The CFO’s Concentration Trap: How to Stop Betting the Business on One Product or Service

From a CFO seat, over reliance on one product or service feels a lot like balancing your entire forecast on a single column in Excel and hoping nobody asks what happens if that column drops by 10 percent. It can look healthy on the surface because the numbers are clean and the story is easy to tell, but it also means one competitor move, one funding change,

one policy tweak, or one shift in customer preferences can turn a “great quarter” into an emergency meeting.

The risk is not theoretical. U.S. Bureau of Labor Statistics data shows roughly half of new businesses make it to the five year mark, and revenue concentration is one of the quiet multipliers that makes normal volatility feel catastrophic when it hits (U.S. Bureau of Labor Statistics, Business Employment Dynamics).

The first thing I look at is concentration in plain language: how much of our revenue comes from the top product, the top customer segment, and the top funding source. If any one of those is doing the heavy lifting, your job is not to panic, it is to quantify. Run a simple sensitivity: what happens to cash flow if the core offer declines 5, 10, or 20 percent, and how long do you have before you need to cut costs or raise capital. Then pressure test why customers buy you in the first place, because “we have always done it this way” is not a strategy, it is a habit. CB Insights has consistently found “no market need” among the most common reasons ventures fail, and that is often what’s happening when a company tries to stretch one offer into every situation instead of building a portfolio that matches real demand (CB Insights, analysis of startup postmortems).

Diversification does not have to mean launching five new products and hiring a small army. The CFO friendly approach is to build adjacent revenue that uses the same capabilities, the same buyers, and the same delivery engine, so margins do not get sacrificed in the name of variety. Start with a “near neighbor” map: add on services, compliance support, training, implementation, reporting, maintenance, or tiered service levels that turn a single transaction into a relationship. Retention matters here, because expanding within your existing base is usually cheaper than constantly hunting. A widely cited Bain and Company finding, published in Harvard Business Review, estimates that improving retention by 5 percent can increase profits by 25 percent to 95 percent, depending on the business model (Bain and Company, HBR). That is not a promise, it is a reminder that a broader offer set can lift lifetime value without doubling your sales effort.

Market variety is the other half of the equation. A single product can still be resilient if it serves multiple segments with slightly different needs, budgets, and buying cycles. As a finance leader, I like segmenting by “who buys, why they buy, and how they pay,” then making sure we are not exposed to one procurement calendar or one economic driver. That is where consulting support can move fast, especially in public sector and regulated environments where demand is real but the purchasing path is complicated. Procuris Consulting has had success working with local housing authorities to strengthen service delivery and reduce single point dependence by helping teams broaden procurement and operational support offerings, tighten vendor strategies, and build repeatable processes that scale across programs. The result is not just “more services,” it is more stability because the organization is not betting its performance on one narrow lane.

If you want a simple CFO checklist to keep this from becoming an annual surprise, track three things monthly: revenue concentration by product and customer segment, pipeline mix by segment and service line, and contribution margin by offering so growth does not come from low quality revenue. Add one practical rule: every quarter, pilot one adjacent offer with a clear target customer, a defined price, and a measurable outcome, then keep what works and kill what does not. The goal is not to become everything to everyone. The goal is to make sure your business can take a hit, adapt quickly, and keep serving customers even when the market stops cooperating.