A broker told me our 35% customer concentration will crush our exit valuation. How do I fix this over a three-year horizon?

Question

Tyler Smith · Accepted Answer

Your broker is correct. Customer concentration is a critical risk factor for buyers. If a single client accounts for more than 15% of your revenue, a buyer will assume that losing that one account will wipe out your profitability. They will price your company using a discounted multiple or demand a heavy earn-out where you only get paid if that client stays.

You cannot quickly fire a massive, high-margin client to fix your ratios. Instead, you must systematically dilute their revenue share over a three-year window by accelerating growth elsewhere.

Implement this three-year mitigation strategy:

1. Secure a long-term, assignable contract with your top client. Negotiate a three-year master services agreement (MSA) that explicitly permits the contract to transfer to an acquirer upon sale. This immediate step mitigates the buyer's risk of client flight post-close.

2. Ring-fence your top account. Assign a senior client success manager to lead and run the relationship, removing yourself as their primary daily point of contact.

3. Reallocate your resources to new customer acquisition. Cap the growth of your top account and invest 100% of your marketing budget and new sales talent into expanding your mid-market accounts. Drive 25% year-over-year growth in secondary customer segments until your largest client represents less than 15% of your total revenue.