A significant portion of our gross margin comes from our top three clients, and the buyer is using this concentration to justify a steep multiple discount. How do we structure the deal or present our accounts to minimize this risk premium and protect our enterprise value?

Question

Tyler Smith · Accepted Answer

Customer concentration is one of the most common reasons buyers demand a steep multiple discount or walk away entirely. If a few accounts dominate your profit margins, the buyer sees a fragile business that is one bad client relationship away from collapse.

To defend your enterprise value, you must change how these accounts are presented. Focus on the longevity of these relationships and how deeply integrated your automated workflows are into their operations. If you have worked with these clients for several years and your team handles the daily delivery without founder involvement, document this in your Accountability Chart.

If the buyer still insists on a discount, suggest a creative deal structure rather than accepting a lower multiple. Offer to place a portion of the purchase price into a customer-retention escrow or structure it as an earnout tied specifically to the performance of those top accounts. For instance, if the key clients stay for twelve months post-close, the escrowed funds are released to you. This structure shifts some of the risk back to you, but it protects your overall valuation and gives the buyer the confidence they need to move forward at a premium multiple.