Landing a great client who keeps expanding their work with you is the dream. Then you look at your P&L one day and realize they’re 60% of your revenue.
If you’re a founder of a professional services firm, you know this feeling. That mix of gratitude (they trust us, the work is good, the relationship is strong) and anxiety (what if they don’t renew? what if their budget gets cut? what if their new CFO wants to consolidate vendors?).
The work keeps coming. The revenue is reliable. But somewhere in the back of your mind, you know you’ve built a structural vulnerability into your business, what financial experts call client concentration risk.
The Dream Client That Became a Risk
Here’s how it typically happens:
You land a solid client. They love your work. They expand into another department. Then another project. Then they ask if you can bring on two more people to handle the additional scope. Before you realize it, they’re not just a major client; they’ve become the foundation of your business.
Nothing feels wrong initially. In fact, it feels like success. You’re delivering exceptional work. They’re expanding. The relationship is strong. Revenue is predictable.
Then something shifts. Maybe it’s their fiscal year planning and they mention “belt tightening.” Or leadership changes, and the new executive wants to “review all vendor relationships.” Or their industry hits headwinds and projects get delayed.
Suddenly, that reliable 60% doesn’t feel so reliable anymore. And you realize you’ve given one client veto power over your business.
The Real Risk Calculation Nobody Talks About
Most founders focus on the obvious risk: “What if we lose them?”
That’s important. But it’s not the only risk. There are several layers of vulnerability that come with revenue concentration:
- Negotiating leverage: When you’re 60% dependent on one client, they know it. Even if they never explicitly use it as leverage, the power dynamic affects every conversation. Renewal discussions. Rate increases. Scope expansions. Project prioritization. You can’t negotiate from a position of strength because you both understand the dependency.
- Opportunity cost: You’re passing up other opportunities because you’re at capacity serving your anchor account. New prospects that could become significant clients get deprioritized. Strategic initiatives that could diversify your revenue get postponed. You’re optimizing for today’s reality, not tomorrow’s stability.
- Strategic decision-making: Do you hire for this client specifically or for the broader business? Do you invest in capabilities this client needs or capabilities that would attract new clients? Do you expand geographically to serve them or to diversify your market? When one client drives most decisions, you’re building their business model, not yours.
- Operational rigidity: Your team’s skills, your delivery processes, your capacity planning—everything gets optimized around serving your largest client. This makes it harder to serve different types of clients with different needs. You’ve accidentally become specialists in serving one company.
- Exit value impact: If you ever consider selling your business or raising capital, potential buyers or investors will immediately identify client concentration as a risk factor. It directly impacts valuation. A business that’s 60% dependent on one client is worth significantly less than one with balanced revenue distribution. According to business valuation experts, high customer concentration typically results in lower multiples and reduced company value.
What Percentages Are Actually Dangerous?
There’s no magic number that universally defines “too concentrated.” But here’s a framework for thinking about portfolio health based on what we see working with professional services firms. According to Forbes, the general rule of thumb is that no single customer should constitute more than 10% of your revenue:
- Under 20% from any single client: Generally healthy. You have negotiating power, operational flexibility, and acceptable risk.
- 20-35% from your largest client: Manageable, but requires attention. You should actively work on diversification while maintaining this relationship. This is a yellow light, not yet red.
- 35-50% from your largest client: Significant risk territory. You need an active diversification strategy with measurable targets and timelines. This level of concentration should make you uncomfortable enough to take action.
- Over 50% from your largest client: Critical risk. This isn’t just a business development problem; it’s a strategic problem that affects every aspect of how you operate. Diversification should be your top strategic priority.
But percentages aren’t the only factor. You also need to consider:
- Client size relative to your capacity: A client who represents 40% of revenue but 60% of your delivery capacity has more influence than the revenue percentage suggests. They’re driving your hiring decisions, your expertise development, and your operational focus.
- Contract structure and stability: A client at 40% on a multi-year contract with steady scope is different from one at 40% on quarterly renewals or project-based work. Consider both the percentage and the reliability.
- Industry and market factors: If your largest client is in a volatile industry or heavily affected by economic cycles, concentration risk is amplified. A client in a stable, growing market poses less risk at the same percentage.
- Growth trajectory: A client that was 20% last year and is 60% this year represents a different risk than one who’s been steady at 40% for three years. Rapid growth in dependency is its own warning sign.
The Diversification Timeline: What’s Realistic?
Here’s what most founders get wrong about diversification: they think it’s a six-month project. It’s not. It’s a multi-year strategic initiative that requires sustained focus.
- First 6 months: Foundation building. You’re not going to significantly change your revenue mix in six months. What you can do is build the systems and positioning that make diversification possible. This means getting clear on your ideal client profile beyond your anchor account, documenting your sales process, building your pipeline infrastructure, and creating the capacity to serve new clients well.
- Months 6-18: New client acquisition. You’re actively closing new business, but these clients are small relative to your anchor account. You might move from 60% concentration to 50% as new clients ramp up. Progress feels slow because you’re building new relationships from scratch while maintaining delivery excellence for your largest client.
- Months 18-36: Portfolio rebalancing. New clients mature, expand, and start representing meaningful revenue. Your anchor client might still be your largest, but they’re no longer 50%+ of revenue. You’ve built multiple relationships that collectively represent comparable scale. This is when concentration risk meaningfully decreases.
- Beyond 36 months: Sustainable diversification. You have a portfolio of clients where no single one represents more than 25-30% of revenue. You’ve built systems that can attract and serve clients consistently. Diversification becomes part of how you operate, not a special initiative.
This timeline assumes you’re actively working on diversification while running the business. It’s not three years of calendar time, it’s three years of consistent effort, strategic investment, and disciplined execution.
The firms that successfully diversify accept this timeline from the start. They don’t expect quick fixes. They build the foundation, commit to consistent execution, and measure progress in quarters, not weeks.
Practical Tactics for Growing New Clients Without Neglecting Your Anchor
The fundamental tension: your largest client requires significant attention to maintain, but diversification requires investing time and resources in new relationships.
How do you do both?
Systematize Your Anchor Account Delivery
Your largest client relationship probably runs on founder attention and institutional knowledge. Document what makes the relationship work. Create clear processes. Develop your team’s capability to manage the account without your daily involvement. This isn’t about reducing quality. It’s about making excellence repeatable and less dependent on you personally. Building strong client engagement models allows you to maintain service quality while freeing up founder bandwidth.
Ring-Fence Business Development Time
Block non-negotiable time for new business development each week. Treat it like a client commitment. Two half-days per week, minimum. This time doesn’t get reallocated when your largest client has an urgent need. You need a capacity leader who can handle the urgent while you focus on the strategic.
Hire for the Future, Not Just Current Capacity
Hire for the future, not just current capacity: When you hire, consider what capabilities you need to serve new client types, not just to serve your current largest client better. This means building a more versatile team even if it feels less efficient in the short term. Before hiring for business development, ensure you have the foundation in place to support that person’s success.
Use Your Anchor Client as Proof, Not a Template
Your largest client relationship proves you deliver results. Use that credibility to attract new clients. But resist the temptation to only target prospects who look exactly like your anchor client. That’s not diversification; it’s concentration risk with slightly different names.
Create Account-Specific Capacity Alerts
Know when your anchor client is consuming too much team capacity. Set thresholds. If they exceed 50% of delivery hours for two consecutive months, you need to either hire specifically for them or start declining scope. Otherwise, you’re crowding out the capacity you need to serve new clients well.
Build Pipeline Before You Need It
Don’t wait until your anchor client’s renewal is uncertain to start building relationships with new prospects. Maintain active business development even when your largest client is stable. The pipeline you build in good times protects you when things change.
Price for Sustainability, Not Just the Deal
When your anchor client represents 60% of revenue, there’s immense pressure to say yes to their requests at any price. Resist this. Charge what the work is worth. Create the margin you need to invest in growth. If they push back on rates, it’s a signal you need diversification even more urgently.
The Strategic Discipline That Makes Diversification Work
Here’s the uncomfortable truth: diversification requires making choices that feel wrong in the moment.
It means saying no to scope expansion from your largest client because you need delivery capacity for new business. It means investing in marketing when you’re already busy with current work. It means hiring ahead of proven need because you want capability flexibility. It means accepting lower utilization rates temporarily while you build new relationships.
These decisions don’t feel natural when you’re running the business day-to-day. The urgent always feels more important than the strategic. Your largest client has legitimate needs right now. The potential new clients are theoretical. The revenue you might lose by saying no feels more real than the revenue you might gain by diversifying.
This is why diversification fails. Not because founders don’t understand the risk. They do. But it is genuinely hard to maintain strategic discipline while operating the business. Scaling beyond founder-led sales requires systems and structure, not just good intentions.
The firms that successfully diversify do several things differently:
- They separate strategic time from operational time: The founder isn’t trying to work on diversification while also managing delivery, handling client escalations, and fighting fires. They protect strategic time with the same discipline they protect client deliverables. Many firms hit a revenue wall because they can’t make this shift from purely operational to strategic work.
- They measure leading indicators, not just revenue: They track pipeline value, new opportunities created, first conversations held, proposals sent—metrics that show progress before revenue changes. This prevents getting discouraged when the P&L doesn’t immediately reflect your efforts.
- They accept transition costs: Diversification costs money before it makes money. Marketing investment, business development time, new hire learning curves, lower utilization while building capacity—these are costs you incur to create future stability. Budget for them.
- They involve the team: Your team knows about the concentration risk. They feel it too. Be transparent about diversification as a strategic priority. Give them visibility into new business development efforts. Create accountability structures that treat diversification as seriously as client delivery.
- They use outside perspective: When you’re the founder who built the relationship with your largest client, it’s hard to see your own patterns. What looks like loyalty and commitment might actually be dependency. An outside perspective can identify blind spots and push harder on uncomfortable changes than you’d push yourself.
What Happens If You Don’t Diversify
Some founders choose not to diversify. They decide the risk is acceptable, or they don’t have the capacity to work on it, or they believe their relationship is too strong to worry about.
That’s a choice. But be clear about what you’re choosing.
You’re choosing to give one client significant influence over your business decisions. You’re choosing to accept lower valuation if you ever want to exit. You’re choosing to operate with limited negotiating leverage. You’re choosing to build your business around serving one company’s needs rather than creating a more robust, independent firm. Customer concentration is one of the most significant risks that can threaten business stability and growth.
For some founders, this is fine. The work is good, the relationship is strong, the revenue is sufficient. They’re comfortable with the tradeoff.
But most founders who live with high concentration risk don’t realize how much it constrains them until something changes. A new procurement process that forces rebidding. A merger that consolidates vendors. A budget cut that reduces scope. A strategic shift that makes your services less critical.
The risk isn’t theoretical. The firms we work with that have successfully navigated transitions from 60%+ concentration to balanced portfolios consistently report the same thing: they didn’t realize how much strategic flexibility they’d lost until they got it back.
Moving Forward
You can’t diversify overnight. But you can start building the foundation today.
If your largest client represents more than 35% of revenue, ask yourself:
- Do I have a clear picture of what diversification success looks like in 12, 24, and 36 months?
- Have I protected consistent time for business development, or does it only happen when I’m not busy?
- Am I hiring for the portfolio I want or just the capacity I need today?
- Would a new client get the same attention and delivery excellence as my largest client, or would they be treated as secondary? Creating intentional customer engagement models is essential for maintaining quality across your client portfolio.
- If my largest client cut their engagement by 50% tomorrow, how long would it take to replace that revenue?
If you hesitated on any of those questions, you likely know you need to act on diversification.
Some founders do this themselves. They carve out the strategic time, build the systems, make the hard choices about capacity allocation, and steadily reduce concentration risk over several years.
Others recognize that maintaining this strategic discipline while running the business requires outside help. The patterns are hard to see from inside. The uncomfortable decisions are easier to make with someone pushing you to actually make them. Our Define phase helps founders establish the strategic clarity needed before diversification can succeed.
Either way, the insight is the same: having a great anchor client isn’t the problem. Becoming dependent on them is. The difference between a strong relationship and a structural vulnerability is whether you’ve built a business that could survive without them.
The question isn’t whether your largest client is great. It’s whether you’ve given them veto power over your future.
