What is Customer Concentration?
Nexa Consultancy | Startup & Finance Glossary
Customer Concentration measures the percentage of a company's total revenue that comes from its single largest customer or a small group of large customers. It is a key risk metric that investors scrutinize during due diligence.
For Startups: While landing a large enterprise customer can feel like a huge win, high customer concentration creates significant risk. If that one large customer decides to leave, it could cripple the startup's revenue overnight.
For B2B/Enterprise SaaS: A general rule of thumb is that no single customer should account for more than 10-20% of total revenue. A high concentration is a red flag for investors, as it indicates a fragile and non-diversified revenue base.
Calculation: Customer Concentration % = (Revenue from a Single Customer / Total Revenue) * 100
Example: A startup has a total annual revenue of ₹5 Crore. Its largest customer accounts for ₹2 Crore of that revenue. The customer concentration is 40%, which is considered very high and risky.