This claim is normally accurate as stated and still misses the risk. Concentration is not only about one large logo. It is about correlated exposure: accounts that share a parent company, a renewal date, an industry, a referral source or a single champion, and that therefore leave together.
TL;DR: The 5% concentration claim is usually true at the account level and false at the level that matters. Here is how to test it across parent entities, cohorts, contract dates and payment methods.
Sellers test concentration the way an accountant would, by sorting accounts by revenue and looking at the top row. That check catches the obvious case and nothing else. The failure mode a buyer cares about is a group of nominally independent accounts that turn out to be one decision, and no billing dashboard groups rows that way because billing systems do not know about parent companies or shared champions.
Four mechanisms account for most of the gap between this claim and what the raw rows show. They are not mutually exclusive and they compound.
Six accounts at 4% each that all roll up to the same parent company are a 24% exposure with one decision-maker. Billing sees six customers. Group by email domain first, then by company name similarity, then ask the seller directly.
If a third of revenue renews in the same month, that month is a single event regardless of how many logos are involved. Concentration in time is concentration.
Accounts that all arrived from one integration listing, one affiliate or one conference are correlated in a way the revenue table cannot show. If that channel closes, the whole group stops replenishing at once.
In agency, consultancy and franchise books it is common for one person to have specified the product for many nominally separate customers. That relationship is not on the balance sheet and does not transfer with the asset.
Every step below runs on a subscription-level export in a spreadsheet. None of it needs access to the seller's live billing account, which matters, because as a buyer you will not get one.
These are the thresholds we use in our own reports. They are working thresholds rather than industry standards, and the right line for a given deal depends on contract length, tenure and how transferable the customer relationships are.
| What you find | Verdict | What to do about it |
|---|---|---|
| Top account under 5% and top ten under 25% | Green | Genuinely diversified. Check renewal-month clustering and move on. |
| Top account 5–10% | Investigate | Normal for a small SaaS. Confirm the contract term and get comfortable with the relationship transferring. |
| Top account above 15%, or top ten above 50% | Price it in | One conversation can reset the economics of the deal. This belongs in the structure, not just the memo. |
| Domain grouping moves the top share by more than 5 points | Investigate | The seller's concentration answer was measured on the wrong unit. Redo the whole analysis on parent entities. |
| More than 25% of revenue renews in one month | Investigate | Time concentration. Make sure that month is not also the month you plan to migrate billing or change pricing. |
Ask for these before the LOI. After the LOI you are renegotiating rather than negotiating, and a seller who will not produce subscription-level rows has told you something useful either way.
Illustrative. A $60,000 monthly book where the largest account is $2,700, or 4.5%, so the claim holds. Grouping by email domain reveals that five accounts totalling $13,000 share one corporate domain: 22% of revenue behind a single procurement decision. Separately, 31% of revenue renews in January because an early partnership pushed a cohort in together. Neither fact is visible in the sorted revenue table, both are visible in ten minutes of grouping, and both change how you would structure the purchase.
Concentration is the risk most often discovered after close, because it is invisible in exactly the report sellers use to check for it. It matters most in the first two quarters of ownership, when the relationships are least transferred and any change you make to pricing, packaging or support is most likely to trigger a review. If concentration is real, the mitigations are structural: hold-backs tied to named accounts, direct conversations with the top customers before close, and a transition plan that leaves the largest renewal month alone.
The relevant tool on this site is the free revenue concentration analyzer, which runs the arithmetic above on a file you paste in. The full method is documented in the 5-risk buyer-side method and the due-diligence checklist.
Every check on this page can be run by hand in a spreadsheet, and if you have the time you should. If you would rather not: send us the target's subscription export and we run the full human-reviewed analysis — logo churn, revenue churn, customer concentration, annual-plan decay, zombie MRR and an A–F revenue-quality grade. The free Starter tier covers one CSV per month, which is enough to check a single deal.
See a sample report → · Get the free 23-point checklist →
As a working rule we treat a single account above 10% of revenue, or a top-ten above 50%, as something that has to be reflected in deal structure rather than noted in the memo. Those are our thresholds, not an industry standard, and the right line depends on contract length, tenure and how transferable the relationship is.
Group before you sort. Group by email domain, then by normalised company name, then by renewal month, and recompute the top shares after each grouping. Concentration that is invisible per-account is usually obvious per-parent, and a Herfindahl-style sum of squared shares gives you one comparable number for the whole distribution.
Because the relationship has not transferred yet. The current owner has years of goodwill with those accounts; on day one you have none, and any change you make is the natural trigger for a re-evaluation. Concentration risk is highest precisely in the period right after the money moves.