Calculate customer concentration
Enter your total annual revenue and the revenue from each top customer to get the concentration index and the associated risk.
What is customer concentration?
Customer concentration is the degree to which a company's revenue depends on a small number of buyers. A business with 80% of revenue from a single customer has very high concentration — and a proportionally high cash-flow risk. UK lenders typically flag 30%+ of revenue from a single customer as a concentration risk during SME credit underwriting, and asset-based lenders apply lower advance rates on concentrated debtor books.
The risk isn't only losing the customer. It's the daily exposure: if that customer delays a payment, cuts an order, or runs into financial difficulty, the business is dragged down immediately. With UK average late-payment levels persistent (many SMEs paid 30-60 days beyond agreed terms), customer concentration is one of the leading drivers of SME insolvency.
Example: Customer A = 60%, Customer B = 30%, Others = 10%
HHI = (60² + 30² + 10²) ÷ 100 = (3600 + 900 + 100) ÷ 100 = 46 — HIGH
The higher the HHI, the higher the concentration and risk. An HHI of 100 means total dependence on a single customer. An HHI below 25 indicates a well-diversified portfolio — the threshold UK lenders typically consider healthy.
Concentration Risk Scale
Interpreting the concentration index and the top customer's share of total revenue:
Good diversification
Rising risk
High dependence
| Customer 1 share | Rating | Risk | Recommended action |
|---|---|---|---|
| < 25% | CONTROLLED | Low | Monitor annually |
| 25%–40% | MODERATE | Medium | Actively diversify, use factoring |
| 40%–60% | HIGH | High | Urgent diversification plan + factoring |
| > 60% | CRITICAL | Very high | Immediate action: factoring + diversification |
How to Manage Concentration Risk
There are two angles for managing customer concentration: reducing concentration over the long term and protecting cash flow in the short term.
Factoring on the concentrated customer
Advance the top customer's invoices within 24-48 hours. Even if the business depends on one large customer, it doesn't depend on the timing of their payments. Cash flow stays protected. Non-recourse factoring also transfers the credit risk (similar to trade credit insurance cover).
Learn more about factoring →Active diversification
Set an internal concentration cap per customer (e.g. 30%) and invest in business development for other segments or geographies. Diversification is a medium-term process.
Full financial diagnosis →Customer-level DSO tracking
Track Days Sales Outstanding specifically for the concentrated customer. A rising DSO on that customer is the first sign of risk — well before any payment default.
Calculate DSO →Frequently Asked Questions about Customer Concentration
Other Related Tools
Track this indicator automatically
Connect your ERP and see this metric in real time on your Advanta dashboard.
Protect cash flow from customer dependency
With factoring you can advance your top customer's invoices within 24-48 hours, regardless of when they pay. Eliminate liquidity risk even while you keep a concentrated customer base.