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When taking your business to market, there’s a crucial concept you need to grasp: revenue mix. Let’s delve into what exactly this entails. Imagine your revenue for the previous year was $5 million. Potential buyers will examine how that $5 million is distributed.
If a significant portion of that revenue, let’s say $1 million, came from a single large-scale job or event, buyers will assess whether this can be replicated consistently over time. Consequently, they will view that million dollars as non-recurring revenue. It’s essential to be cautious and pay close attention to this aspect.
Ideally, you don’t want any individual job to account for more than 6% to 8% of your total revenue mix. The composition and quality of your revenue hold great significance. Having a higher number of smaller jobs, where no single job significantly impacts your overall revenue, will increase the value of your business.
Consider this scenario: You have fewer jobs, but each job carries a higher dollar amount. If one of these jobs vanishes in the following year, your revenue will experience a significant drop. From a buyer’s perspective, this depreciation in revenue will devalue your business. Hence, maintaining a diversified revenue mix is vital.
Furthermore, within our industry, another important aspect of revenue mix is the balance between construction and mitigation. Mitigation revenue holds greater value to buyers because it typically offers higher profit margins. On the other hand, you want to ensure that construction revenue remains a significant component of your mix.
This balance is often seen as ideal for maximizing the value of your business. Remember, revenue mix plays a critical role in determining your business’s worth.
If you have any questions or would like to discuss this further, we’re happy to connect with you. Feel free to reach out to us at www.RBASells.com or give me us call.
