How exposed is the business to losing one client?
How much of revenue depends on a small number of clients. A practice can be profitable and growing and still be fragile, if losing one relationship would remove a significant share of income
Get a finance reviewRevenue from largest client (or top five) ÷ Total revenue × 100, rolling 12 months
A single client above 20% to 25% of revenue, or a top five above 50%, is generally treated as a concentration risk.
The share of total revenue that comes from your largest clients. It is usually shown in two ways: the percentage from the single largest client, and the percentage from the top five. It is measured over a rolling twelve months so that one large invoice does not distort the picture.
A business can be profitable and growing and still be fragile. If one relationship accounts for a large share of income, a change of contact, a budget cut or a procurement review at that client can remove a significant part of revenue with little notice. Concentration also weakens your position in fee negotiations, and a buyer or lender will price that risk into any valuation or facility.
Group related entities together: three subsidiaries of the same parent are one risk, not three. Look at gross margin by client alongside concentration, since a large client on thin margin is a different problem from a large client on healthy margin. Where concentration is high, the answer is rarely to turn work away. It is usually to set a deliberate target for revenue from new clients and track progress against it each quarter.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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