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Answers to Frequently Asked Questions
The percentage of your total income that is produced by either your highest-paying customer or a group of your top-paying clients is known as customer concentration or customer revenue concentration. The possibility of losing highly profitable consumers raises the risk of this number being too high.
A high customer concentration may impact the creditworthiness of your company. You can have a harder time getting loans with low-interest rates if your company depends too much on a small group of clients.
Increase sales to new clients or enter new markets to reduce the concentration percentage. Think about an acquisition. Ensure that your company’s client interactions are not dependent on a single individual. Have several contacts who can speak out for you if necessary.
The relationship changes dramatically to the downside when customer base concentration exceeds the second threshold, indicating that highly concentrated customer bases encourage providers to exercise greater caution and refrain from taking unwarranted risks.