One major client accounts for over thirty percent of our annual revenue, which we know will terrify potential buyers. How do we systematically reduce this customer concentration risk during our exit runway without hurting our short-term cash flow?

Question

Tyler Smith · Accepted Answer

Customer concentration is one of the most common valuation killers. If a single customer accounts for more than fifteen percent of your revenue, buyers will see an existential threat to the business and will either heavily discount your multiple or demand a massive earn-out to protect their investment.

To fix this on your exit runway, you must execute a dual strategy of protecting the major client while aggressively growing your other accounts. Do not make the mistake of firing or ignoring your largest client to balance the percentages; you need their cash flow to fund your growth and show strong historical profitability.

Instead, focus your sales team on expanding your mid-tier accounts and bringing in new business. Use your EOS® Scorecard to track active lead generation and conversion metrics weekly, ensuring your sales pipeline is diversified. Dedicate specific quarterly Rocks to securing multi-year contracts with your other top accounts, which increases their individual share of your revenue pool.

Simultaneously, you must institutionalize the relationship with your largest client. Ensure they are serviced by a dedicated account team, and transition the primary communication away from you. If the buyer sees that the major client is bound to your company by contract and operational systems, rather than your personal friendship, the perceived risk drops significantly.