The Dependency Trap
Agency founders rarely plan for client concentration. It happens gradually. A large client wins. You hire to service them. Before you know it, 35% of your revenue depends on one relationship.
How To Measure It
Revenue concentration. What percentage of total revenue comes from each client? If your top client exceeds 25% of revenue, you have a concentration risk.
Profit concentration. Calculate profit contribution per client. You might find that your second-largest client is actually more important to profitability.
Contractual concentration. What is the remaining contract term with each major client?
How To Manage It
The 25% rule. No single client should represent more than 25% of revenue. If any client exceeds this threshold, actively develop two new clients that will each represent 10–15% of revenue.
Margin weighting. Focus on high-margin opportunities, not just high-revenue ones. A €200,000 client at 40% margin is more valuable than a €500,000 client at 15% margin.
Relationship diversification. Ensure at least two people have deep relationships at each major client.
The Bottom Line
Client concentration risk is a slow-burning fire. By the time it becomes visible, the damage is severe and the recovery is slow. Measure it quarterly. Manage it actively. Do not wait for it to become a crisis.
*Satyabrata Das provides CFO intelligence with commercial edge to agencies and consultancies. Book a free discovery call →*