Definition: Herfindahl-Hirschman Index, a measure of market/revenue concentration. For SaaS diligence, it quantifies customer concentration risk.
The HHI score is calculated by squaring each customer's revenue share and summing them. A company with 10 equal customers scores 1,000 (diversified). A company with one customer at 50% and 5 at 10% each scores 3,000 (highly concentrated). Scores above 2,500 warrant a valuation discount.
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Try ChurnLens Free →Herfindahl-Hirschman Index, a measure of market/revenue concentration. For SaaS diligence, it quantifies customer concentration risk.
The HHI score is calculated by squaring each customer's revenue share and summing them.