Revenue concentration risk calculator

Enter your top revenue or traffic sources to see your concentration score, risk rating, and the valuation haircut buyers typically apply when a business depends too heavily on one source.

Sources

Revenue source % share

Total: 0%

Concentration analysis

HHI concentration score

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0 = perfectly diversified · 10,000 = single source

Risk rating

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Top source

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Estimated valuation haircut

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Distribution

How buyers use concentration risk

Buyers discount heavily for concentration because it represents a cliff-edge scenario: if the dominant source disappears — a Google algorithm update, a customer churning, a platform policy change — revenue can drop 30–70% overnight. The historical multiple a business deserves on its earnings assumes some revenue stability; concentration undermines that assumption and buyers price it in.

The most common mitigation is demonstrating that concentration is a result of excellence in one channel, not absence of alternatives. Sellers can improve their position by building a second meaningful channel before going to market — even getting a second source to 15–20% of revenue typically moves a business out of the "high risk" bracket.

About this tool

Enter your top revenue or traffic sources and their percentage share. The tool calculates a Herfindahl-Hirschman-style concentration score, identifies single-source dependency risk, and estimates the valuation haircut a buyer would typically apply — giving sellers a realistic picture of how concentration affects their asking price, and helping buyers quantify risk during due diligence.

Frequently asked questions

What is the Herfindahl-Hirschman Index (HHI)?

HHI is a standard measure of market concentration — the sum of squared market shares across all participants. Applied to business revenue or traffic, a score near 0 means income is spread across many sources; a score near 10,000 means a single source controls everything. In acquisition due diligence, buyers use it informally to quantify dependency risk and justify valuation adjustments.

What counts as a "source"?

For revenue: individual customers, sales channels (Amazon, Shopify, direct), geographies, or product lines. For traffic: Google organic, paid search, Facebook/Instagram, email, direct/brand, referral. Enter whatever level of granularity is meaningful for your business — the point is to capture any single dependency that could put revenue at risk if that source disappeared.

How much does concentration reduce valuation?

It depends on the buyer and the business type. For content sites, heavy Google dependency (60%+ of traffic) can reduce the multiple by 0.5–2.0× — especially after the 2024 HCU updates made algorithm risk more salient. For SaaS, a single customer at 40%+ of ARR is a common deal-blocker. For ecommerce, Amazon concentration above 70% of revenue often triggers a 15–25% haircut. The estimates in this tool are indicative ranges, not formulas.

What if sources don't add up to 100%?

If your entries sum to less than 100%, the remainder is treated as distributed across unlisted sources — this actually reduces your concentration score, since the untracked portion is assumed to be diversified. If they sum above 100%, the tool warns you. Aim for entries that sum to exactly 100% for the most accurate picture.

Does concentration always hurt valuation?

Not always. Some buyers view strong performance from a single high-quality source (e.g. dominant brand SEO) as a moat rather than a risk. Context matters: concentration in a channel the buyer controls or can replicate is less concerning than dependency on a platform that could change its algorithm or terms. Use the haircut range as a starting point for due diligence conversations, not a fixed discount.

Revenue concentration risk calculator