relationship is a friendship with the retiring owner. Ask what would have to happen for that customer to leave, and whether the seller's departure is on the list.
Usually only late, and always with the seller's agreement. Sellers resist for good reason, a customer who learns the business is being sold may start looking, so customer conversations typically come after a signed letter of intent, sometimes only in the final days before closing, and occasionally are framed as something other than acquisition diligence. Where direct calls are refused entirely on a business with heavy concentration, that refusal is itself information, and the response is usually to shift the risk into structure rather than to proceed on assurances.
Ask specifically rather than generally. Who does each major customer call when something goes wrong? Who sets pricing, and on what basis? Who holds the technical knowledge the business runs on? What happens to a quote if the owner is away for three weeks? Then check the answers against people below the owner, who frequently describe a more centralised business than the owner does. The most useful question is often the simplest: what has the owner not been able to take a holiday without?
Move it into the structure rather than only into the price. An earnout tied to retention of the specific customers, an escrow sized against the concentrated revenue, a longer transition and introduction period for the seller, and a genuine transfer plan for the relationships are all standard responses. Reducing the price alone is the weakest of the options: it compensates you for the risk without doing anything to prevent it, and if the customer leaves you have still bought a materially different business.
Describe the customer base and the owner's role. The Concierge will help you think through the commercial risk and how to structure around it.