Due Diligence for Technology Companies: Managing Customer Concentration
#Finance
For a technology company, customer concentration due diligence remains crucial. By segmenting customers based on their contribution to revenue and product, one can gain a clearer understanding of its customer concentration and take appropriate actions to mitigate associated risks. Here are some key factors to consider:
Identifying Key Clients: In the case of a technology or software company, it's not just about revenue from clients but also about customer concentration and user engagement. The due diligence process involves identifying both key clients (businesses purchasing the software) and key user segments (individuals or organizations using the software).
Assessing Revenue and Usage Dependency: Instead of just revenue, the evaluation should also consider the usage metrics, such as monthly active users (MAU), daily active users (DAU), or other relevant engagement metrics. This provides a more comprehensive view.