Channel Dependency
What is channel dependency and how do you price it?
One distribution channel, platform, referral source, or contract vehicle carries the revenue.
What to ask for
Suspecting a flag is not the same as verifying one. These are the documents and signals that turn a hunch into a decision.
- Revenue by source: platform, contract vehicle, referral partner, direct.
- Platform account health, standing, and current terms of service.
- Contract vehicles and set-aside status, with expiry dates.
- Whether referral relationships are contractual or personal.
The question to ask the seller
“Where do customers actually come from, and what happens if that channel repriced or vanished tomorrow?”
Ask it in those words. A seller who answers straight is telling you something. A seller who dances is telling you more.
A channel someone else controls is customer concentration wearing a different coat. One decision by a stranger, a policy change, a re-compete, a partner who retires, and the revenue is gone without a single customer being unhappy.
If the channel can be revoked or repriced by a decision you do not participate in, treat it as concentration and escalate the severity accordingly.
Price the fragility. If the channel can be revoked by a stranger's decision, treat it like customer concentration and escalate the severity.
Travels with
Flags that show up together.
Screening one of these usually turns up the others. They share a cause more often than they share a coincidence.
Every deal you read gets safer.
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