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THE PULSE

1. There are hard lines where customer concentration starts costing you real money.

Analysts put the healthy zone at under 10% of revenue from any single customer. Between 10% and 20% is caution territory, private equity firms typically draw a hard internal line at 15%. Above 30%, businesses see their valuation drop 20% to 35% compared to a similarly sized, diversified competitor. Source: Beancount.io customer concentration analysis, May 2026.

What it means for you: This isn’t a soft guideline. It’s a number that shows up directly on a term sheet, a loan application, or a sale price, whether you’ve ever calculated it yourself or not.

2. Banks already know your concentration number, even if you don’t.

In asset-based lending, banks typically advance 80% to 85% against eligible receivables, but cap any single customer at 15% to 25% of the total borrowing base. Revenue above that threshold from a concentrated customer can be excluded from your collateral entirely. Source: Beancount.io, May 2026.

What it means for you: If a bank won’t fully count your biggest client’s revenue as real collateral, that’s a signal worth taking seriously about how real that revenue actually is to your business’s stability.

3. Federal contractors just got a live demonstration of concentration risk.

65,500 small business contractors received a combined $155 billion in federal payments in 2024. During a government shutdown, roughly $3 billion a week in contractor payments freezes, and unlike furloughed federal employees, contractors don’t receive back pay. Source: U.S. Chamber of Commerce analysis of Bloomberg Government data, October 2025.

What it means for you: For a contractor whose revenue leans heavily on one agency, a shutdown isn’t a headline. It’s an immediate, unpaid pause on the majority of their income.

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Your best client could also be your biggest liability

A few years ago I sat with a consulting client in an African country, working through his client list to understand who actually paid his bills. He got to the government contracts and I asked what percentage of his revenue that represented. Seventy percent, he said. I asked him if providing for his family was something he took real pride in. Of course, he said. Then I told him that if the government ever shifted that work to a competitor, it would likely kill his business.

Ten seconds of silence. I never heard from him again after that call.

I don’t think he was upset with me. I think I said out loud the sentence his own numbers had been trying to tell him for years, and nobody had ever said it to him plainly before.

Seventy percent from one source isn’t unusual, it’s actually one of the most common ways small businesses grow. One relationship gets big, it becomes easy, and easy starts to look like stable. But concentration and stability are not the same thing. A client that makes up most of your revenue isn’t your biggest asset. It behaves exactly like your biggest single point of failure: everything is fine until the day it isn’t, and then everything is not fine all at once.

The math here is unforgiving. If one customer is 70% of your revenue, losing them doesn’t shrink your business by 70%. It usually ends it, because the fixed costs you built to serve that client, staff, equipment, leases, don’t shrink along with the revenue. They stay exactly the same size while the income that covered them disappears overnight.

THE VERDICT: a real decision, graded.

The decision: In late August 2026, cell-therapy manufacturing startup Cellares lost its largest customer when Bristol Myers Squibb ended a roughly $380 million partnership, after determining Cellares’ automated manufacturing platform couldn’t meet the requirements to produce commercial batches of BMS’s CAR-T therapy Breyanzi. Within a week, Cellares cut 100 jobs. A week after that, it cut 68 more. That’s 168 employees gone in under a month.

My verdict: Losing the BMS deal wasn’t the real mistake. Building a company where losing one deal could cost 168 jobs in three weeks was.

Why most people are reading it wrong: The headline reads like a manufacturing failure. The real story is a concentration failure. One customer relationship had grown large enough that its exit didn’t just hurt Cellares, it forced an immediate, public restructuring of the entire company.

Your version: You don’t have a $380 million contract on the line. But you might have the small-business version of the exact same setup: one client whose exit would force you to lay off half your team in the same month. The dollar amount is different. The math is identical.

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How to find out if you’re one client away from a crisis

You don’t need a valuation firm to run this test. You need your last twelve months of invoices and about twenty minutes.

1. Calculate your real number. Add up revenue from your single largest client over the last twelve months and divide by total revenue. Most owners have never actually done this math. They’ve only felt it.

2. Know the zones. Under 10% from one client is healthy. 10% to 20% puts you in caution territory. Above 30% is a red flag serious enough that buyers, lenders, and investors will discount your business for it, and they’re not wrong to.

3. Strip out the fixed costs tied to that client specifically. Staff, equipment, space, software, whatever exists mainly to serve that one relationship. That number is your actual exposure if they leave.

4. Build one new relationship before you need it. The fastest way to bring a 70% number down isn’t firing your big client. It’s adding smaller ones next to it until the percentage shrinks on its own.

5. Put a review of this number on a recurring calendar, not a one-time fire drill. Concentration creeps up quietly, the same way it did for the client I mentioned above. Nobody decides on purpose to become dependent on one account.

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THIS WEEK’S MOVE

Calculate what percentage of your revenue came from your single largest client over the last twelve months. If the number surprises you, that’s exactly the point. It means you’ve been running on a fact you never actually looked at.

Best,

Micah

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THE BROWN BOX

The Brown Box is out now, and Reduce Risks is chapter four of the TURNAROUND method for exactly this reason. Customer concentration is one of the quietest risks a business carries, because it looks like success right up until it doesn’t. That’s the chapter that walks through how to spot it before it spots you.

Grab your copy → https://www.amazon.com/dp/B0H2X4Z85W

Already read it? A two-line review does more for this book than almost anything else you could do for me. Hit reply once it’s up, I read every one.

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