How do you measure customer concentration risk?

Score impact, disruption likelihood, and replacement difficulty on one scale and combine them. Here impact 9, likelihood 5, and replacement difficulty 6 produce a composite risk score of 6.85 — high enough to warrant a diversification plan.

What customer concentration is too high?

There's no single threshold, but many lenders flag any single customer above 20-25% of revenue. The score matters more than the percentage: a 40% customer on a 10-year contract can be safer than a 20% customer winning annual bids elsewhere.

Why multiply the scores instead of averaging?

Multiplication, like an FMEA RPN, makes the score spike when all three factors are high and stay low if any one is low. An account that's huge but trivially replaceable scores far lower than one that's huge, fragile, and irreplaceable.

What is a good concentration risk score?

Lower is better. Rank your accounts and watch the top of the list; the 6.85 in the example is on the elevated end and signals that this customer should drive a diversification or contract-lock-in plan, not a wait-and-see.

How do I lower a high concentration score?

Attack the factor you can move. Lock in a multi-year agreement to cut disruption likelihood, qualify new accounts to cut replacement difficulty, or shrink the customer's revenue share to cut impact — whichever lever is cheapest for your shop.

Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator

Customer Concentration Risk Calculator

Customer concentration risk measures how exposed a contract shop is to losing or being squeezed by a single dominant customer. Owners and CFOs of make-to-order and job shops use it to decide when one account has grown dangerous enough to justify diversifying the book. The score combines three things: how badly losing the account would hurt, how likely a disruption is, and how hard the lost revenue would be to replace. A shop where one customer is 60% of revenue isn't automatically high-risk — it depends on relationship stability and how quickly that capacity could be re-sold.

What this calculator does

Score business risk from dependence on one customer or customer program.
deciding whether a customer concentration needs pricing discipline, diversification, or capacity limits
It produces a composite concentration risk score from impact, disruption likelihood, and replacement difficulty scores on a shared scale.

Formula used

customer concentration risk score = customer concentration impact score × concentration disruption likelihood score × replacement difficulty score
Use the same scoring scale across comparable customer orders, RFQs, and make-to-order jobs.

Inputs explained

Customer concentration impact score:
Concentration disruption likelihood score:
Replacement difficulty score:

How to use the result

Use it in annual business reviews, before adding capacity for one big customer, or when weighing whether to chase diversification work at thinner margins.
It's a relative ranking tool, not an absolute probability — scores are only comparable when every account is rated on the same consistent scale by the same rater.

Current U.S. benchmarks

The U.S. prime lending rate is 6.75% (Federal Reserve via FRED, 2026-07-02). Payback and financing math should start from today's rate, not a remembered one.

Common questions

How do you measure customer concentration risk? Score impact, disruption likelihood, and replacement difficulty on one scale and combine them. Here impact 9, likelihood 5, and replacement difficulty 6 produce a composite risk score of 6.85 — high enough to warrant a diversification plan.
What customer concentration is too high? There's no single threshold, but many lenders flag any single customer above 20-25% of revenue. The score matters more than the percentage: a 40% customer on a 10-year contract can be safer than a 20% customer winning annual bids elsewhere.
Why multiply the scores instead of averaging? Multiplication, like an FMEA RPN, makes the score spike when all three factors are high and stay low if any one is low. An account that's huge but trivially replaceable scores far lower than one that's huge, fragile, and irreplaceable.
What is a good concentration risk score? Lower is better. Rank your accounts and watch the top of the list; the 6.85 in the example is on the elevated end and signals that this customer should drive a diversification or contract-lock-in plan, not a wait-and-see.
How do I lower a high concentration score? Attack the factor you can move. Lock in a multi-year agreement to cut disruption likelihood, qualify new accounts to cut replacement difficulty, or shrink the customer's revenue share to cut impact — whichever lever is cheapest for your shop.

Last reviewed 2026-05-12.