Your biggest customer is a third of revenue and most of the discount

Concentration costs more value than the percentage suggests, and two businesses with identical exposure can be priced very differently.

By Steve 5 min read
Abstract bridge artwork for Your biggest customer is a third of revenue and most of the discount

Two businesses, both doing £4m of revenue, both with one customer at 35% of the top line. One sells on a clean multiple. The other gets an offer with half the consideration deferred, a retention condition attached, and a conversation about escrow. The difference isn’t the percentage. It’s what happens to that account the day the owner’s name comes off the door. Customer concentration is one of the few features of a small business that almost every acquirer, lender and investor prices explicitly. It is also one of the most…

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