Three customers are 60% of revenue. The concentration is worse than that.

Most owners measure customer concentration by revenue share, which is the one measure that consistently understates the exposure a buyer or a lender will price in.

By Steve 5 min read
Abstract bridge artwork for Three customers are 60% of revenue. The concentration is worse than that.

Almost every owner of a concentrated business already knows the number. Three names, or five, account for most of the top line, and the intention to fix it has been on the plan for years. What tends to be less well understood is that the headline figure is usually the flattering version. Measured the way an acquirer, a lender or a serious non-executive would measure it, concentration is generally higher than the revenue split suggests, and the gap between the two numbers is where the valuation discount lives. Four ways…

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