An important early question is what share of your sales comes from your largest customer? The answer sets the tone for everything after it, and past a threshold it can become a significant issue for price and terms.
Why buyers care so much
A buyer needs to assess whether earnings can continue after you leave. If a material share of revenue depends on one customer and a relationship held personally by the owner, they may question continuity. Responses can include a different price, conditions, deferred consideration or a decision not to proceed; the percentage alone does not determine the outcome.
Experienced buyers may examine customer continuity closely, including the terms and relationships behind the headline percentage.
Where the thresholds sit
There are no universal thresholds. I use the following bands as discussion prompts, not as a formula for the multiple. Contracts, margins, customer stability and the buyer's alternatives all matter:
| Top customer share | Questions to examine |
|---|---|
| Under 10% | Lower exposure to one customer, but still check the top group, margins, terms and relationship ownership. |
| 10–20% | Review continuity, the contract and who holds the relationship. Documentation helps explain the position; it does not remove every risk. |
| 20–35% | May discount the multiple, or propose an earn-out (a portion paid later, only if the customer stays). |
| Over 35% | Expect close scrutiny of continuity, contracts and relationship ownership. A buyer may discount, seek protections or decline. |
Also examine the top three combined, related customer entities, regions, customer types and channels such as a booking platform or head contractor. In the professional Review, a region, channel or customer type above 50% caps this test at 3; above 75% caps it at 2. A single irreplaceable supplier is examined under compliance and supply transferability.
Why it is useful to start early
A change in customer mix or relationship ownership needs time to demonstrate. Start by calculating the largest customer's share and the top three combined for consistent periods. Compare margins as well as revenue, list the agreements and notice terms, and record who manages each relationship. Ask your lawyer to check the relevant rights and obligations.
Then decide what to change. That might mean strengthening the relationship beyond the owner, building alternative revenue or simply explaining an already stable position more clearly. The customer concentration workbook helps organise the evidence. No single percentage or fixed number of months determines the outcome.
A worked example
Illustrative, not a client outcome: a distributor has NZD 2 million of revenue, including NZD 800,000 from one account. That is 40% concentration. If day-to-day contact moves from the owner to a manager, the percentage remains 40%. What changes is the evidence about continuity. A buyer still needs to assess the agreement, notice period, margin and likelihood of the customer staying. The change alone does not establish a higher multiple.
Concentration is test six of eight. The full set, or score yourself on all eight with the readiness check.
About the author
Oscar Rodwell runs Rodara Advisory, preparing New Zealand businesses worth NZD 1–10 million for sale. His experience owning, running and selling businesses in retail, manufacturing, hospitality and property informs his work on earnings, people, agreements and handovers. About Oscar.
