Our largest customer has a long-term contract. Does that remove the concentration problem when we sell?

Question

Tyler Smith · Accepted Answer

Treat the contract as a potential risk reducer, not a substitute for diversification. A long stated term does not, by itself, establish how much revenue is protected or whether the relationship will survive a sale.

Have your transaction attorney review the agreement before you describe the account as secure to prospective buyers. The important questions include:
- Does the customer commit to minimum purchases, or does the agreement only establish terms for future orders?
- What termination, cancellation or price-adjustment rights exist?
- Does an ownership change require notice or consent?
- Can the agreement be assigned if the transaction structure requires it?
- What happens when the current term ends?

Contract protection and relationship continuity are separate issues. If the customer relies primarily on the owner, document its history in a shared CRM, introduce other responsible team members and transfer account responsibility gradually. Monitor satisfaction and owner involvement during that transition.

Even an enforceable purchase commitment does not eliminate every commercial risk. The customer's own financial health and its willingness to renew still matter. Avoid presenting the contract as a guarantee of future earnings.

My recommendation is to prepare an attorney-reviewed summary of the agreement's protections and limitations, supported by evidence of a team-managed relationship. Continue developing other profitable customers. A contract can help explain the exposure, but reducing reliance on that account remains a distinct value-building priority.