Measure exposure in more than one way
List customer revenue and gross profit for consistent periods. Identify related customers that share one purchasing decision, and separate exceptional projects from repeat activity. A customer producing 30% of sales may account for a much larger or smaller proportion of gross profit. Compare the information across time instead of relying on one year-end snapshot.
Worked example: revenue concentration can hide profit exposure
| Hypothetical business | Revenue | Gross profit |
|---|---|---|
| Customer A | £300,000 | £150,000 |
| All other customers | £700,000 | £210,000 |
| Total | £1,000,000 | £360,000 |
| Customer A share | 30.0% | 41.7% |
Losing Customer A would not automatically reduce EBITDA by £150,000: variable cost savings, stranded overheads, replacement activity and timing all matter. The example shows why revenue percentages alone are incomplete. It is not a prescribed risk threshold or a valuation adjustment.
Read the commercial terms
Record remaining contract length, termination provisions, renewal arrangements and any change-of-control provisions for appropriate legal review. A signed contract and an expected repeat order are different evidence. Explain whether revenue depends on a framework without committed minimum purchases, a single project or ongoing orders.
Test the operational response
Could released capacity be used elsewhere, and how long would that take? Separate a credible replacement plan from an unweighted sales pipeline. Consider collection risk, customer-specific equipment and stock, recruitment commitments and how fixed overheads would respond. Scenarios should make the timing and assumptions visible.
What to include in your valuation information pack
Prepare a customer schedule with revenue, gross profit, payment terms, outstanding balances, contract status and relationship owner. Anonymised summaries can be discussed initially; detailed confidential records follow through an agreed channel. Explain known changes since the reporting date.
Connect this with owner-held customer relationships and working capital requirements.