---
title: "Top customer above 25% of revenue: concentration risk"
url: https://firstpassmemo.com/flags/top-customer-over-25-percent/
updated: 2026-10-07
publisher: FirstPass Memo (hello@firstpassmemo.com)
---

Red flag explained · Customers and retention

# Top customer above 25% of revenue: concentration risk

Short answer: When one customer, sponsor or partner is more than a quarter of revenue, a large part of the profit depends on that one relationship surviving the sale. Ask whether there is a contract, how long it runs, and whether the customer knows about the sale. Price the deal as if they might leave.

Updated 7 October 2026 · Checker rule CONCENTRATION

## When the checker raises it

Raised as high severity when the listing states that the top customer, client or account is more than 25% of revenue.

## Why it matters

Large customers renegotiate when ownership changes. Some contracts let them leave on a change of control. Others rest on a relationship with the founder.

A simple test: work out payback without that customer. If the deal no longer works, you are buying one contract with a business attached.

## A worked example

Composite example, not a real listing

Paid newsletter on regional real estate, 9,400 subscribers, 610 paying Asking price: $58,000 Average monthly revenue: $3,300 Average monthly profit: $2,700 Top customer: largest sponsor is 35% of revenue Business age: 3 years Owner hours: 8 hours per week

Traffic or revenue sources typed in: Email 70%, Social 20%, Referral 10%.

What the red-flag checker (https://firstpassmemo.com/checker/) returns: payback of 21.5 months on average monthly profit, and this flag:

High Top customer is 35% of revenue

If that customer leaves after the sale, a large part of the profit leaves with it.

Ask: Is that customer under contract, and have they been told about the sale?

The same example also raises: Email is about 70% of traffic (https://firstpassmemo.com/flags/one-channel-over-60-percent-of-traffic/), No churn figure for a recurring-revenue business (https://firstpassmemo.com/flags/no-churn-figure/), No connected data source mentioned (https://firstpassmemo.com/flags/no-connected-data-source/).

## What to check

- Ask whether that customer is under contract, until when, and whether the contract can pass to a new owner.

- Ask whether they have been told about the sale.

- Work out payback with that customer's revenue removed.

## Questions to send the seller

- Is that customer under contract, and have they been told about the sale?

- What share of revenue comes from the top 1 and top 3 customers, partners or programs?

- Is the largest customer or partner under contract, when does it end, and do they know about the sale?

- Are any customers, partners or suppliers personal contacts of yours who may not stay after a sale?

## Related flags

- Concentration not disclosed (https://firstpassmemo.com/flags/concentration-not-disclosed/)

- Few paying customers (https://firstpassmemo.com/flags/few-paying-customers/)

- One channel above 60% (https://firstpassmemo.com/flags/one-channel-over-60-percent-of-traffic/)

- All red flags explained (https://firstpassmemo.com/flags/)

## Useful next

- Buying a newsletter (https://firstpassmemo.com/buy/newsletter/)

- Free red-flag checker (https://firstpassmemo.com/checker/): paste a listing and see which flags it raises.

The checker is a set of plain rules, not an AI model, and its flags are prompts for questions, not verdicts. Composite examples are invented. Informational screening only, not investment, legal or tax advice.

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FirstPass Memo is informational screening, not investment, legal, tax, accounting or valuation advice, and not an audit. Seller figures are not independently verified. HTML version: https://firstpassmemo.com/flags/top-customer-over-25-percent/