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Guide

Customer concentration and what it does to a deal

Updated

Concentration is the first thing a buyer's adviser finds, because it falls straight out of the sales ledger. Better to arrive with the answer than to be asked for it.

Why buyers care so much

A buyer's downside case is not the business trading badly, it is the business losing the thing it depends on. Where one customer is a large share of turnover, that single relationship carries a disproportionate share of the value, and the buyer has no way to know whether it survives a change of ownership. So they do not usually walk away. They restructure.

What they typically ask for

  • A larger deferred element, or an earn-out linked to that customer's revenue after completion.
  • Specific warranties about the contract, the notice period and any known intention to re-tender.
  • An indemnity or retention aimed at loss of the account within a defined window.
  • Contact with the customer before completion, which is a negotiation in itself.
  • Sight of the contract, the trading history, and the change of control provisions.

Reducing the risk before you go to market

  1. Grow the rest of the base rather than shrinking the big client: concentration is a ratio, and the numerator is your best customer.
  2. Move the relationship from a person to a contract, with a term, a notice period and a change of control clause you can live with.
  3. Spread the relationship inside the customer, so it does not sit with one buyer on their side either.
  4. Document the trading history, so length and stability are evidence rather than assertion.
  5. Prepare the honest answer to 'what happens if they leave', because you will be asked.

What we will not tell you

There is no published UK figure for how many percentage points of value a concentrated customer base costs, and any site that gives you one has made it up. What is verifiable is that the ordinary UK SME transaction has been settling around a median of 4.5 times EBITDA (UK200Group SME Valuation Index, November 2025), and that where in a range like that you land is exactly what factors such as concentration decide.

Run the checker to see how concentration sits alongside the other five things a buyer tests.

Questions, answered directly

How much customer concentration is too much?

There is no statutory or published threshold. As a working rule, buyers start asking pointed questions when one customer passes roughly a fifth of turnover, and start reshaping the deal when it approaches half. This checker uses 20% and 40% as the points where the conversation changes, which is a judgement about buyer behaviour rather than a rule anyone publishes.

Should I tell a buyer about a dominant customer?

Yes, and early. It is the most visible thing in the sales ledger, so it will be found, and finding it late costs you credibility across the whole disclosure exercise. Arriving with the contract, the trading history and a plan is a far stronger position than being asked.

Find out what a buyer will find.

Six questions, in the order a buyer's adviser asks them. No score theatre, no invented uplift.

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Run the checker