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Formula
Concentration = Revenue from Top Customers / Total Revenue
Know your metric
Importance of
Customer Concentration
Risk Assessment
Helps assess risk associated with dependency on few customers.
Revenue Stability
Indicates potential volatility in revenue streams.
Customer Dependency
Highlights dependency on major customers.
Drawbacks of
Customer Concentration
Risk of Customer Loss
High concentration increases risk.
Inhibits Diversification
Can deter efforts to diversify customer base.
Market Vulnerability
Makes the company vulnerable to market changes affecting a few customers.
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