The revenue line
Customer concentration risk is the exposure created when a large share of revenue sits with a few accounts. Any single customer above twenty percent of revenue draws attention, and above thirty percent it becomes central in any sale or lending conversation. But the percentage understates it. The real test is whether anyone other than you has a relationship there, and how fast they could replace you if they wanted to.
Written by Michael Schuerman, Growth Partner in Atlanta. Twenty years inside high-growth companies, including $0 to $300M growing Zillow Flex, now Zillow Preferred, in three years. Updated September 2026.
01 The real test
Forget the percentage for a second. If your largest customer left in ninety days, would you cut payroll? If the answer is yes, that account is already setting your pricing, your hiring and your appetite for risk. Nobody wrote that down. It is just true.
And it usually shows up somewhere else first. You cannot move your prices because one account might object. You cannot take a week off because one renewal only happens if you are in the room. That is not a sales problem. It is a structure problem.
02 The six moves
Revenue by customer for the last twelve months, sorted, as a percentage of the total. Then do it again on gross profit, because your largest account is often not your most profitable one. Buyers use the same two lists. You should see them before they do.
For each of your top five accounts, write down who at your company knows their people, and who at their company would take your call if their main contact left tomorrow. If the answer to both is you, that revenue is not the company's yet. It is yours, personally, and it does not transfer.
Bring an account owner and a delivery lead into the relationship inside ninety days, with a standing quarterly review that you attend but do not run. This is the single highest-value use of your calendar and almost nobody does it, because nothing is on fire.
Ask the honest question: if your biggest customer wanted to replace you, how long would it take and what would it cost them? If the answer is a phone call and a month, you are a vendor being paid partner prices, and the renewal is a coin flip every year.
Concentration falls two ways: lose the big account, or grow everything else. Only one of those is a plan. A dedicated push on the next tier of customers moves the percentage without a single hard conversation, and it makes the eventual renewal negotiation one you can afford to walk away from.
Any acquirer will discount for it, and they will do it quietly, in the multiple, not as a line item you get to argue about. Owners are usually surprised by how much of the gap between a three and a five multiple is this one issue.
03 What I would not do
Fire the account to fix the ratio. The percentage improves and the business gets smaller. Grow the denominator instead.
Add threads during the renewal. Introducing new faces while terms are on the table reads as a negotiating move, because it is one. Do it in a quiet quarter.
Assume the contract protects you. A thirty-day out on a forty-percent account is not a contract, it is a courtesy. Read the term before you read the revenue.
Concentration and owner dependency are usually the same problem. The six signs your business cannot run without you covers the wider version, and exit-ready covers what it costs you at sale.
04 Questions owners ask
It is the exposure created when a large share of your revenue depends on a small number of customers. The practical test is not a percentage, it is a question: if your largest account left in ninety days, would you cut payroll? If yes, that account is setting your pricing, your capacity decisions and your risk tolerance, whether or not anyone says so out loud.
A common rule of thumb is that any single customer above twenty percent of revenue draws attention, and above thirty percent it becomes a central issue in any sale or lending conversation. But percentage alone understates it. A twelve percent account you would survive losing is fine. A twelve percent account whose only relationship is with the owner, on a contract they can exit in thirty days, is a bigger problem than a stated number suggests.
Two levers, and only one of them is comfortable. Grow the rest of the book, which lowers the percentage without a hard conversation, or diversify deliberately by pushing into the next customer tier with dedicated capacity. Firing a large account to improve a ratio is almost never the right first move. Fixing the relationship depth and the contract terms usually is.
Yes, and usually in the multiple rather than as a visible deduction. Buyers underwrite the risk that revenue leaves with the relationship, so they discount for it and rarely explain the arithmetic. It is one of the two or three issues that most often separates a three-times business from a five-times business at this size, along with owner dependency, which is normally the same problem wearing different clothes.
Add threads before the renewal, not during it. Bring an account owner and a delivery lead into the relationship over the next ninety days, put a standing quarterly review on the calendar that you attend but do not run, and make sure someone other than you has a real reason to be on their phone. Do not wait for a clean moment. There is not one.
Yes. That is exactly the kind of thing I get in the room for early. Bring revenue and gross profit by customer for the last twelve months to the call and I will tell you where the exposure actually is. If you want me holding the relationship plan, that is the operating seat, scoped to team size and markets. Three-month minimum, then month to month.
Bring revenue and gross profit by customer for the last twelve months. Thirty minutes and you will know.
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