Our largest client makes up thirty-five percent of our total revenue, and the buyer wants to discount our valuation multiple by two full turns to account for this concentration. How do we structure a contingent purchase price adjustment that preserves our target multiple while mitigating their risk of client loss?

Question

Tyler Smith · Accepted Answer

To solve this without accepting a permanent haircut on your multiple, you must structure a contingent pricing bridge using a specific customer run off clause. Instead of accepting a lower overall multiple at closing, agree to hold a portion of the purchase price in an escrow account or structure it as a short term contingent note. If the customer renews their contract or maintains their historical spend for twelve to twenty-four months post close, the funds are released to you. If the customer leaves, the purchase price is adjusted downward by a pre-agreed formula. This shifts the focus from a hypothetical risk to an actual outcome. Operationally, you must show the buyer that this client is integrated into your company system. Use your Accountability Chart to prove that the account is run by a dedicated account team using structured processes, not just by the founders. During the transition, make sure the client relationship is managed through your weekly Level 10 Meeting™ structure to maintain service standards. This operational proof combined with a clawback escrow protects your target valuation while giving the buyer the downside protection they require to close.