We have a single customer representing half of our revenue. Instead of accepting a massive discount on our valuation multiple, how do we structure a long-term commercial agreement with this client before going to market to neutralize the buyer's risk concerns?

Question

Tyler Smith · Accepted Answer

Standard buyers will punish high customer concentration by slashing your valuation multiple or demanding a massive holdback. To neutralize this risk before you list, you must secure a long-term, multi-year commercial agreement with that key customer. This agreement must include a rolling minimum volume commitment, clear service-level agreements, and a change-of-control clause that explicitly permits the contract to transition to a new owner without renegotiation.

By locking in a multi-year commitment, you convert volatile, concentrated revenue into highly predictable future cash flow. In your EOS® V/TO®, this key account should be managed as a major Rock, with a clear owner on your Accountability Chart responsible for the relationship. When you present this structure to a buyer, show them the contract alongside your historical delivery data. Use the Income Approach under IVS 105 to argue that the predictability of these cash flows warrants a standard or premium multiple, rather than a concentrated-risk discount.

You must prove that your team, guided by their weekly Level 10 Meeting™ cadence, handles all operational touchpoints with this client. This demonstrates that the account is institutionalized, meaning the client is loyal to your systems and your people, not just your personal relationship.