My financials look clean on paper, but I know our revenue is highly dependent on verbal agreements with long term clients. How will a buyer verify these relationships during due diligence, and how do I formalize them without spooking my clients?

Question

Tyler Smith · Accepted Answer

Buyers are highly skeptical of verbal agreements because they represent unmitigated risk. During due diligence, a sophisticated buyer will conduct customer reference calls to verify the stability of your revenue. If your top clients only stay because of their personal connection to you, the buyer will heavily discount your valuation. To prepare, you must transition these relationships from personal contracts to institutional agreements. Begin by using the trust creation process with your key clients. Approach them with an other focused mindset, framing the formalization of contracts as a benefit to them, such as securing long term pricing, guaranteed capacity, or dedicated service levels. This allows you to secure signed, multi year agreements without signaling that you are preparing to sell the business. Simultaneously, transition the primary point of contact for these clients to other members of your leadership team. Have your account managers lead the quarterly reviews and handle all communication. When the buyer performs their due diligence, they will see formal, written contracts and client relationships that are deeply integrated with your company operations rather than your personal cell phone. This structural shift turns fragile, relationship dependent revenue into highly predictable, institutional cash flows that directly drive up your market multiple.