Our primary customer has dropped from forty percent to twenty percent of our revenue, but the buyer is still discounting our multiple due to concentration risk. How do we counter this discount using our client-retention data?

Question

Tyler Smith · Accepted Answer

While dropping your top customer from forty to twenty percent of your revenue is a major milestone, buyers will still try to use any concentration over fifteen percent to discount your multiple. To counter this discount, you must prove the operational depth of that relationship. Show the buyer that this customer is embedded in your systems, making it incredibly difficult for them to leave. Present the historical data from your Level 10 Meeting scorecards to highlight the stability and longevity of this account. Demonstrate that the relationship is managed by your leadership team through your Accountability Chart, rather than being personally tied to the departing founder. You can also propose a balanced deal structure to mitigate their perceived risk. Instead of accepting a flat discount on your valuation, suggest a performance-based structure or a targeted earnout that protects your payout if the customer remains for a set period post close. By demonstrating both operational stickiness and a willingness to align incentives, you neutralize their leverage. This keeps your enterprise value intact while addressing their risk concerns.