What owners can do when one product supplies most of the sales

A successful product can generate steady revenue while exposing a business to significant risk. If most sales depend on one product supplied by a single manufacturer, a production delay, pricing change, or supplier dispute can threaten earnings. Jay Boren faced this concentration risk when he acquired LockNLube, a grease-tool business whose flagship $30 coupler came from a South African manufacturer that held the patent and supplied the product on a non-exclusive basis.

When Boren acquired LockNLube in March 2017, the company generated approximately $1 million in annual revenue. Over the next seven and a half years, he expanded its catalog from a handful of products to more than 250 SKUs. He focused on owners who already purchased the original coupler, introducing grease guns, fitting kits, and other maintenance tools. This allowed LockNLube to sell more products to existing customers while reducing its dependence on a single revenue source.

Boren later purchased four or five small businesses, generally paying between $50,000 and $300,000 per acquisition. These transactions brought additional products, patents, trademarks, and intellectual property into LockNLube. By August 2024, the company employed approximately 20 people and had developed a broader product portfolio, supported by both direct consumer sales and business distribution.

Boren eventually sold LockNLube to Macnaught, an Australian family-owned manufacturer with complementary products, established manufacturing facilities, engineering resources, and an existing supply chain. The acquisition gave Macnaught access to LockNLube's products and customers, while providing LockNLube with manufacturing and operational capabilities that would have been more expensive to develop independently. Boren remained involved for approximately two years, helping integrate ERP systems, introduce products, and resolve supply-chain issues.

Expanding from one flagship product to 250 SKUs can spread revenue across more categories, but it does not necessarily eliminate the risk of relying on a single manufacturer. Buyers may examine both revenue concentration and the contractual arrangements governing critical suppliers, particularly when the supplier owns the underlying intellectual property.

Boren's journey shows how expanding into adjacent products, acquiring intellectual property, and developing distribution channels can change a business's profile before an exit. It also illustrates why strategic buyers may value a company differently when it already possesses the manufacturing, engineering, and supply-chain capabilities needed to support its next stage of growth.

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Market timing affects both the price a seller receives and the terms a buyer is willing to offer. Businesses with growing revenue, stable margins, and predictable cash flow generally attract stronger offers than those facing declining performance or operational problems. Financing conditions also influence valuations. Higher interest rates increase acquisition costs, while tighter SBA lending reduces the number of qualified buyers for smaller businesses. Industry conditions also matter: buyers typically pay more for companies in growing sectors than those facing declining demand. Owners who start preparing for a sale while the business is performing well have more flexibility in choosing when to enter the market.

The Exit Planning Institute's Southeast Michigan Chapter hosts its fourth annual Business Owner Forum, bringing together business owners to discuss company valuation, succession planning, and preparing for an eventual exit. The half-day event includes a keynote on how management teams influence business value, panels featuring business owners, and a discussion with an owner who has completed an exit. Five short presentations cover reducing owner dependence, building transferable business value, company culture, and real estate strategies for sellers. Details →

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Mark Sims of ConsultMSG explains five factors buyers examine when valuing a business: competitive positioning, clean financial records, cash conversion cycles, customer and supplier concentration, and operational capabilities. The discussion covers how unreliable financial data can delay due diligence, why dependence on a few customers can reduce buyer confidence, and how documented processes and transferable supplier contracts affect valuations. Sims also explains why buyers may discount a purchase price when significant investments are needed after closing.