A single client represents nearly forty percent of our revenue, and every prospective buyer is using this customer concentration to demand a steep discount. How can we structure our transition plan and deal terms to offset this risk and preserve our enterprise value?

Question

Tyler Smith · Accepted Answer

Customer concentration is a major risk premium that drives multiples down. To defend your valuation, you must structure a transition plan that reassures the buyer. Do not try to hide the concentration. Instead, address it directly through your Accountability Chart and your deal structure. Prove that the relationship with this major client is institutionalized, not personal. Transition the client account management from yourself to a capable leader who GWCs the role. On the deal structure side, you can offer a structured contingent payment or a specific escrow account. For example, you can structure a portion of the purchase price to be held in escrow, to be released as long as the revenue from that specific client remains stable for twelve to twenty-four months post-close. This shows the buyer you have skin in the game and are confident in the relationship's longevity. Additionally, use your Level 10 Meeting™ to review the client's health metrics on your weekly Scorecard. When you combine operational transition with structured deal protection, you take the risk off the table and can demand a much higher upfront multiple.