Welcome back to another edition of The Wise Exit newsletter. This week, we’re sharing another piece of the Build to Exit checklist from Exitwise Managing Partner and CEO Todd Sullivan: revenue quality. We’re covering:

Let’s get to it.

One Big Customer: Risk or Moat?

In the early days of building a company, every founder is chasing the same thing: one customer who’ll actually pay.

That’s how it should be. But years later, when it’s time to sell, that same customer can be the first thing a buyer asks about.

Buyers don’t just look at how much revenue you have. They look at how likely it is to still be there after the deal closes.

To a buyer, it’s all about risk. They’re buying your future cash flow. If any single customer makes up more than 20% of your revenue, that’s generally considered risky, and a buyer will price that risk into what they’re willing to pay.

There are ways to get ahead of it:

1. Plan to diversify early. As you grow, aim for revenue from 30 customers, not three. In software, one common route is product-led growth: a free offer that converts a share of users into paying customers and builds a long tail of smaller accounts.

2. Lock big customers into transferable contracts. If you do have a customer that large, a multi-year contract helps offset the risk, but only if it can actually pass to a buyer. Check the clause now, not during diligence.

3. Spread the relationships. If you got hit by a bus tomorrow, what would happen to your biggest accounts? Bring other people you trust into those relationships, so they don’t run only CEO to CEO.

Sometimes concentration can’t be avoided. If only a handful of companies buy what you make, you’ll likely have two or three big customers if you’re successful.

That’s where the story matters. We sold a business that had one major customer. When the buyer said how great it would be to have that customer, our client made it clear: they’d built a moat around that relationship, and the only way to get it was to buy them. The story held up, and it led to an enormous exit.

In cases like that, buyers want proof the relationship will last:

And if one buyer won’t pay up for that, another one will. Creating competition for your business is ultimately the answer.

Customer concentration isn’t automatically a deal-killer. But it’s something to plan for long before a buyer starts asking about it.

1️⃣ If my biggest customer left tomorrow, what percentage of revenue would go with them?

2️⃣ Could my largest contracts transfer to a buyer as they’re written today?

3️⃣ If I stepped away for a month, who else on my team has a real relationship with my top accounts?

4️⃣ If I sell a subscription product, do I know my net revenue retention, and which direction it’s moving?

5️⃣ Do I have customers who would speak on my behalf to a buyer during diligence?

☑️ Map your top 10 customers by percentage of revenue: Flag anyone above 20%. That’s where a buyer will look first.

☑️ Pull your largest contracts and read the transferability clauses: Know which ones would pass to a buyer and which wouldn’t. Fixing a clause now is a lot easier than fixing it mid-deal.

☑️ Pick one major account and add a second relationship: Introduce someone you trust on your team to that customer, and start sharing the day-to-day contact.

That’s all for this week. Remember, buyers aren’t just paying for your revenue. They’re paying for how confident they are that it’ll still be there after you sell.

If you want help thinking through how a buyer would see your customer base, reply to this email or contact us here. We’re always happy to walk you through it.

Talk next week,

Brian Dukes, Managing Partner

Todd Sullivan, Managing Partner