A prospective buyer is willing to pay our target multiple for our core business but wants to apply a heavy discount to the revenue generated by our largest client, who accounts for thirty percent of our sales. How do we structure a contingent pricing mechanism or a separate earn-back pool to capture the full value of this account without risking the entire transaction?

Question

Tyler Smith · Accepted Answer

Heavy customer concentration is one of the most common valuation killers. Rather than walking away or accepting a massive discount across your entire business, you can isolate the concentrated risk through a structured contingent pricing mechanism or a target-specific earn-back pool.

Under this structure, you split your valuation. The diversified portion of your business is valued and paid at a standard high multiple at close. The revenue from your major client is isolated into a separate pool. If that client remains active and meets specific revenue or margin thresholds at twelve and twenty-four months post-close, you earn out the remaining portion of your valuation multiple.

To protect this earn-back, use your weekly Scorecard metrics to track the health of this relationship transparently during the transition. Use your EOS Accountability Chart® to assign a dedicated account director to that seat, proving to the buyer that the client relationship is institutionalized and does not depend on you, the departing owner.

This structure reassures the financial sponsor while giving you a clear, uncapped path to capture the full enterprise value of your operations. It converts a structural risk into a shared performance goal.