Every Agency Has One
Ask an agency owner privately, not in a pitch deck, and most will admit to a specific client they would fire tomorrow if they had what felt like a good enough reason. Nothing catastrophic has happened, the invoices clear, the work gets done, but the relationship costs more in patience, awkward calls, and quiet dread than its revenue seems to justify. That client rarely gets fired on the spot. It gets a mental note, and the note tends to sit there for a long time.
What Concentration Risk Looks Like in Numbers
Projectworks, a valuation and project-accounting advisory source, describes a fairly consistent set of thresholds, treated here as professional consensus rather than a peer reviewed statistic: a single client above roughly 20% to 25% of total revenue is a red flag, and a top three client group collectively above 50%, or a top five group above 70%, likewise signals high concentration. Those numbers give the vague, uneasy feeling about one difficult client an actual measurement to check itself against.
The Buyer’s Eye View: What One Client Can Do to a Sale Price
The clearest way to understand the stakes is a worked example straight from Projectworks: a firm with $1 million in EBITDA where $400,000 comes from one at risk client is not valued at $1 million by a buyer evaluating the business. The buyer is effectively purchasing $600,000 of real earnings and, in the advisor’s own words, a lottery ticket, since that one client’s continued spending is not something the buyer can count on the way it can count on the rest of the business.
Concentration is described as one of the fastest ways to see a multiple compress at the negotiating table, which means the client sitting on an agency’s mental fire list is a specific, quantifiable discount on what the agency itself is worth today, well beyond being an operational headache, whether or not an owner is thinking about selling anytime soon.
Why the Threshold Itself Is a Judgment Call, Not a Rule
Wall Street Prep, a second, independently consulted source, corroborates the same direction while landing on a different exact number, flagging a customer above 10% of revenue or a top five group above 25% as a potential red flag under some frameworks, while other frameworks place the meaningful risk threshold higher, at 25% for a single client or 40% to 50% before a business is essentially built around one customer. That disagreement is not a weakness in the underlying concern, it is useful information in its own right: there is no single bright line every advisor agrees on, which is exactly the kind of ambiguity that lets a name sit on a list rather than force an immediate decision.
Why Agencies Keep the Name on a List Instead of Acting
This is reasoning, not a cited statistic. Revenue that is already booked feels safer than revenue that has not been won yet, even when the booked revenue is quietly riskier by the numbers above. Recency bias plays a role too, a client’s worst month is more vivid than its average one, so the case for firing them can feel stronger in the moment than it looks a few weeks later once the immediate frustration fades. And nobody wants to be the person who makes the call, since firing a paying client is a decision with an obvious, immediate cost and a much harder to see, delayed benefit.
A fire list, kept honestly rather than as a running joke, is a reasonable response to that asymmetry. It converts a vague feeling into a written, revisited judgment instead of either impulsively acting on frustration or letting the relationship drift indefinitely on autopilot.
What Moves a Name Off the List
A list only earns its keep if something eventually happens because of it. In practice, a name tends to come off a fire list one of two ways: a specific incident finally crosses the line that was already implicitly there, a missed payment, a scope demand too far, or a genuine alternative shows up, new capacity, a bigger prospect, that makes the concentration math above impossible to keep ignoring. Revisiting the list on a real schedule, not just when the client happens to cause a bad week, is what keeps it a decision tool instead of a permanent holding pattern.
Sources
The external data in this article draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.
- Projectworks, Client Concentration Risk: What It Is, Why It Tanks Your Valuation and How to Fix It
- Wall Street Prep, Customer Concentration Risk, Formula and Calculator