Our biggest customer wants to buy more. Should we turn down the work to reduce concentration before an exit?

Question

Tyler Smith · Accepted Answer

Do not turn away profitable work solely to improve a concentration percentage. Evaluate the additional earnings alongside the dependence, investment and capacity commitments the expansion would create.

A valuable customer relationship can still end. The practical goal is to keep its growth from making the rest of the business less resilient or preventing you from developing other accounts.

Before accepting the expansion, assess:
- The additional gross profit, not just additional revenue.
- Any dedicated hiring, equipment or inventory it requires.
- Whether those resources could serve other customers.
- Payment terms and the cash needed to support the work.
- Whether the commitment would crowd out sales or delivery for other accounts.

Then make customer diversification an explicit priority alongside the expansion. Give someone responsibility for developing other profitable accounts and monitor whether their contribution is growing. Diversification should reduce financial dependence, not merely add names to a customer list.

Avoid solving the problem by winning low-margin work that strains operations. You could report a lower concentration percentage while leaving the business with weaker earnings and greater complexity.

My recommendation is to accept expansion only when its economics and commitments remain attractive under a realistic downside scenario. Negotiate flexibility where possible and protect capacity for other customers. For a future buyer, a growing major account is easier to evaluate when you can also demonstrate that the business is building meaningful earnings elsewhere.