When A Major Customer Walks Away
Every business has moments that test its resilience. For some, it’s a sudden market shift. For others, it’s the departure of a key team member. And sometimes, it’s the loss of a major customer that you thought you could rely on.
These moments can feel like a huge blow. But they’re also where strong businesses find the opportunity to regroup, learn, and emerge stronger.
The Case Study
The business in this case is a medium-sized distributor with steady year-on-year growth. For several years, one of their largest customers represented nearly 35% of annual revenue. This customer relationship felt stable, orders were consistent, the working relationship was positive, and the revenue stream helped underpin the rest of the business.
Then, unexpectedly, the customer decided to bring distribution in-house. Overnight, the business was facing the loss of more than a third of its turnover.
The Immediate Impact
The initial reaction was shock. The founder had assumed the customer relationship was secure. Without that contract, the numbers told a very different story:
Cash flow projections showed a shortfall within three months.
Staff capacity was mismatched to the reduced volume.
Debt facilities had been sized for the higher revenue base, putting repayment schedules under pressure.
The reality was clear: the business couldn’t operate as it had before. Immediate decisions were needed to stabilise cash and keep operations viable.
Step 1: Stabilising Cash Flow
The first step was building a revised forecast that stripped out the lost revenue. This allowed the founder to see the real picture and what the business looked like without that customer.
Key actions included:
Negotiating with suppliers to adjust payment terms.
Revisiting bank facilities to ensure short-term liquidity.
Identifying discretionary spend that could be paused or stopped.
This didn’t fix the problem, but it bought time. The business could see where cash pressure points would hit and make proactive moves.
Step 2: Resetting the Cost Base
With lower revenue, the existing cost structure was unsustainable. The founder undertook a full overhead review, asking what was essential versus what could be streamlined.
Casual and contracting staffing levels were right-sized to align with current sales volume.
Warehouse operations were restructured to match demand.
Marketing spend was redirected toward retaining and growing mid-tier customers instead of broad brand campaigns.
It was difficult, particularly the staffing decisions, but necessary to give the business breathing room.
Step 3: Diversifying the Customer Base
One of the clear lessons was the risk of relying too heavily on a single customer. With 35% of revenue gone, the path forward required spreading risk across more customers.
The founder created a focused sales strategy targeting mid-sized accounts that had previously been overlooked. Instead of trying to land another big account, the aim was to build a stronger base of 10–15 customers each representing 5–10% of revenue.
This strategy took time to deliver, but within 12 months the revenue gap had been substantially closed. Importantly, no single customer represented more than 15% of turnover, reducing the risk of a repeat scenario.
Step 4: Strengthening Governance and Reporting
The founder also recognised that the warning signs had been missed. The customer’s decision to bring distribution in-house hadn’t come out of nowhere, but without robust risk management in place, the potential impact hadn’t been properly considered.
From that point forward, the business:
Introduced monthly reporting with scenario analysis.
Added customer concentration metrics to the financial dashboard.
Conducted regular reviews of top customers, including relationship health and renewal risk.
This shift meant that any future over-reliance would be flagged early, allowing time to prepare.
Step 5: Rebuilding Confidence
Perhaps the hardest part of losing a major customer isn’t financial, it’s emotional. Leaders often feel blindsided or question their own judgment. Teams worry about stability.
In this case, transparency was key. The founder openly communicated the challenge to staff, explained the decisions being made, and shared the strategy for recovery. This honesty helped retain trust during a turbulent time.
By the time new customer relationships were established and the business was back on stable footing, the team had developed a stronger sense of resilience and unity.
Lessons for Other Business Owners
This case study highlights several important lessons for any business owner:
Know your customer concentration: If one customer represents more than 30% of revenue, you carry significant risk.
Always run scenarios: Build “what if” models that consider the loss of a major customer, so you know what actions to take.
Keep cash flow visibility: Strong forecasting gives you early warning of shortfalls and more time to act.
Diversify strategically: A broad base of mid-tier customers often provides more stability than one or two large accounts.
Communicate openly: When challenges hit, clarity and honesty with your team and stakeholders builds confidence.
Challenges like losing a major customer are part of the business journey. The way through is clear visibility, decisive action, and a focus on building resilience into the customer base. Businesses that treat setbacks as signals to strengthen systems, diversify revenue, and sharpen strategy position themselves for long-term success.