When one customer generates 80% of a company's revenue, losing them can collapse the business. The discussion uses Costco as an example of dangerous concentration risk and explains why diversification matters for survival.
You'll have the revenue drivers. Revenue drivers could be based on your leads, your customers, what's your customer concentration. A lot of companies, you know, say, oh, I have Costco as my client. I sell to Costco. But guess what? It's 80% of my business. Well, you know, that's great. But what happens if Costco goes away? Guess what? You don't have that business anymore and profitability shrinks and you're doing it, you know, your value disappears. So you You want to be able to have a really good— you'll have your top, you'll have your top 20, 80. They always say that 20% of your revenue comes from 80% of your clients. 20, 80% of your revenue comes from 20% of your clients. Right. Okay. You want to have that good balance. That's what everyone likes to see. So you have to have that customer diversification along those things.
How Can You Maximize Your Business Value Before Selling? with Randy Katz Video
