A single enterprise client accounts for thirty-five percent of our total revenue, and buyers are attempting to heavily discount our multiple or structure the entire deal as a high-risk earnout because of customer concentration. How do we negotiate a deal structure that isolates this specific client risk without converting our entire guaranteed cash at close into a multi-year performance gamble?

Question

Tyler Smith · Accepted Answer

High customer concentration is a primary driver of deal friction, with buyers often attempting to use it to push down the purchase price or structure the deal as an earnout.

To protect your cash at close without walking away from the transaction, you must propose a deal structure that isolates this risk. Instead of accepting a low valuation multiple on your entire business, suggest a bifurcated deal structure.

Under this approach, you receive a standard, clean multiple on the diversified portion of your earnings. For the earnings associated with the concentrated client, negotiate a specific escrow account or a targeted seller note.

This structure should dictate that the escrowed funds or seller note payments are released to you on a prorated basis over twelve to twenty-four months, contingent solely on the concentrated client continuing to generate a baseline level of revenue. This protects the buyer from sudden post-closing customer loss while ensuring you get paid full value if the customer remains.

To support this structure during negotiations, present your historical EOS® data. Show the buyer your track record of long-term contract renewals and consistent customer satisfaction scores. This evidence demonstrates that your relationship with the client is institutionalized, rather than dependent on you as the owner.