How Elite Buyers Handle a 50% Customer

The deal looks solid.

✔️ Strong SDE
✔️ Clean books
✔️ Great reputation

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.
You flinch at the psychology.

Because this isn’t just a financial question.

It’s existential.

🚫 Most Buyers Walk

The common advice?

“Too risky. Walk away.”

And sometimes, that’s right.

But the smartest buyers don’t just walk.

They investigate.
They disarm.
They engineer.

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.
But it’s not binary.

There’s a difference between a brittle dependency—and a sticky strategic anchor.

Here’s what elite buyers probe:

Are contracts in place? Multi-year terms, auto-renewals, penalties?
Customer tenure? Longer = stronger.
Seller-dependent relationship? Or embedded in the team/process?
Revenue model? Recurring or one-off?
Switching costs? How painful is it to leave?
Barriers to entry? How likely is that competition threatens this contract?
Competition? Are there other options? Or is the seller pretty well the only option?
Who is the customer? Are they financially stable? Is the service provided by seller likely to continue to be needed?

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 Psychology

Here’s the real trap:

The seller doesn’t see the risk.

Why?

Because that whale account is:

Their crown jewel
Their ego validation
The story they tell themselves about success

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.
Deal tension.
Stalled trust.

🧠 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 Visual

Pie chart. Revenue waterfall. Lender memo.

Abstract risk doesn’t move sellers.
Visual risk does.

🧩 Structure Is How Pros Derisk Without Killing the Deal

Once you’ve got emotional alignment, bring the structure.

1. Price Reduction

Classic. Quantify the revenue risk and adjust.
Use comps, lenders, or DSCR math to back it.

2. Transition Services Agreement

Keep the seller involved during customer transition.
Spell out meetings, calls, handoffs. clear deliverables.

3. Retained Equity

Let them keep 10-15%.
Now they’ve got skin in the outcome—not just the exit. Note that if this is an SBA 7(a) deal seller would have to personally guarantee your loan for 2 years. So this is probably a tactic reserved for non SBA deals.

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 Escrow

Hold back part of the purchase price.
Release only if the customer sticks through 12-24 months. The greatest risk is 0-12 months post closing.

⚠️ SBA Rule: Escrow is capped at your equity injection.

🧾 Final Analysis

Customer 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

DISCLAIMER:

I am a lawyer but not your lawyer (unless we so happen to be working a deal together pursuant to a written engagement agreement). This newsletter is for educational and informational purposes only and nothing in this or any other issues is intended as legal or financial advice and cannot be relied on as such. Do your own diligence and consult with your own lawyer or financial advisor before taking any action on your deals. Nothing in this newsletter is intended to solicit your business in any way and should not be interpreted in any way as legal advertising.

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