Customer Concentration: Good, Bad, or Ugly?

Classic theory in business valuation presumes that customer concentration (CC) increases risk and therefore lowers value. New research suggests that CC, depending on the circumstances, can have positive effects, all other things being equal, that support increased continuing cash flows and symbiotic relationships, thereby improving the overall value of a business. Nonetheless, CC always has the risk of an abrupt ending, increasing risk to an owner. This article follows the presentation made at the 2023 International Conference of the American Society of Appraisers. Customer situations are specific to the subject company and sometimes industry focus.