Bargaining power of buyers

How much pressure customers can apply on price and terms.

A supplier whose top three customers account for 74% of revenue has very little room, and that concentration shows up in receivable days, in payment terms, and in the margin.

Customer concentration is disclosed for many companies and can be inferred from the segment or geography breakdown for others. An auto ancillary selling to three manufacturers, or a services firm with one dominant client, has a structural ceiling on its margin no matter how good it is.

Concentration is not fatal. Concentration plus a commodity product is.