Three customers are 54% of revenue. The concentration is worse than that.

Customer concentration is almost always reported in the way that flatters it most, and the number that matters is rarely the one on the board pack.

By Steve 5 min read
Abstract bridge artwork for Three customers are 54% of revenue. The concentration is worse than that.

Most businesses know their concentration figure. It appears in the board pack once a quarter, usually as revenue share by customer, usually sorted descending, usually with a note that the top three are large but stable. The number is accurate and it is also the wrong number. It is measured in the wrong currency, aggregated at the wrong unit, and it ignores the correlation between the names on the list. The consequence is not just an understated tail risk. Concentration extracts a price every single day the business trades, in…

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Important: General information only. Rialto Bridge articles describe patterns and considerations that may apply to a business; they are not financial, legal, tax or accounting advice, and they take no account of your particular circumstances. Consider your own situation and seek advice from a qualified professional before acting.

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