The risk most businesses carry.
WHAT IT MEANS
Depending on a few customers for most revenue.
WHY IT IS DANGEROUS
Losing one changes everything, and they know it.
WHAT IT COSTS BEFORE ANYTHING GOES WRONG
Pricing power The ability to refuse unreasonable demands Negotiating position on terms
WHAT TO MEASURE
The proportion of revenue from your largest customer, and from your largest few.
WHAT THRESHOLD SHOULD CONCERN YOU
Any level at which losing one would threaten the business.
WHAT TO DO ABOUT IT
Develop other customers, deliberately.
WHY DELIBERATELY
Large customers consume capacity, and diversification does not happen by itself.
WHAT TO PROTECT
Capacity for developing new relationships.
WHAT TO ESTABLISH
A target proportion, and work toward it.
WHAT TO BE ALERT TO
A large customer's own difficulties Changes in their personnel Reduced order frequency Payment slowing
WHY PAYMENT SLOWING
It is frequently the first sign of their trouble, and yours.
WHAT TO DO ABOUT SUPPLIER CONCENTRATION SIMILARLY
Identify alternatives before you need them.
WHAT TO DO ABOUT CHANNEL CONCENTRATION
The same: depending on one route to market is the same risk.
WHAT TO RECOGNISE
That serving a large customer well is not the same as being secure.
WHY
Their decisions are made for their own reasons.
WHAT TO ASK
What would happen tomorrow if they stopped.
