Client Concentration Risk Calculator

In professional services and commercial banking, a single client generating over 20% to 25% of annual revenue represents elevated risk. Any single account exceeding 30% to 35% is classified as critical concentration risk, as losing that single relationship can instantly trigger operating insolvency.

The HHI is a standardized metric measuring revenue distribution across accounts, calculated by summing the squares of each client's revenue percentage. Scores below 1,500 indicate healthy diversification, 1,500 to 2,500 reflect moderate concentration, and scores above 2,500 indicate severe dependency.

High customer concentration severely depresses company valuation multiples in M&A due diligence. An agency whose Top 3 accounts generate 70%+ of earnings presents immense revenue volatility compared to a broadly diversified peer.

The stress test models the instantaneous loss of your primary account, deducting variable costs while holding fixed overhead (salaries, leases, software) constant. If operating profit turns negative, it indicates high structural vulnerability.

1. Implementing continuous outbound sales pipelines regardless of current capacity. 2. Capping single-client onboarding at 20% of agency capacity. 3. Packaging bespoke services into productized offerings. 4. Maintaining 6–12 months of fixed overhead in liquid cash reserves.

No; large enterprise accounts provide economies of scale, stable retainers, and strong case studies. The danger arises only when fixed overhead is expanded exclusively to service that single client without building diversified pipeline momentum.