We have a single client that represents over twenty-five percent of our revenue. Even though our account managers run the day-to-day relationship, we know buyers will discount our valuation. How do we mitigate this customer concentration risk during our exit runway?

Question

Tyler Smith · Accepted Answer

High customer concentration is a major value killer. A buyer looks at a business with a single dominant client and sees a fragile revenue stream. If that client leaves post-close, the buyer's investment is ruined. You must proactively address this risk during your exit runway.

First, secure the revenue with long-term contracts. Work to sign your major client to a multi-year agreement that includes a clear change-of-control clause. This ensures the contract remains valid after the sale, giving the buyer peace of mind.

Second, institutionalize the relationship. Ensure that no single person, especially not the founder, holds the relationship. Use your Accountability Chart to distribute touchpoints across your account management, product, and executive teams.

Third, focus your sales team on diversification. Make client acquisition in new sectors a high-priority Rock. Even if you cannot easily dilute the giant client's percentage of revenue due to rapid growth, proving that you are successfully winning new, diverse accounts shows the buyer your growth engine works.

Finally, present the concentration as an opportunity, not a threat. Document how deeply embedded your operations are within that client's systems. If your software, custom workflows, or logistics are integrated with theirs, the cost of switching is incredibly high. Proving this integration exists helps convince a buyer that the revenue is highly secure.