How to Reduce Client Concentration Risks Before Selling Your IT Business?
Introduction: Understand Your Client Concentration Risk If a large share of your IT services company's revenue comes from one or two clients, potential buyers may question how stable that income will be after an acquisition. Customer concentration is a recognised consideration in technology M&A due diligence, where buyers assess revenue stability, contract terms, and customer retention. 1. Measure Revenue Dependence on Major Clients Start by calculating the percentage of annual revenue generated by each client. Review both your largest customer and your top five customers over the past three years. This helps you identify whether your business depends heavily on a small number of accounts. 2. Build a More Diversified Client Base Reducing concentration takes time, so strengthen your sales pipeline before bringing your company to market. Target new industries, develop referral partnerships, and offer relevant services to existing customers. A broader client base can ...