Address Customer Concentration Before Taking Offers

Look at profit as well as the sales percentage

List several years of revenue by customer and examine how much profit comes from the largest accounts. A customer with modest sales can still account for an outsized share of earnings.

Check whether one umbrella account actually represents several independent clients. Explain the underlying relationships rather than allowing a billing label to make the business appear more concentrated.

Identify what the buyer can count on

A history of repeat orders is different from a contract with a term and clear assignment rights. Ask counsel to review consent, renewal and cancellation clauses.

If the relationship depends on your personal involvement, set out who will take it over. A written transition plan is more credible than an assurance that the customer will never leave.

Expect concentration to influence the offer

A buyer may reduce the cash price, seek a longer owner transition or propose an earnout tied to retention. These structures move some future risk back to you.

Compare payment timing and enforceability with your advisors. A high contingent total may be less useful than a lower amount paid at closing.

• Prepare an accurate customer revenue schedule.
• Keep confidentiality controls around identifying details.
• Explain realistic diversification work already underway.

Start improvements before the sale window

Buyers look at the operating history, so signing a few new accounts immediately before listing may not erase years of concentration. Give improvements time to show in the records.

Avoid public marketing that identifies a major customer. Buyer screening and an NDA should come before detailed client disclosure.

Keep the sale moving

• Put the earnings in context
• Review the earnout tradeoffs
• Start a seller valuation

Use the valuation form to outline your sale, or call (408) 555-0179.