In short
- Customer concentration means a large share of revenue comes from a small number of clients.
- Buyers see it as risk: if a major client leaves, profits fall sharply.
- As a rough rule of thumb, many buyers start asking questions when one client exceeds around 15 to 20% of revenue.
- It rarely stops a sale, but it often changes the structure, with more of the price paid later.
- Formal agreements, team-held relationships and a wider client base all reduce the risk.
Many event production companies grow around one or two anchor clients: a conference organiser, an agency or a venue that books them for years. That loyalty is valuable. But when it comes to a sale, buyers will look closely at how much of the business depends on those clients.
What buyers measure
- The share of revenue from your largest client.
- The share from your top five and top ten clients.
- How long each major client has worked with you, and whether that is changing.
- Whether there are written agreements, or only a relationship.
- Who holds the relationship: you, or your team.
As a rough rule of thumb, many buyers start asking questions when a single client accounts for more than around 15 to 20% of revenue. The level that concerns a particular buyer depends on the client, the contract and the sector.
Why it matters
A buyer is paying for future profit. If a large part of that profit could disappear with one client decision, the buyer has to allow for that risk. It also makes the business harder to finance, because lenders take the same view.
The risk is greater when the relationship is with the owner personally. If the client books because of you, and you are leaving, the buyer will worry they will follow you out of the door.
How it affects a deal
High concentration rarely stops a sale on its own. More often it changes the shape of the deal:
- A lower multiple of profit.
- More of the price paid later, sometimes linked to the major client staying. See deferred consideration and earn-outs.
- A longer handover period, so the relationship can be passed on properly.
- Closer due diligence on the client relationship.
How to reduce the risk before you sell
- Put relationships on paper. Framework agreements, preferred-supplier status or multi-event commitments give a buyer visibility.
- Share the relationship. Make sure your project managers know and work directly with your major clients.
- Widen your client base. Target new sectors and event types. Corporate, association, agency and venue work each behave differently.
- Track the numbers. Keep a simple monthly record of revenue by client so you can show the trend improving.
- Start early. Diversification takes time to show in the accounts. Two years of improving figures are far more persuasive than a plan.
Why it matters to Ignite Group
We look for businesses with a broad client base, but we also understand how event companies grow. If you have a major client relationship, we would rather discuss it openly at the start and agree a handover plan that protects it, than discover it late in due diligence.
Written by Sanjeev Desour, founder of Ignite Group. About SanjeevThis guide is general information about UK practice, not legal, tax or financial advice. Take advice from your own accountant and solicitor on your circumstances.