Customer concentration (top 10 = ?%)

What it is

What share of total revenue the business's ten largest customers account for — a single number that says a lot about how much of what you're buying depends on relationships you don't control yet.

Why it matters

If a handful of customers can walk away — especially right after an ownership change, when they have every reason to reevaluate who they're buying from — the revenue you paid for can evaporate fast. Lenders discount concentrated books for the same reason: a business standing on two or three big accounts isn't nearly as reliable as one spread across a hundred smaller ones. Concentration above roughly 10–15% in any single customer is where buyers and underwriters typically start asking harder questions.

What to look for

• Any single customer above 10–15% of total revenue
• Written contracts versus informal, handshake relationships with the largest accounts
• Whether the relationship with a top customer runs through the company or through the owner personally
• Any recent loss of, or near-loss of, a major account — and why it almost happened