One customer was forty percent of revenue, and the first buyer used it to justify a low multiple and a heavy holdback. Reframing the risk and creating competition closed it at $30M to $35M.
Request a Confidential ValuationForty percent of revenue ran through a single customer, a relationship the founder had personally held for nine years. The first buyer treated that as the whole story: a discounted multiple, a large indemnity holdback tied to the account, and language that let it claw back value if the contract churned. The concentration was real, but it was being priced as a liability rather than understood.
Before going to market we built the case the founder had never had to make, a nine-year renewal history, expanding seat count, deep workflow integration, and switching costs measured in quarters rather than weeks. We documented the rest of the base, which was growing faster than the headline account, and put the relationship's economics in front of buyers rather than letting them imagine the downside. Then we ran a competitive process so no single buyer's view of the risk went unchallenged.
Buyers who understood the stickiness bid against buyers who feared the churn, and the fear lost. The company closed at $30M to $35M with a normal-course holdback rather than a concentration-specific clawback. Concentration is a discount only when it is left unexplained.
Customer concentration is a discount only when it is left unexplained. Documented, defended, and put in competition, a sticky anchor account can be the most valuable thing in the business.
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