Concentration Risk: The “Hero SKU” and “Whale Client” Trap Buyers Miss

February 16, 2026

4 Min Read

Concentration Risk: The “Hero SKU” and “Whale Client” Trap Buyers Miss

📌 Contents

Key Takeaways

Quick summary

Concentration Risk: The “Hero SKU” and “Whale Client” Trap Buyers Miss

Key takeaway: If one product or client drives the majority of revenue, you’re not buying a business—you’re buying a single point of failure.

You find a business generating $50,000/month. Margins look strong. The growth chart looks like a hockey stick. You’re ready to make a full-price offer.

Then you open the real numbers.

$40,000 of that revenue comes from one product… or one client.

That’s when the truth hits: you’re not buying a diversified $50k/month business. You’re buying a $10k/month business attached to a $40k/month lottery ticket. If that one pillar fails, your “investment” becomes a stress test.

This is Concentration Risk—and it’s one of the fastest ways to lose your capital overnight.

Amazon FBA: The “Hero SKU” Problem

Verdict: If one ASIN drives most revenue, the business is fragile—one hit can drop sales off a cliff.

In Amazon FBA, sellers often show “storefront revenue” across a catalog of 30–50 products. Looks safe.

But behind the curtain, one ASIN is doing all the heavy lifting. That’s the Hero SKU.

Here’s the risk: if 80% of revenue relies on one product, the business is incredibly fragile.

Any of these can wipe you out fast:

A competitor hijacks the listing
A sudden wave of 1-star reviews hits
The product goes out of stock for 2 weeks
Amazon flags the listing for compliance
Your supplier slips and quality drops

And then? Revenue doesn’t dip. It falls off a cliff.

What to demand in due diligence: ask for a trailing 12-month Sales by SKU report (units + revenue + margin per SKU). If one product is over 20% of revenue, you are buying a product—not a brand.

Amazon FBA hero SKU concentration risk with unbalanced revenue distribution dashboard

Agencies: The “Whale Client” Crisis

Key takeaway: If one client pays the bills, you don’t own a portfolio—you own one client’s mood.

In the agency world, high MRR looks like the holy grail. But it’s often hiding a dangerous reality:

One “Whale Client” is carrying the business.

If a single client accounts for 40% of revenue, you’re not buying a business. You’re buying a stressful freelance job with one boss who can fire you.

Even worse: that whale is often loyal to the founder, not the agency. When the founder exits, the client uses that moment to renegotiate… or leave.

This is where “relationship ownership” matters. If the relationship lives in someone else’s head, you don’t own it.

If you want the deeper version of this risk, read:

Don’t Buy a Job: How to Spot “Shadow Equity” Risks in Agency Acquisitions

The 20% Rule (And How to Price It)

Verdict: Concentration doesn’t always kill a deal—but it should kill premium multiples.

In real M&A, there’s a simple benchmark:

No single product, client, or traffic source should represent more than 20% of total revenue.

If the business breaks this rule, it doesn’t mean “don’t buy.” It means:

Don’t pay a premium multiple.
Structure the deal to protect yourself.

Two buyer-safe structures:

Valuation discount: reduce your offer based on the concentration percentage.
Earn-out / holdback: only pay the “extra” if the Hero SKU or Whale Client is still producing revenue 6–12 months after takeover.

This keeps the seller honest—and keeps you from paying today for revenue that disappears tomorrow.