In this article · 7 parts
A large customer is a concentration of risk as well as a source of income. The question is not simply what percentage of sales they represent. It is what would happen to cash, ongoing costs and your available time if they paid late, reduced the work or left.
For someone building alongside other work or commitments, one dependable buyer can make a small business workable. You do not automatically need to replace that arrangement. You do need to understand what it supports before you reduce hours elsewhere, buy equipment or make other commitments around it.
Start with the consequences of losing the customer. Then decide how much dependence you can carry.
1Sales share is a warning light, not the whole assessment
Customer concentration usually starts with a simple calculation: revenue from a customer divided by total revenue for the same period. Use a representative period and consistent records. A single busy month can distort a seasonal service, while a full-year average can hide a recent change.
The figure tells you where recorded sales come from. It does not tell you when the money arrived, how much work was required or what costs would disappear with the customer.
The Business Development Bank of Canada's discussion of diversification identifies dependence on a major client as a business vulnerability. That general principle does not supply a universal safe percentage. A small new business and an established employer with payroll have different exposures.
Instead of adopting an arbitrary limit, examine revenue, contribution, unpaid balances and control over your time separately.
2Illustrative example: the biggest customer carries more than half the contribution
Made up, to show the idea
A reader runs a small maintenance service. In one representative month, a property manager accounts for €1,200 of revenue. Other customers account for €800. Total revenue is €2,000, so the manager represents 60% of sales.
Assume directly attributable variable costs are €240 for the manager's work and €320 for the other work. Contribution means revenue less these variable costs: €960 from the manager and €480 from other customers, or €1,440 in total. The manager therefore provides about 66.7% of contribution.
For this illustration, fixed business costs are €300 per month and would remain if the manager left. The business currently has €1,140 left after the listed variable and fixed costs. Without the manager, that falls to €180: €480 of remaining contribution less €300 of fixed costs.
Those amounts are not take-home pay. The example has not charged for the owner's labour, tax or any omitted cost. It also assumes the other customers remain and the fixed costs genuinely cannot be reduced immediately.
Now suppose the other customers buy 25% less during a quiet month, with their variable costs falling in the same proportion. Their revenue becomes €600 and variable costs €240. Contribution is €360, leaving €60 after fixed costs. That weaker month makes the effect of losing the manager more serious.
The calculation does not forecast that the manager will leave. It shows why “we would still have some customers” is not enough information for a decision about employment income.
3Payment dependence is a separate problem
Revenue and cash received are different records. If the large customer's invoice is unpaid, the business may have already bought materials and completed the work without receiving the cash expected to cover them.
Record outstanding balances by customer, when they are due and what additional costs you would incur before collecting them. Keep disputed amounts visible rather than treating every invoice as equally likely to arrive on time.
Ask what happens if the buyer pays later than expected. Which bills still fall due? Would you use wages intended for household spending? Would accepting the next job increase the unpaid balance?
This exercise may lead to different booking or payment arrangements for future work. Any change must fit the contract and applicable rules. The immediate practical point is to avoid treating continued orders as a cure for unpaid existing orders.
4Dependence can hide in the timetable
A customer who provides predictable, well-scoped work may be easier to accommodate than several small buyers with scattered appointments. Diversification has costs: quoting, travel, scheduling and administration all take time.
However, one buyer can also occupy the only hours in which you could serve anyone else. Last-minute requests, extensive revisions or pressure to reserve availability may make the relationship more restrictive than its sales percentage suggests.
Record the whole time requirement. Include unpaid coordination and the slots you keep free but cannot confidently sell. Then ask whether you can decline extra work without undermining the existing arrangement.
Do not infer legal employment status from customer count alone. If the relationship raises questions about control, independence or worker status, get jurisdiction-specific advice on the actual working arrangement. This article assesses commercial dependence; it does not classify the relationship legally.
5Run three different scenarios
Use the records you have to describe three possibilities:
- The customer stays but pays later than expected.
- The customer reduces the volume while expecting the same availability.
- The customer leaves and the costs you have committed to remain.
For each, identify the first practical problem, how long current resources could cover it and which action is available before household essentials are affected. Be explicit about uncertain assumptions. A prospective replacement is not confirmed income.
If you cannot estimate a replacement lead time, write “unknown”. You can investigate it by trying a small acquisition activity while the current relationship is healthy. Do not fill the gap with the amount of time you hope it would take.
The result might be that dependence is acceptable at your present scale while you retain wages, but unsuitable as the basis for reducing those wages. That is a useful distinction.
6Reduce fragility at a pace you can deliver
You might set clearer scope, improve records, negotiate payment arrangements for future work or avoid buying equipment that only this customer needs. These actions address different parts of the exposure.
You could also protect a small amount of capacity to investigate another source of business. Define it realistically. If you can only serve one additional customer, there is little value in launching a campaign that generates enquiries you cannot handle.
Consider whether apparent diversification is real. Several accounts controlled by the same purchasing organisation may still depend on one decision. Customers from one narrow sector may reduce spending at the same time. You cannot eliminate every shared risk, but you can avoid counting separate invoices as proof of independence.
Do not damage a good relationship merely to improve a ratio. The aim is a business that can withstand a plausible change, not a customer list with a particular shape.
7Before you make a larger commitment
Write a short conclusion: “If this customer changed the arrangement, I would lose this contribution, still owe these costs, and have these options.” Identify the evidence behind each part.
If the conclusion depends on immediate replacement sales, an unconfirmed payment or money reserved for household needs, delay the larger commitment and investigate that weak point.
For the smallest useful next step, list your largest customer's recorded revenue and unpaid balance separately. Then note the next expense you would incur to keep serving them. Those three facts often reveal more than a reassuring total sales figure.
General information to help you think things through. Not regulated financial, legal or tax advice.