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Choose the period and the costs that can really change
This exercise tests the next year without one customer. It is different from an unpaid historical invoice, which would need its own collection and loss assumptions. Avoid counting that older amount again as lost future sales.
The UK government’s cashflow lesson asks exporters to consider resources needed by both the new venture and the current business. The account-level comparison below is original ELN analysis; the source does not supply a standard safe concentration limit.
A 40% revenue loss can erase more than 40% of the result
Fictional annual U.S.-dollar model: the largest account contributes US$400,000 sales and US$240,000 of directly avoidable costs. Other customers contribute US$600,000 sales and US$360,000 of such costs. The specified annual fixed-cost budget is US$300,000, including the management cover in this example.
| Annual amount | With the large account | Without it |
|---|---|---|
| Revenue | 1,000,000 | 600,000 |
| Included avoidable delivery costs | 600,000 | 360,000 |
| Contribution before fixed costs | 400,000 | 240,000 |
| Specified fixed costs retained | 300,000 | 300,000 |
| Remainder before other omitted items | 100,000 | −60,000 |
Do not assume a cost disappears with the order
The lost account removes US$160,000 of contribution, taking the stated remainder from US$100,000 to minus US$60,000. If some staff, premises or supplier costs are committed, do not put them in the avoidable column merely because that customer used them.
A credible, lawful cost reduction of US$30,000 would still leave minus US$30,000 under these assumptions. Its actual timing, exit cost and effect on the remaining customers also matter. This is not an instruction or permission to cancel a contract or change employment terms.
Give management an explicit concentration test
Ask for contribution by account, contract renewal dates, costs that can change, and evidence that other customers would remain. Test whether a replacement order needs extra selling effort, price reductions or capacity; do not enter an unwon replacement as assured revenue.
Use the annual unit-economics scenarios for the before/after results and keep the account-level table beside them. Cash runway should separately test actual collections and committed payment dates. The useful outcome may be a smaller commitment, different customer mix or a funded contingency—not an unsupported promise of rapid replacement sales.
Scope
- The figures and customer mix are fictional. No safe customer-concentration percentage, revenue forecast, credit assessment, cancellation right or full accounting/tax result is established.
Next step
Map contribution and commitments by customer, test the annual result without the largest account, and identify the actual funding and customer-diversification decisions before committing more capital.
Sources & review notes
UK government — business.gov.uk
Passage, dates and research notes
official-guidance · Plan your cashflow; resources still needed for the current business
Read lesson and transcript; use only actual resource constraints and dated cash planning, not financing availability or success promises.
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