If we had 30% of your investment portfolio tied up in a single company, you’d probably fire us…and you’d be wise to do so.
But business owners do this with their own clientele all the time, and often the business is the lion’s share of their net worth in the first place.
Big problem.
Client concentration is incredibly common, especially in founder-led businesses. That one customer who believed in you early on… or the big account that kept the lights on during a tough stretch. Loyalty like that is meaningful.
But here’s what we’ve learned walking alongside business owners who are preparing for growth, transition, or eventual sale:
Customer concentration quietly erodes both valuation and resilience.
From a buyer’s perspective, high concentration means higher risk. It raises questions like:
“What happens if this one client leaves?”
“Is the relationship tied to the owner personally?”
“Can this revenue be transferred, or is it fragile?”
Even if you’re not planning to sell anytime soon, customer diversification is still one of the best things you can do to protect your business and position it for opportunity.
- It creates stability when markets shift
- It improves your negotiating position
- It builds confidence — both for you and for future stakeholders
Think of it like spreading weight across more beams. The more balanced the structure, the more confidently you can build.
Here’s what this means for you:
First, don’t shrink the numerator: build the denominator. The client is only a concentration risk if they’re a large percentage of relatively smaller total revenue to your firm. By growing adjacent relationships and sectors, you’re more diversified without turning away existing loyal clients.
You don’t need to overhaul your model overnight. But it’s worth asking:
“What small shifts can I make this year to spread risk and strengthen my foundation?”
Because the future may bring tighter capital, tougher margins, or harder pivots. But a well-diversified customer base helps you respond from a position of strength — not scrambling.
This content is for informational purposes only and should not be construed as individualized investment, business, legal, or tax advice. Business decisions and outcomes vary based on individual circumstances. Investment advisory services are offered through Keating Financial Advisory Services (KFAS) pursuant to a written agreement.