Most SaaS listings look diversified.
"150 customers." "Growing across industries." "No single dependency."
Then you get into the data room.
Three accounts. One of them is paying 40% of the revenue. And they renewed six months ago, on a month-to-month basis.
That’s not a diversified customer base. That's a business with a veto.
What the Listing Says vs. What the Data Shows
Customer concentration rarely announces itself. The listing says "growing SMB customer base." The financials show clean recurring revenue. The CAC looks reasonable.
But the distribution is buried. Most sellers don't lie, they just describe the business the way it feels from the inside. And from the inside, 40% from one account feels like a strong partnership, not a structural risk.
Here's how to surface it before you sign an LOI.
The Questions That Actually Work
1. "Pull your top 10 customers by revenue for the last 12 months. Show me their first purchase date."
What you're really asking: How concentrated is the revenue, and when did each relationship start?
🔴 Red flag: Any single customer above 25% of TTM revenue.
🔴 Red flag: The top customer is also the newest, concentration built on one deal, not organic growth.
2. "Have you raised prices on any of your top 5 accounts in the last 24 months?"
What you're really asking: What's the power dynamic here? Can you charge what the product is worth, or are you afraid to rock the boat?
🔴 Red flag: "We haven't raised prices. These are good customers, we don't want to lose them."
That sentence tells you who's in charge. And it isn't the seller.
3. "What would happen to the product roadmap if your largest customer churned tomorrow?"
What you're really asking: Is the product serving the market, or serving one client?
🔴 Red flag: Three features named after a single company. ("The [CustomerName] Dashboard," "The [CustomerName] Export.")
Custom features built for one account aren't product development. They're consulting debt.
What It Costs When You Miss It
Customer concentration doesn't always kill deals at close. Sometimes it kills them afterward.
Here's the three-act failure:
Act 1: Earnout miss. The concentrated account leaves six months post-close. Revenue drops 35%. The seller hits 60% of their earnout target and argues the business was misrepresented. You argue it wasn't. Both sides are partially right.
Act 2: Price negotiation leverage shifts. The moment the concentrated customer realizes the business just sold, they have a window. Founders are loyal; acquirers are vendors. Expect a conversation about pricing, terms, or both — usually within 90 days.
Act 3: Roadmap capture. The concentrated customer has informal influence over the product. Post-acquisition, that influence becomes explicit. They weren't paying for a product. They were paying for a dedicated development team.
What Good Looks Like
🟢 No single customer above 15% of ARR.
🟢 Top 10 customers represent less than 50% of revenue combined.
🟢 The business has raised prices on its top accounts, and kept them.
🟢 Customer-specific features are documented, priced, or sunset. Not quietly accumulating.
🟢 The largest customer has been on contract (not month-to-month) for at least 18 months.
The Takeaway
A 150-customer SaaS can still be a single-customer business.
The distribution is what matters. Most buyers don't ask. They look at total customer count, calculate an average revenue per account, and call it diversified.
Good diligence finds the concentration.
Great diligence finds the contract terms, the price history, and who's actually been driving the roadmap.
Those answers don't live in the headline metrics. They live in the questions you ask before you sign anything.