The Renewal You Haven't Had Yet: A Revenue Concentration Review for UK SMEs

Most UK SMEs have a supplier review somewhere in their governance pack. Fewer have the mirror image: a structured look at how much of the business rests on a single customer. The asymmetry is understandable. Suppliers can, in principle, be replaced by a procurement exercise. A large customer that pays on time and treats the account as a partnership tends to be treated as a success rather than an exposure.

That is precisely why the review is worth doing. Concentration is not automatically a problem. A specialist manufacturer with one anchor OEM, or a consultancy working inside a single public sector framework, may be pursuing a deliberate and profitable strategy. The difficulty arises when concentration is unexamined: when nobody in the business can state, with figures, what would happen to margin, cash and headcount if the account gave notice, or how long a credible replacement would take to secure.

Concentration is not the same as risk

A single client can represent two thirds of turnover and still be a sound position, provided three conditions hold. The relationship is contractually durable, the margin is strong enough to fund a replacement search, and the business understands which parts of its cost base are genuinely variable. Where any of those conditions is missing, the same two thirds becomes a different proposition entirely.

The purpose of a concentration review is therefore not to produce a number that triggers alarm. It is to establish whether the organisation has deliberately chosen its exposure and has the means to manage it. The output should be a short written position that a board or management team can interrogate, not a dashboard that nobody reads.

Three measures, not one

Turnover share is the figure most often quoted and the least informative on its own. A more useful review looks at three measures side by side.

• Turnover share. What proportion of invoiced revenue the account represents, on a rolling twelve-month basis rather than a single financial year.
• Gross margin share. Where the account sits relative to the rest of the portfolio. A client that supplies a third of revenue but half of contribution is a materially different dependency from one that supplies a third of revenue at below-average margin.
• Cash share. What proportion of the debtor book and of forecast cash receipts depends on that client's payment behaviour. Payment terms, dispute history and the timing of the largest invoices matter more here than headline revenue.

A simple table with those three columns, and a comparable figure for the top five accounts, is usually enough to shift a conversation. If the three shares diverge sharply, the divergence itself is the finding.

The replacement test

The question that changes behaviour is not "how big is the account?" but "how long would it take to replace?" A defensible answer requires evidence rather than optimism.

Work backwards from the sales cycle. How long does it typically take from first substantive conversation to signed contract for a client of this size and sector? How much of the current pipeline consists of opportunities genuinely comparable in scale, rather than aspirational? What proportion of recent wins came through referral, framework or tender, and which of those routes could realistically be repeated at short notice?

Then add the operational lead time: onboarding, security or compliance approval, recruitment if delivery depends on people not yet in post. For many service businesses the honest answer is nine to eighteen months from a standing start, which is considerably longer than the notice period most contracts provide. That gap, between contractual notice and realistic replacement, is the true measure of exposure.

What the contract does not say out loud

A review should read the agreement for the mechanics of exit: notice periods, termination for convenience, change-of-control provisions, volume commitments, indexation clauses and any exclusivity that constrains whom else the business may serve. It should also record what the contract cannot show, namely the depth of the relationship. How many people at each organisation genuinely know one another? If the account is held by a single individual on either side, that is a structural weakness independent of contract terms.

A 90-day contingency plan

The plan is not a response to a lost account. It is a set of actions taken while the account is still healthy, so that the business is not negotiating from a standing start.

Days 1 to 30: establish the position. Complete the three-share analysis, agree the replacement timeline with sales and operations, and identify the cost lines that could be flexed within a quarter. Very often a meaningful share of delivery cost is fixed by assumption rather than contract.

Days 31 to 60: build the bridge. Confirm available working capital or facility headroom to absorb a gap in receipts. Refresh the pipeline with named target accounts of comparable scale. Ensure the relationship is held by more than one person, and that the client's own stakeholders have met them.

Days 61 to 90: rehearse the conversation. Agree in advance what the business will and will not concede at renewal, including price, term length and any additional volume commitment. A renewal discussion conducted without a stated walk-away position is not a negotiation.

Structural choices made well before the risk crystallises

Contingency planning buys time. Structure reduces the need for it. The measures that matter are rarely dramatic: pricing architecture that makes smaller accounts viable, productised offers that shorten the sales cycle, a sector mix that prevents one client's market from becoming the company's market, and account governance that puts more than one name against the relationship. Each is a small decision. Taken together, they flatten the concentration curve over two or three years without requiring the business to turn away good work.

A place on the board agenda

The review belongs on the same agenda as the supplier audit, with the same discipline: a short paper, three measures, a replacement estimate and an owner. Reviewed annually, it takes an afternoon. Left until a renewal letter arrives, it becomes a different kind of exercise altogether.