Risks – Business Customers and Marketing
Their customer demand for the products and services offered by a business reflect their needs for those products and services. Customers can be retail or wholesale. Overreliance on anyone’s customer or anyone’s customer category increases the risks to maintaining profit levels. The loss of a major customer on which the business relied will impact on its profit level. It may even challenge the viability of the business itself.
Terms of trade offered to customers can also have risks associated with it. Offering customers payment terms over time is essentially providing them with a ‘loan’.
Extended terms tie up capital in the normal operation of the business. The capital tied up in funding customers to purchase business’s products and services is likely to reduce the overall return on the funds invested in the business; and hence its value. Poor debtor policies and controls can see bad debt levels increase with the obvious reduction in profit.Marketing activities.The customer base is likely to turnover over time. Assuming that customers will remain forever is simply not realistic. Businesses without marketing activities designed to bring new customers to the business to, at least, maintain the customer base are likely to see profits fall over time.Graham Long
Disclaimer: The views expressed in this article are those of the Writer. The information is not meant to be exhaustive. Readers are responsible for making their own inquiries and assessments as to the truth and accuracy of all the information given and should seek advice from professionals. No liability (in contract, tort or otherwise) will be accepted for any loss or damage incurred as a result of reliance upon any material contained in this publication or any information or advice provided in this publication or incorporated in it.
Kevin Lovewell
M: 0401 308 385
P: 1300 551 757
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Member & Registered Business Valuer
Australian Institute of Business Brokers
Jessica Holbrook
P: 1300 551 757
E: Click here to contact Negotia Group
Business Analyst
