The “20% Rule”: Why Buyers Are Slashing Company Valuations Over This One Mistake

When a single customer makes up too much of your revenue, buyers punish you with discounted multiples and delayed earnouts. Here’s how to protect your exit.

EXPERT OPINION BY CHRISTINE SLOCUMB, ENTREPRENEUR AND ADVISOR

A recent exit advisory client had a single customer that comprised over 35% of her revenue.  And adding to the complexity, this large enterprise customer wouldn’t sign a monthly retainer agreement—they paid in semi-annual installments and then subtracted each month from that amount. This made her buyer nervous, resulting in a lower offer in the letter of intent (LOI), an........

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