Customer Concentration Risk Calculator

It is not advised to have a single major source of revenue generation. The level of revenue risk your portfolio has due to depending on a small group of customers is known as customer concentration risk. The risk to your revenue increases with the size of the client.

Customer concentration has an upside, like the opportunity to develop long-term relationships
and improve customer service & customer needs. Keeping a customer concentration risk calculator handy helps in minimizing financial losses.

For instance, you have a high customer concentration if you have one customer who generates 20% or more of your revenue. Like anything else, if there is an advantage, there are also certain disadvantages to having a concentrated consumer base.

Disengagement from the concentrated client base might disastrously affect revenue, earnings, and cash flow. It also has an impact on pricing and negotiating power, both of which ultimately lead to lower revenue. It makes it difficult to diversify over time and unfairly takes resources away from smaller clients. All of this, in turn, may lower your company’s value.

If you’re concerned that a small number of sizable clients account for the majority of your revenue, it’s important to ask yourself the big question: what would happen if you lost your biggest client or if your sector had an economic downturn? A customer concentration risk calculator helps in knowing your existing vulnerabilities and can assist you in managing and reducing any potential future revenue concerns.