Move guide
Spread the customer risk and prove customers stay
Your report suggested a move on at least one of these two questions:
- whether concentration kills the deal;
- whether customers are demonstrably happy, and come back.
This move guide puts the largest accounts on contract and moves the relationships off one person. Then it gets independent proof that customers rate you and stay, and a reason for every one that left.
1. When it applies
Use this move guide if your report placed either question at "Red flag" or "Doubtful".
| Question | Where it may sit today | Where this move guide aims |
|---|---|---|
| Does concentration kill the deal? | Red flag: "One customer is the business, on a handshake." Doubtful: "Concentration is known; the terms are short or informal." |
Supported: "Concentration reducing by plan; relationships institutional, not personal." |
| Are our customers demonstrably happy, and do they come back? | Red flag: "Recent, reliable feedback from our largest customers would favour a competitor, and customers are leaving: lost listings, lapsed renewals, falling repeat purchase." Doubtful: "We have no recent, reliable feedback and don't measure retention; we believe customers love us because the sales team says so." |
Supported: "Recent, independent feedback covering our largest customers rates us ahead on their key purchase criteria, and retention, renewal or repeat-purchase rates are measured and healthy vs peers." |
If both already sit at "Supported" or higher, skip this move guide.
A "Red flag" on concentration caps the report's verdict at "Slow down". Like taking the business off the owner, it takes months to fix, so start early.
2. What to do
Six steps. Contracts and a falling share take six to twelve months. The feedback takes six to eight weeks.
- List every customer above 5% of revenue, with its contract, expiry, notice period and the price basis at renewal. Table A below records it.
- Put the top accounts on contract. Give each a second and third relationship below the account owner.
- Set a plan that shows the largest customer's share falling, year by year.
- Commission recent, independent feedback that covers your largest customers. Measure retention, renewal or repeat purchase by cohort.
- Give every lost customer a reason. A buyer reads a coded list of lost customers better than a churn rate.
- Line up reference customers who will take a buyer's call.
3. What to produce
One table.
Table A. The customer and contract schedule
| Customer | Share of revenue (%) | Contract and expiry | Notice period | Price basis at renewal | Relationship holders (names) |
|---|---|---|---|---|---|
A large customer with one name in the last column is a key-person risk too.
4. A worked example
Illustrative. Written for this move guide. It describes no client.
A specialist food-ingredients supplier sells to manufacturers. Its largest customer takes a big share of revenue on a rolling purchase order.
The contracts.
- The largest customer signed a supply agreement with an expiry date, a notice period and a price review clause.
- The next four customers had a second contact added, from production planning.
The evidence.
- An outside firm interviewed the ten largest customers. Eight rated the supplier ahead on reliability.
- Every customer lost in three years got a reason. Most had closed a plant or been bought.
Nine months on.
- 5 of 5 top customers on contract
- 10 largest customers interviewed by an outside firm
- All lost customers with a reason
On a retake, both questions could be answered at "Supported".
What it looked like in our work
From our own work. Figures changed.
For a business software vendor preparing a sale, our due diligence coded every customer its main product had lost.
| Reason | What happened |
|---|---|
| Bought by a group on another platform | The customer was bought, and the new owner moved it onto the platform it already used |
| Moved to a product built for consumers | Most of the customer's sales were to consumers, and it moved to a product built for them |
| Stopped using it | The customer's volumes fell, and it did not replace the product |
None of the reasons was the product or the service. That turned a churn rate into a story a buyer can check.
5. Effort and dependencies
- Chief executivePuts the top accounts on contract and sets the concentration plan.
- Sales leadAdds the second and third relationships, and codes every lost customer.
- An outside firmRuns the customer feedback, so a buyer can trust it.
What you need
- The buyer map from knowing who buys and why.
- Revenue by customer for the last three years.
How long
- Six to twelve months for contracts and a falling share. Six to eight weeks for the feedback.
What gets in the way. We have seen these in our own work:
- One funder, one contract. A health services provider took most of its revenue from one government funder. Its largest contract was due to revert to a lower price basis at retender, and that was the realistic downside.
- A renewal wall. A contact-centre business had every top contract expiring in the years a buyer would hold it. The two largest came up for renewal during the sale.
6. How will you know it worked?
The test is whether a buyer could lose your largest customer and still want the business. Retake the check after the contracts are signed and the feedback is in. Each of these should be true when you answer:
| Question | You can answer Supported when | A document alone does not count if |
|---|---|---|
| Whether concentration kills the deal | Concentration is falling by plan, and the relationships sit with the business. | The largest customer is on contract, but one person still holds it. |
| Whether customers are happy and come back | Recent, independent feedback covers your largest customers, and retention is measured by cohort. | The evidence is your own survey, or a list of logos. |
The worked example is illustrative.
Think we've used your work without proper credit? Tell us and we'll fix it.