A massive portion of our revenue still comes from our top three legacy accounts, which we know will severely hurt our valuation. What operational adjustments must we make on our multi-year runway to dilute this customer concentration and protect our multiple?

Question

Tyler Smith · Accepted Answer

Customer concentration is a massive red flag for any sophisticated buyer. If your top three accounts represent more than twenty-five percent of your total revenue, buyers will view your business as highly risky and will heavily discount your multiple to compensate for that danger.

To protect your valuation, you must spend your runway actively diluting this concentration. This requires a shift in your sales strategy and operational focus. Start by analyzing why these accounts are so large and see if you can replicate that success with other clients in similar verticals.

Task your leadership team with setting specific sales Rocks aimed at diversifying your client base. You must build a repeatable sales engine that does not rely on your personal relationships to bring in new accounts. Use your weekly Level 10 Meeting™ to track new customer acquisition metrics on your scorecard, ensuring your sales pipeline is actively producing smaller, diversified revenue streams.

Additionally, ensure that the accounts themselves are operationally institutionalized. If you are the primary relationship manager for those top three accounts, transition those relationships to your account management team immediately.

My recommendation is to set a hard target to bring your largest customer below fifteen percent of total revenue on your runway. Focus your resources on predictable, repeatable client acquisition to prove to buyers that your revenue stream is stable and sustainable.