Client Concentration Risk
How dependent am I on my largest clients?
No automatic risk threshold is applied; what counts as acceptable concentration depends on your contract terms and risk tolerance.
Why this comes up
Two agencies with identical revenue and margins can carry very different real risk if one has its largest client at 15% of revenue and the other at 55%. Concentration doesn't show up in a P&L, it shows up the day that one client leaves, or the day a lender or buyer asks about it.
How we calculated this
Largest Client Share = Largest Client Revenue / Total Revenue Top-N Share = sum of the N largest clients' revenue / Total Revenue HHI = sum of each client's revenue share squared
Worked example: five clients with revenue of $500,000, $300,000, $150,000, $100,000, and $50,000 (total $1,100,000), top 3.
Largest Client Share = 500,000 / 1,100,000 = 45.5% Top 3 Share = (500,000 + 300,000 + 150,000) / 1,100,000 = 86.4% HHI = 0.4545^2 + 0.2727^2 + 0.1364^2 + 0.0909^2 + 0.0455^2 = 0.310
What this means
- No single one of the three figures tells the full story; a low largest-client share can still sit inside a genuinely concentrated top-3 or top-5 if the next several clients are also large, which is why all three are reported together.
- HHI captures how evenly distributed your whole client base is, not just the top few; a lower HHI means revenue is spread more broadly across your book.
- There's deliberately no automatic risk threshold built in. What counts as acceptable concentration depends on your contract terms, that client's stability, and your own risk tolerance, this is the input to that judgment, not a substitute for it.
Common mistakes
- Looking only at largest-client share and missing that the next several clients are also large, understating real concentration in the top handful.
- Treating concentration as purely a revenue-diversification question, without also weighing it alongside credit risk on those same large clients.
- Checking concentration once and not re-running it as the client mix changes, especially before taking on a large new contract.
Frequently asked questions
Is there a "safe" concentration level?
No universal number; it depends on contract terms (a client on a long-term contract with real switching cost is a different risk than month-to-month), that client's own stability, and your risk tolerance. Use the figures as inputs to your own judgment.
Why does this matter beyond day-to-day operations?
A buyer or lender will price concentration into their own evaluation of your agency; see Staffing Agency Valuation and Value Drivers for how this feeds into a directional valuation.
Should I check this before taking on a new large client?
Yes, run it with the new client's projected revenue included to see what it would do to your concentration profile before signing; see How to Evaluate a New Staffing Contract.
Limitations
No automatic risk threshold is applied to these numbers; what counts as acceptable concentration depends on your contract terms, client stability, and risk tolerance.
Next decision
Learn more
Client Concentration Risk for Staffing Agencies — why concentration affects credit exposure and how a buyer would eventually value your agency.