Client concentration describes the share of a firm's revenue or backlog attributable to a small number of clients.
Definition
Owners measure client concentration by grouping revenue, backlog, or another exposure measure by client, parent organization, market sector, or contract. A common calculation divides one client's amount by the firm's total for the same measure and period. Firms may use trailing revenue, current backlog, or both because they answer different questions. Grouping related agencies or subsidiaries can also change the picture, so the reporting basis should be clear. Concentration does not by itself show whether a client is profitable, dependable, or likely to leave. It is not a prediction of lost work. A large client may provide recurring projects, while reliance on a few clients can make the firm more exposed to budget, procurement, or relationship changes. Owners review concentration with contract terms, pipeline, payment patterns, and service mix to understand how much of the business depends on particular relationships.
How owners use it
- Group related departments or entities consistently when deciding what counts as one client.
- Compare revenue concentration and backlog concentration as separate views of exposure.
- Review large client shares alongside contract duration, renewal timing, and pipeline.
- Example: One client accounts for $600,000 of $2,000,000 revenue; $600,000 / $2,000,000 = 0.30, or 30%.
