What If Your Biggest Client Left? How to Measure the Risk
Take what your largest client paid you this year and divide it by your total income. That one figure tells you how much of your business belongs to somebody else's decision.
In the example below the answer is 38%. And because the business has costs that do not shrink when a client leaves, losing her would take 47% of the profit. One email could nearly halve what the owner takes home.
A big client feels like safety. Often it is the largest risk in the business. Here is how to measure it, what the number means, and how to spread the weight without turning good work away.
Sorted by client, the largest line is hard to miss. Example data.
The short version
Client concentration = your largest client's payments ÷ total income × 100.
The hit to profit is bigger than the hit to income, because costs stay.
Above about a third from one client, plan for the day she leaves.
The fix is not to drop her. It is to grow the rest and keep a larger cushion.
The sum
Client | Paid this year | Share of income |
|---|---|---|
Client A | $36,480 | 38% |
Client B | $19,200 | 20% |
Client C | $14,400 | 15% |
Everyone else | $25,920 | 27% |
Total | $96,000 | 100% |
Three clients provide nearly three quarters of her income, and one of them provides more than a third. If you have never done this sum, the result is usually a surprise.
Why profit falls further than income
Today | If Client A left | |
|---|---|---|
Income | $96,000 | $59,520 |
Cost of running the business | $18,000 | $18,000 |
Profit | $78,000 | $41,520 |
Change in profit | down 47% |
Income falls by 38% and profit falls by 47%. Her rent, software and insurance are the same with or without Client A, so the whole of the lost income comes out of what she keeps.
This is the mirror image of what a price rise does, and for the same reason. Fixed costs make good news better and bad news worse.
What the number means
Largest client's share | What it suggests |
|---|---|
Under 15% | Well spread. One departure is an inconvenience. |
15% to 30% | Worth watching. Keep the cushion healthy. |
30% to 50% | A real dependence. Plan now for a departure. |
Over 50% | Closer to a job than a business, without a job's protections. |
These bands are our own way of thinking about it and not a rule. Someone with one long contract and deep savings may be comfortable at 50%. The point is to know your figure and decide on purpose.
How long would it take to replace her?
That is the practical question. If it would take four months to replace Client A's work, you need four months of the gap in hand.
Line | Amount |
|---|---|
Profit lost each month without Client A | $3,040 |
Months to replace the work, estimated | 4 |
Cushion that covers it | $12,160 |
A cushion sized for an ordinary slow month would not come close. Concentration is a reason to hold more than the usual amount.
A departure shows up as a step down, not a dip. Example data.
Five ways to spread the weight
Grow the others before you need to. Give Clients B and C a reason to do a little more with you.
Keep finding new clients while you are busy. The time to look is when you do not have to.
Get it in writing. A notice period in the agreement turns a sudden loss into a planned one.
Hold a larger cushion. Sized to the gap and the time to replace it, as in the table above.
Do not let her set your prices. A client who knows she is a third of your income may negotiate as though she owns it.
Notice that none of these is "take on less work from your best client". Good work from a good client is a gift. The aim is to make sure she is one of several legs under the table.
The quiet version of the same risk
Concentration is not only about clients. The same sum works for anything a business leans on.
One source of new clients, such as a single referrer or one platform.
One service that brings in most of the income.
One season that carries the year.
One person, which in a business of one is always you.
Run the percentage for each. Where one line is above a third, you have found the thing to protect.
A spread of clients is also one of the things that gives a business value to somebody else, as we set out in what makes a small business sellable.
See it in your own numbers, free
La Soglia, the free membership of the Money Mastery System, holds everything you own and everything you owe in one place, personal and business together, with no bank connection and no card. Income sorted by client, which is where this sum begins, is part of the paid membership.
Bring it to the Collective
What share of your income comes from your largest client? The Money Mastery Collective has a discussion feed open on the free membership. Work it out, and you will not be the only one above a third.
Questions we hear
What is client concentration?
The share of your income that comes from your largest client. Divide what she paid you by your total income and multiply by 100.
How much income from one client is too much?
There is no fixed rule. Above about a third, a single departure would change your year, so it is worth planning for.
Why does losing a client hurt profit more than income?
Because your running costs stay the same. All of the lost income comes out of what you keep.
How do I reduce dependence on one client?
Grow your other clients, keep finding new ones, put a notice period in writing, and hold a cushion sized to the gap.
References
There are no outside figures in this post. Every number is our own worked example.
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A note on what this is
This article is educational. The Money Mastery System is an educational tool, not financial software, and nothing here is legal, tax, investment or financial advice. The figures and the bands are illustrations, and what level of dependence is acceptable is your own judgment. For guidance on your own circumstances, please speak with a qualified professional who knows them.
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