Diversify the client base
When it may fit: A few clients dominate.
Evidence needed: Pipeline and target segments.
Trade-off: Takes time and investment.
Professional Services Intelligence Brief
How to Evaluate Client Concentration Risk
When one or two clients provide a large share of fees, losing one can change the firm’s year. Measuring the exposure comes before deciding what to do about it.
1. The business problem
What happens to the firm if our largest client leaves?
Concentration builds quietly. A strong client grows, the firm serves it well and its share of fees rises. Nothing looks wrong until the client changes advisers, merges, or cuts its budget.
The risk is not only the revenue lost, but the profit lost, because costs such as salaries cannot be cut as quickly as fees disappear.
2. What the evidence can reveal
A concentration review includes:
- Calculated Share of fees, and of contribution, from the largest clients.
- Calculated Contract terms and length of relationship.
- Calculated Stress test: the effect on profit if a major client leaves, given costs that cannot be reduced quickly.
- Information gap Client health, alternatives available to them, and the depth of relationships beyond one contact.
Share of contribution matters more than share of fees, and the two can differ.
3. Investigate the problem
The synthetic firm is analyzed by service line, and we use lines as stand-ins for large relationships. Calculated Tax & Compliance accounts for about 31% of fee revenue ($8.30M of $26.4M) and about 34% of contribution ($3.40M of roughly $9.9 million). Tax and accounting together are about 52% of fees.
Illustrative A stress test on an invented client shows the logic. Suppose the largest client were 15% of fees, or about $4.0 million of $26.4M. At the firm’s overall contribution margin of about 37.5%, losing it would remove about $1.5 million of contribution, about 80% of the $1.85M operating profit, even if the direct costs for that client could be removed immediately. If salaries cannot be cut quickly, the effect is larger.
Hypothesis Even a firm with no dominant client may have concentration within a service or an industry. Information gap Client-level data and contract terms are not in the demo. A simple table of the top ten clients by fees and by contribution, with the length of each relationship, is the first piece of evidence to assemble.
4. Explore the interactive experience
Investigate it yourself.
Firm Economics Dashboard: a service-line dashboard with utilization and realization, a scenario simulator for hours, rate and cost, evidence-linked answers from APIS, and a sample brief, all on synthetic data.
The experience below is built on a synthetic firm, “Demo Advisory Partners,” analyzed by service line. It has no client-level, pipeline or business development records, so service lines are used to show the method. Nothing in it is real.
- In the Scenario tab, the preset lowers billable hours by 10%, a stand-in for losing a large client. Note the profit effect.
- Add a 3% rise in realized rate. Could pricing offset the loss?
- Ask APIS how sensitive profit is to a drop in hours.
5. Evaluate possible solutions
Managing concentration is a long-term effort.
6. What leadership should do next
Questions to answer
- What share of fees and contribution comes from the top five clients?
- How secure are those relationships?
- What would losing one cost?
- How quickly could we replace it?
Data to gather
- Fees and contribution by client
- Contract terms
- Relationship mapping
- Pipeline
Steps to take
- Rank clients by contribution.
- Stress-test the largest.
- Set a concentration limit.
- Build the pipeline.
7. Engage Two Pillars
Understand Your Firm’s Economics and Growth Opportunities
Two Pillars can help professional services firms investigate client profitability, engagement operations, capacity and strategic growth using your own data. A good first step is a client concentration review with a stress test of the largest relationships.
Sources and data notes
- The organization, its figures, and every number in this article and its interactive experience are synthetic and illustrative. They are not real data, a benchmark, or a forecast.
- Reviewed October 2026. This article describes an approach to investigation. It does not replace review by qualified professionals.