The Hidden Danger of Revenue Dependence — Ask the CFO, August 5

Are You Relying Too Heavily on One Customer?

Let’s talk about something I see far too often—and that too many business owners ignore until it becomes a problem: customer concentration.

In our August session of Ask the CFO, we dug into what happens when a significant portion of your revenue comes from just a handful of clients. For some of the business owners I work with, it’s one client making up 50%, 60%, or even 70% of the total top line. That might feel like stability—but the risk is real, and often hidden.

How It Starts

Most businesses don’t set out to have a concentration problem. It usually comes from something that seems positive—like a big client placing steady orders, year after year. You stop having to invest in sales or marketing. You don’t need new equipment, new reps, or even a bigger team. It becomes easy to coast.

But what begins as efficient can quietly turn into dependence. And if that one client has a downturn, restructures, or just decides to switch vendors… the whole business can be in jeopardy overnight.

Real-World Examples

I shared the story of a client I’ve worked with for years. They had 70% of their revenue coming from one customer and insisted things were fine. Then the pandemic hit. Supply chain chaos made that big customer over-order—then under-order—then back off entirely. Their volume dropped dramatically, and the business barely scraped through.

To their credit, we used that time to start building a broader customer base. But the process took years—not months—to rebalance. And we only avoided catastrophe because we started talking about it before the bottom dropped out.

The Exit Multiplier (or Discount)

If you’re thinking about eventually selling your business, concentration becomes even more critical. A buyer will discount your valuation the moment they see 40% or more of your revenue tied up with one name.

Now, could you make the case that this customer is a strategic asset? Yes—but you’ll need the right buyer, the right context, and a solid plan to tell that story. Most financial buyers will use concentration to drive the price down. Strategic acquirers might be more open, especially if it expands their footprint with that customer. But it’s not a gamble you want to take without a plan.

What You Can Do About It

We spent much of the session brainstorming how business owners can start chipping away at this risk. Here are a few takeaways:

• Start with acknowledgement: You can’t fix what you won’t name. Accept that concentration is a real issue, even if it’s not urgent—yet.

• Share relationships: When one founder holds all the client connections, they become a single point of failure. Bring others into those relationships, and document them.

• Ask for referrals: One of the simplest—and most overlooked—growth tactics is just asking your best customers who else they know.

• Develop a strategic plan: Set a goal. Want to get from 70% to 40% over five years? Write it down. Build the team. Track progress.

• Invest in marketing and business development: It might feel risky, but doing nothing is riskier. Whether it’s SEO, outbound, or distributor partnerships—something has to drive new business.

• Evaluate your contracts: If you do have long-term agreements with major clients, use them to your advantage. But remember—they still expire. They’re not bulletproof.

Final Thoughts

Customer concentration is often a byproduct of success—but that doesn’t mean it’s safe. If you’re not careful, the very relationship that helped you grow can be the one that limits your future.

What I want for my clients—and for any small business owner—is resilience. That means having the confidence that if one customer walks away, your business still stands strong.

If you missed this month’s Ask the CFO, I encourage you to read through this post and start thinking seriously about your own customer mix. And as always, if you want a second set of eyes on your numbers or a plan for the next phase—I’m here.

Until next time,

Lowell Mora
CFO + Strategic Advisor