Definition
The percentage of total revenue generated by the largest handful of customers.
Formula
Revenue from top N customers / Total revenue x 100
How to measure
Rank customers by revenue contribution and sum the top 5 or 10 customers' revenue, then divide by total revenue.
Why track it
High concentration signals real business risk, since losing just one or two large accounts could meaningfully damage the company's revenue.
Example
A company discovers its top 3 customers make up 40% of total revenue, prompting a push to diversify its customer base.
FAQ
- What is Customer Concentration Ratio?
- The percentage of total revenue generated by the largest handful of customers.
- How do you calculate Customer Concentration Ratio?
- Revenue from top N customers / Total revenue x 100
- Why track Customer Concentration Ratio?
- High concentration signals real business risk, since losing just one or two large accounts could meaningfully damage the company's revenue.