Customer concentration
In short. Customer concentration is how much of a business's revenue comes from a small number of customers. A business is highly concentrated when one or two customers account for most of its sales, which can bring efficiency but also leaves it exposed if a major customer leaves or changes terms.
Last checked against its sources on 10 October 2026. How we write these.
Concentration is measured simply: the share of revenue that comes from your largest customer, or your top three. A business where one customer brings in half the sales is in a very different position from one where no customer is more than a tenth.
It is not automatically bad. Research from UC Berkeley's Haas School found that suppliers with a concentrated customer base often run leaner, holding less inventory and spending less on selling and administration for every unit of sales, because they coordinate closely with their main customers.
The same research found those suppliers reported lower gross margins, which reflects the other side: a major customer has bargaining power. Requests for lower prices, longer payment terms, custom work and dedicated support can build up one reasonable request at a time.
The practical response is to know your number, price extra requests rather than absorbing them, keep the relationship owned by more than one person, and keep winning other customers while the big one is still happy.
Questions people ask
What counts as too much customer concentration?
There is no single threshold. The useful test is what would happen to cash and staffing if your largest customer left next month, and how long it would take to replace that revenue.
Can a business be concentrated on purpose?
Yes. Some businesses choose a few large customers deliberately. The risk is concentration by default, where nobody decided it and nobody has planned for the customer leaving.
Sources
- Less is More: The Unexpected Value for Suppliers That Have Few Major Customers (Haas News, UC Berkeley) checked 10 October 2026
- IFRS 8 Operating Segments (IFRS Foundation) checked 10 October 2026