How to use the customer concentration calculator
- Enter each customer's name and what they paid in the same period, using positive amounts.
- Add as many rows as you need, up to 60. Small customers can be grouped on one row.
- Read the concentration index, the effective number of customers and the share of the largest customers.
- Use the ranked table to see each share and the running total.
Formula
share = customer revenue / total revenue
HHI = sum of (share x 100)^2
effective number of customers = 10,000 / HHI
The index runs from 10,000 divided by the number of customers (everyone equal) up to 10,000 (one customer). The effective number is how many equal-sized customers would give the same index.
Five customers
Revenue is $100,000: $48,000, $27,000, $12,000, $8,000 and $5,000. The shares are 48%, 27%, 12%, 8% and 5%. Squared, they are 2,304, 729, 144, 64 and 25, so the index is 3,266.
The effective number of customers is 10,000 / 3,266 = 3.06, so revenue behaves as if it came from about three equal customers even though there are five. The largest customer is 48%, the top three are 87% and the lowest possible index with five customers would be 2,000.
What the index tells you
The Herfindahl-Hirschman index squares each share, so large shares count much more than small ones. Doubling the share of the biggest customer raises the index far more than adding a few small ones. That makes it a good single number for dependence on a few customers.
Limits of the number
The index describes how revenue is spread. It does not say how risky a customer is, how long the contract runs or how easy it would be to replace the revenue, and this page sets no cut-off for a good or bad score. Pair it with the Pareto Analysis Calculator for the 80/20 view, and with the Churn Rate Calculator for retention.
Assumptions and limits
- All amounts are revenue for the same period.
- Each row is one customer. If one buyer appears twice under different names, combine the rows.
- The index uses shares as percentages from 0 to 100, so the maximum is 10,000.
- No threshold or rating is applied.
Frequently asked questions
What does an index of 2,500 mean?
It matches four customers who each pay the same amount. In general, divide 10,000 by the index to find the equal-customer equivalent.
Why include the effective number of customers?
The index is hard to picture on its own. The effective number turns it into a count that is easy to compare with your actual number of customers.
Should I group small customers together?
Grouping many tiny customers on one row makes the index look higher than it is, because one big row is squared. For the most accurate result, list customers individually where you can.
Can the index be used for products or suppliers?
Yes. The same arithmetic describes the spread of revenue across products or spend across suppliers. Change the row names and read the shares the same way.