Customer Concentration Risk: When One Client Is 42% of Your Revenue
If one client is 42% of your revenue, you do not own a business. You own a contract.
Concentration is the risk that never appears in the accounts. Margins look fine. Growth looks fine. Then a procurement manager you have never met changes supplier, and two thirds of your cost base is suddenly stranded against a third of your revenue.
It costs you long before that, in three ways.
Pricing. You cannot put a price increase in front of the client who can end you, and they know it. Your worst margin is usually your largest customer.
Planning. Your forecast is not really your forecast. It is their renewal decision with a spreadsheet wrapped around it, and nobody in your building gets a vote.
Valuation. A buyer prices it in without being asked. Heavy concentration turns a clean multiple into a discount, or moves half the money into an earn-out that depends on the client staying. The fix is not firing them. It is growing around them, deliberately, while the relationship is still good.
Track concentration as a monthly number, not a feeling. Set a ceiling most businesses should keep any single client under 25%. Know your answer to one question before you need it: if they left on Sunday, what comes out of the cost base, how fast, and who decides.
Turning these ideas into a disciplined monthly practice is core to the work of a fractional CFO. To see where your company stands today, start with the instant financial diagnosis, free during our founding period.
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