Carta vs Forge for a Manufacturer Priced on Two Customer Relationships

Buyer diligence in a contract manufacturing business centers almost entirely on customer concentration: how long each key OEM relationship has run, whether contracts are up for renewal soon, and what happens to volume if one account leaves. That diligence happens the same way whether Carta or Forge or neither is involved, and it's the real driver of what the founder's shares are worth, not a generic revenue multiple.

If the company has grown to include key employees with equity or phantom equity, and especially if a next-generation ownership transition is being planned in stages rather than all at once, Carta gives you one accurate record of who owns what and how it vests. That record matters more, not less, when a transition happens gradually over several years rather than in one transaction.

Forge's marketplace connects sellers with outside institutional and accredited buyers who already track specific companies, and that network is built around recognizable venture-backed technology names, not precision contract manufacturers regardless of how well-run or profitable they are. Customer concentration risk is also exactly the kind of thing outside marketplace buyers are least equipped to diligence properly without deep industry knowledge, so even if a buyer showed interest, it's not obviously the right kind of buyer.

A bank-financed buyback secured by equipment, or an ESOP-adjacent structure that lets key employees gradually earn into ownership, both keep working capital available for tooling and payroll in a way a large lump-sum cash-out often doesn't. If debt financing is part of the plan, current bank prime around 6.75% and the fed funds rate around 3.63%¹ are worth checking against whatever your bank quotes, since equipment-secured loans are often priced close to prime plus a spread.

Even in an internal buyout with no outside buyer, run the exercise as if a real acquirer were doing diligence: how long has each key OEM relationship run, when does each contract renew, and is there anything in writing committing that customer to continue past the next renewal. This isn't paperwork for its own sake; it's the actual analysis that should set the discount applied to a straight revenue multiple, and it's useful information for the business regardless of the buyout.

Run the exercise as if a real acquirer were asking these questions:

• How long each key OEM relationship has run, since longer relationships are easier to defend in diligence.
• When each key customer contract comes up for renewal, and how soon that falls after the ownership change.
• Whether anything in writing commits a key customer to future volume, beyond an informal relationship.
• What happens to overall volume if one of the two main accounts leaves after the transition.

Budget six to ten weeks if a straightforward buyback, longer, often three to six months, if an ESOP-adjacent structure is being considered, since that involves outside valuation and legal specialists. Start the customer-concentration review immediately, in parallel with deciding on structure, since that analysis feeds directly into price regardless of which financing path the company ultimately chooses.

The most common mistake is applying a standard industry revenue multiple without discounting for customer concentration, then being surprised when a key account leaves shortly after the ownership transition and the company can't service the debt taken on to fund the buyout. Say two OEM accounts represent most of revenue and neither contract has a long remaining term; pricing as if that revenue is as durable as a diversified customer base sets the buyout price, and any associated debt, too high relative to the real risk.

Discount explicitly for concentration, and size any debt financing conservatively against the diversified portion of revenue alone. A reasonable discipline is to run the buyout math twice, once assuming both key accounts renew on schedule and once assuming the larger of the two doesn't, and make sure the company can still service its buyout financing under the more conservative of the two scenarios before committing to it.

Negotiate a customer-retention holdback: a portion of the buyout price held back for six to twelve months and paid only if the key OEM accounts identified in diligence remain active customers through that window. This directly addresses the concentration risk this kind of shop carries without requiring anyone to guess at a discount percentage up front.

Also negotiate a consulting or advisory arrangement if the founding machinist has relationships with the OEM accounts that the remaining team hasn't yet fully absorbed, paid separately and for a defined period, so there's a real incentive for a smooth handoff rather than an abrupt one. And if an ESOP-adjacent structure is being considered instead of a straight buyback, get a specialist's involvement early, since the tax and valuation mechanics differ meaningfully from a simple share purchase.