Murray Kent paid £30,000 for a four-person electrical conduit fittings business operating out of what he generously described as a crack den. A decade later, a private equity-backed acquirer wrote him a check for 6.2 times EBITDA. All cash. No earnout. No equity rollover.
A lot of things had to go right for that offer to land the way it did. The one Murray spent the most time on was customer concentration.
Why Buyers Punish Concentration Twice
When he bought the business, one customer represented roughly 40% of revenue. Murray knew what that number would do to a buyer one day. Acquirers underwrite durability. A company with a single customer at 40% is not really one company. It is a bet on one relationship, and buyers price it that way. They have watched too many deals unravel when an anchor customer renegotiates, gets acquired, or quietly drifts to a competitor a year after close.
The penalty almost always shows up in two places at once. The headline multiple comes down. And the structure of the deal shifts hard against the seller. Less money at close. More tied to an earnout that depends on that anchor customer continuing to behave the way it always has, with the founder no longer in the seat to make sure it does. Owners who walk in expecting one number and one structure walk out with a smaller number and most of it parked behind two or three years of post-close performance they only partly control.
Most owners hear all of that, nod, and go back to running the business they have. The number stays where it is. Part of the reason is that the obvious fix is the wrong one. Firing the anchor customer would collapse the financials a future buyer is also reading. Concentration cannot be solved by subtracting from the numerator. It has to be solved by adding to the denominator.
Building Around the Anchor
That is the work Murray did. He expanded into new states. He invested in marketing aimed at buyers who had no relationship with the anchor account. He hired salespeople whose targets had nothing to do with the legacy book. The largest customer kept buying. Everything around it grew faster.
Over several years, the concentration number dropped from 40% to roughly 20%. Revenue went up the entire time. Murray never had to choose between fixing the ratio and protecting the financials, because he was not taking anything away. He was building around what he already had.
By the time the acquirer showed up, the business looked completely different on the inside. Hundreds of customers won on their own merits. A management team running the floor without him. Margins a buyer could underwrite. The largest account was still the largest account, but it was no longer the story.
That is what made the 6.2 multiple possible, paid in full at close. A buyer paying that kind of price with that kind of structure needs to believe the cash flows are durable without the founder in the seat. One customer at 40% makes that belief almost impossible, and the offer reflects it. Lower price. Money held back. The same business with that customer at 20%, surrounded by a deep base of others, tells a completely different story.
Concentration is one of the few problems where the fix takes years and the payoff arrives in a single afternoon. Murray started the work the day he bought the company. The acquirer wrote the check a decade later.
If your largest customer is north of 20% of revenue today, the clock you want to be on is the same one Murray was on. Not the one that starts when an acquirer comes calling.
The clock on your ultimate exit doesn’t start when an acquirer comes calling, it is already ticking. Customer concentration is just one of the critical metrics buyers scrutinise to decide whether to write a clean, all-cash check or bury your payout behind a multi-year earnout. If you want to know exactly how the market would underwrite your company today, you need to objectively measure your own drivers of value. Take just 13 minutes to complete your assessment here and see your business through the eyes of a premium acquirer, long before they do the maths for you.