Customer Concentration Risk

What is Customer Concentration Risk?

Customer Concentration Risk occurs when a significant portion of a company’s revenue comes from a small number of customers. If one of these major clients churns, it can have a devastating impact on the company’s financial stability.

Why It Matters

• It highlights potential vulnerabilities in the revenue stream that could worry investors or lenders.

• Diversifying the customer base reduces the impact of any single account’s decision to leave.

• It encourages companies to build a more balanced portfolio of small, medium, and large accounts.