How Elite Buyers Handle a 50% Customer
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The deal looks solid. ✔️ Strong SDE Then one line in the CIM rewires your brain: “One customer accounts for 35% of revenue.” Discussions with the seller and your QoE indicate that the issue worsens, with a more accurate estimate of around 50%. You don’t flinch at the numbers. Because this isn’t just a financial question. It’s existential. 🚫 Most Buyers WalkThe common advice? “Too risky. Walk away.” And sometimes, that’s right. But the smartest buyers don’t just walk. They investigate. They understand: Risk isn’t a red light. It’s a fork in the road. 🧪 First, Diligence: What Kind of Risk Are You Holding?Customer concentration can be fatal. There’s a difference between a brittle dependency—and a sticky strategic anchor. Here’s what elite buyers probe:
You’re not just looking at revenue. You’re looking at gravitational pull.
If the customer is baked into operations and culture, you may have a moat—not a minefield. But if it’s flaky, founder-held, and uncontracted? Time to get surgical. 🧠 Where Most Buyers Blow It: Seller PsychologyHere’s the real trap: The seller doesn’t see the risk. Why? Because that whale account is:
So when you raise concerns, they don’t hear: “Let’s manage this together.” They hear: “Your biggest achievement is actually your biggest failure.” Cue defensiveness. 🧠 What Elite Buyers Do Instead✅ Future Framing“If that customer left six months after close, what would you want to happen if you were in my shoes?” This triggers role reversal, not resistance. ✅ Mutual Protection Framing“This isn’t just about me—it’s about protecting your legacy.” Lowers ego threat. Positions you as an ally. ✅ Third-Party Perspective“Any lender or buyer will flag this. I’d rather solve it with you now.” Externalizes the risk. Defuses blame. ✅ Preemptive Praise“You’ve retained that client for 15 years. That’s no accident—I want to make sure we keep them.” Respect increases flexibility. ✅ Soft Loss Aversion“I really want to close this. But if we can’t solve for this risk, I may have to pass—even though I’d hate to.” No threats. Just truth. ✅ Invite Co-Creation“What would feel like a fair way to handle this?” Psychological ownership drives buy-in. ✅ Make the Risk VisualPie chart. Revenue waterfall. Lender memo. Abstract risk doesn’t move sellers. Visual risk does. 🧩 Structure Is How Pros Derisk Without Killing the DealOnce you’ve got emotional alignment, bring the structure. 1. Price ReductionClassic. Quantify the revenue risk and adjust. 2. Transition Services AgreementKeep the seller involved during customer transition. 3. Retained EquityLet them keep 10-15%. 4. Forgivable Seller Note (Tied to Retention)If the customer leaves or if overall revenue drops, the note disappears or is reduced.
Pro tip: Re-amortize or pause payments if forgiveness hits—protects DSCR. 5. Performance-Based EscrowHold back part of the purchase price. ⚠️ SBA Rule: Escrow is capped at your equity injection. 🧾 Final AnalysisCustomer concentration is a red flag. But it’s not always a red line. 🧠 Psychology gets the seller to engage. 📊 Diligence tells you if it’s survivable. 🧩 Structure gets the deal to close. Anyone can walk. Elite buyers derisk—and close anyway. Until next time... Stay sharp! Eric Buyers Black Book
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