Is it ever okay to buy a business with high customer concentration?

by a searcher from University of Cincinnati - Carl H. Lindner College of Business

1 year ago

I have reviewed about 75 CIMs so far and one of the most common issues I came across is high customer concentration. My definition of high customer concentration is that either the top client provides more than 15% of the revenue or top 10 clients provide more than 50% of the revenue. 

So, the question for the experts in the community is that whether there is any scenario based on industry or business type where it is okay to buy a business with a high customer concentration and I should do a little more digging than simply walk away?

9 likes
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39 comments

searcher from University of Rousse

A business with broad customer base is favourable - you do not want a business where the annual billing for the larger customer to be 50% of company's revenue

1 year ago | like reply | 0 likes

searcher from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM)

This is an interesting question, and I think a lot of people have a hard time defining this. For me the tipping point is having more than 10% sales in with one customer, though I agree it depends on the case.

1 year ago | like reply | 0 likes

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