How to Fix Customer Concentration Without Shrinking

Murray Kent paid £30,000 for a four-person electrical fittings business operating out of premises he charitably described as a slum. A decade later, a private-equity-backed buyer wrote him a cheque for 6.2 times earnings. All cash. No earn-out. No equity rollover. A lot had to go right for an offer like that — and the thing he spent the most time on was customer concentration.

Why buyers punish concentration twice

When he bought the business, one customer accounted for roughly 40% of revenue. Murray knew what that figure would do to a buyer one day. Acquirers underwrite durability, and a company with a single customer at 40% is not really one company — it is a bet on one relationship, and buyers price it that way. They have seen too many deals unravel when an anchor customer renegotiates, gets acquired, or quietly drifts to a competitor a year after completion.

The penalty almost always lands in two places at once. The headline multiple comes down, and the structure of the deal shifts hard against the seller: less cash on completion, more tied to an earn-out that depends on that anchor customer continuing to behave — with the founder no longer in the seat to make sure it does. Owners who walk in expecting one number and one structure walk out with a smaller number, most of it parked behind years of post-completion performance they only partly control.

Most owners hear all this, nod, and carry on as before. Part of the reason is that the obvious fix is the wrong one. Firing the anchor customer would collapse the very financials a future buyer is also reading. Concentration cannot be solved by subtracting from the top. It has to be solved by adding underneath.

Building around the anchor

That is the work Murray did. He expanded into new regions, invested in marketing aimed at buyers who had no link to the anchor account, and hired salespeople whose targets had nothing to do with the legacy book. The largest customer kept buying; everything around it grew faster.

Over several years, concentration fell from 40% to roughly 20% — while revenue rose the whole time. He never had to choose between fixing the ratio and protecting the numbers, because he was not taking anything away. By the time the buyer arrived, the business looked completely different inside: hundreds of customers won on their own merits, a management team running the floor without him, and margins a buyer could underwrite. The largest account was still the largest — but it was no longer the story.

If your biggest customer is north of 20% of revenue today, the clock you want to be on is the one Murray was on — the one that starts now, not the one that starts when a buyer comes calling.