What is Customer Concentration (Whale Client)?
The Short Answer
Customer Concentration (Whale Client) explained simply
Customer concentration means that a big chunk of a business’s money comes from just one or a few customers. Think of it like putting all your eggs in one basket. If that one customer leaves, or significantly reduces their orders, the business could be in serious trouble. It’s a common issue for smaller businesses or those in niche markets.
Real-World Example
The Single-Client Software Company
Imagine a software company that makes $1 million a year. One client, a large corporation, pays them $800,000 of that. This means 80% of the software company’s revenue comes from just one customer. If that corporation decides to switch to another software provider, the software company loses 80% of its income overnight. This makes the business very risky and less attractive to buyers.
Why this matters
Customer concentration matters because it creates a big risk for a business. If a major customer leaves, the business could lose a lot of money quickly. This makes the business less stable and less valuable to potential buyers. Buyers want to see a diverse customer base, so they aren’t dependent on just one or two clients.
Always try to diversify your customer base. It makes your business stronger and more valuable. Don’t rely too heavily on one big client, even if they seem stable.
Always try to diversify your customer base. It makes your business stronger and more valuable. Don’t rely too heavily on one big client, even if they seem stable.
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