What are the maximum acceptable thresholds for customer concentration?

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May 21, 2018

by a searcher from Georgetown University - The McDonough School of Business in New York, NY, USA

What is acceptable for the top customer? Top 5? Top 10? #Customer #concentration #customerconcentration #top

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Reply by a searcher
from Duke University in Durham, NC, USA
Also be careful of groups that can act as a single customer. For example f the revenue is concentrated around government contracts the risk can be different if the contracts are spread across different budgeting groups (health services, defense, etc.) vs being all under one budgeting department like defense (army, navy, etc.). The main concern is if there was a defense budget cut the latter would be more affected than the former. Granted each situation is different but this is also true of insurance companies and reimbursements as they can play follow the leader.
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Reply by a searcher
from IMD in Lausanne, Switzerland
Here is my response to a similar question in a another thread:

Nominally you do not want customer concentration of course...but the devil is in the details. Has this situation been going on for the past 10 years? or is it because they just got this huge 2 new customers which now make a significant chunk of your business? Can your customers leave overnight or are there [ENFORCEABLE] long-term contract in place? Etc. Look at the broad picture, define key criteria and decide how risky is it.
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