Our top customer represents fifteen percent of our revenue, but our second and third customers are also around ten percent each. How do buyers look at this concentration footprint and how do we position it to protect our multiple?

Question

Tyler Smith · Accepted Answer

Buyers look at customer concentration as a major risk factor because losing a single account could instantly wipe out your profitability. When your top three clients account for thirty-five percent of your revenue, buyers will try to discount your multiple or demand a large earnout.

To protect your valuation, you must prove these relationships belong to the business, not to the founder. Use your Accountability Chart to demonstrate that your account managers and operations team own the client touchpoints. Show that you do not personally manage these key accounts.

Next, present your documented systems. Show how your team delivers consistent results using your proprietary operational processes, which ensures high switching costs for these customers.

You can also secure multi-year service agreements with these top accounts before going to market. If these contracts are backed by clear service level agreements, you mitigate the buyer's fear of immediate post-close churn.

Spend some Thinking Time formulating how you can expand your mid-tier accounts to naturally dilute this concentration over the next twelve months. By showing a clear growth trajectory in other accounts alongside institutionalized relationships, you can defend your multiple from a concentration penalty.