We are using the Step by Step Exit framework to prepare our business for an exit in three years, and our Value Gap Assessment showed a major risk around customer concentration. How do we track and mitigate customer concentration risk on a weekly scorecard when client revenue fluctuates throughout the year?

Question

Tyler Smith · Accepted Answer

Customer concentration is one of the single biggest valuation killers when you prepare for a clean exit. If any single client accounts for more than fifteen percent of your revenue, buyers will see huge risk and discount your company value. You cannot wait for your annual financial review to address this. You must track it weekly.

To do this, add a metric to your weekly scorecard called top client revenue percentage. This is the rolling twelve-month revenue contributed by your largest client, updated weekly.

Additionally, track new account acquisition outside of your top three clients. This is a leading indicator that shows whether your sales team is actively diversifying your client base or simply taking the easy route by expanding accounts with your existing large clients.

Another excellent weekly metric is the percentage of total sales pipeline value coming from new logos versus existing accounts.

By keeping these metrics on your weekly scorecard, you force your sales seat to focus on diversification. When you eventually present your Business Insights Report to prospective buyers, you will be able to show a clear trend of declining customer concentration, which will dramatically increase your valuation and ensure a clean exit.