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.

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Publication Details

Journal
Business Valuation Review
Published
2025-01-01
DOI
https://doi.org/10.5791/2163-8330-44.1.2
Primary Topic
Customer churn and segmentation
Type
article
Field-Weighted Citation Impact
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article

Customer Concentration: Good, Bad, or Ugly?

Rob Schlegel, Will Frazier, Michael Hill
1 links
Business Valuation Review
Customer churn and segmentation
article

Customer Concentration: Good, Bad, or Ugly?

Rob Schlegel, Will Frazier, Michael Hill
article en

Abstract

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.

Business Valuation ReviewVol. 44(1)
Valve (United States) (US), Association for Symbolic Logic (US)
Openalex Percentile: Top 87%
Customer churn and segmentation
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