Concentration Risk Self-Audit: How Exposed Are You?

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Plenty of contractors have never put a number on how concentrated their revenue is. This self-audit shows, in your own dollars, how much of your business rides on a single carrier, program, or referral source.

There are two separate tests here, and running them together is how a shop at 12 percent ends up scored like a shop at 60 percent.

Concentration. Your single largest source as a share of revenue, counted at the parent company. Healthy at or under 10 percent, caution above 10 and up to 25 percent, danger above 25 percent. Exactly 10 reads healthy, exactly 25 reads caution. This measures where you stand today.
Stability, the swing test. How many percentage points of your total revenue one realistic decision by that source could move: a rate cut, a routing change, a program ending. Points, not a relative percentage. Circle anything above 5 points, and treat anything above 10 points as not up for debate. Exactly 5 is not circled; exactly 10 is circled but not yet in the not-up-for-debate group. Like the zones, this is a RocketLevel working test from the programs we run, and it is the same test The Concentration Risk Playbook uses. This one is about what could happen next.

A source can pass one test and fail the other. Score them separately.

Worked example (the sample numbers your sheet copy opens with). $3,000,000 in revenue. Largest carrier $900,000, which is 30 percent: danger. Largest third-party administrator (TPA) or program $500,000, about 16.7 percent: caution. Largest referral source $300,000, exactly 10 percent: healthy, because 10 sits inside the healthy band. The verdict follows the worst of the three, so this shop reads danger.

Date this reading and keep it with the sheet: total revenue, the name of your single largest source, its dollars, and its share. Run it again on the same date next year. A level on its own cannot tell a steady 20 percent apart from a 20 percent that was 8 percent twelve months ago, and the second one is the one that should worry you.

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Three tools, and which one to reach for. This sheet and The Concentration Risk Playbook both measure your single largest source as a share of revenue and use the same zones listed above. Those bands are RocketLevel working thresholds. They proxy for how quickly you could replace the source if it went away, which is the thing you actually care about and cannot measure directly.

The Calculator: Revenue Concentration (HHI) and Your Risk Zone measures something different: it squares and sums every source's share to score your whole mix on a scale that runs to 10,000, using thresholds antitrust regulators wrote for judging mergers. Different instrument, different scale, so the two numbers are not meant to match.

If your book looks spread out but you suspect one property management group or one building type sits underneath it, run The Vertical and Channel Concentration Audit, which cuts the same revenue two ways. If you want the audit and the ninety-day fix on one page you can work in, use the The Concentration Risk Audit and Diversification Sprint Board.

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Three ways to use this self-audit

On a computer: run it right below. Enter your revenue and your three largest sources, and both tests read out separately.
On a phone, or to keep your numbers: make your own copy in Google Sheets.
No Google account? Download it for Excel and open it in Excel or any spreadsheet app. </aside>

https://gem-resource-hub-calculators.nyc3.cdn.digitaloceanspaces.com/concentration-self-audit/index.html

How to use it: in your Google Sheets or Excel copy, edit only the highlighted input cells (your total annual revenue, your residential share, and the revenue from your single largest carrier, program, and referral source). Your exposure table and verdict update automatically.

Important: please read. This tool is provided free of charge by RocketLevel as a general, educational estimate and starting point only. The results are illustrative estimates based solely on the figures you enter; they are not a guarantee of any outcome, value, cost, or result, and they are not legal, financial, tax, accounting, insurance, or other professional advice. Using this tool does not create an attorney-client, advisory, or other professional relationship with RocketLevel. RocketLevel makes no representations or warranties of any kind, express or implied, regarding the accuracy, completeness, or suitability of this tool for your situation, and provides it "as is." You are solely responsible for verifying any figures and for consulting your own attorney, accountant, financial professional, or other qualified advisor before making any decision. To the fullest extent permitted by law, RocketLevel and its affiliates, officers, and employees disclaim all liability for any loss, damage, or claim arising from its use.

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Tools for this play

Do it yourself or have it done. The two tests on this sheet take ten minutes with the last 12 months of revenue by source, and you can run them every year on your own. Bringing a danger-zone number down means adding sources you own, and building those commercial relationships from scratch is the part that takes dedicated people to staff. RocketLevel's inside sales team works that part, booking meetings with property managers, facility directors and owners so no single source carries the business.

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Part of the free GEM Resource Hub by RocketLevel Commercial. Playbooks and tools for running the whole restoration business, A to Z, while specializing in building commercial revenue you own. RocketLevel is a bolt-on inside sales team that strengthens your commercial pipeline. Explore more in the GEM Resource Hub. New here? About RocketLevel and what the system has produced. When you're ready, see what your market is worth or book a Commercial Growth Call.

How we source figures: every number in this library names its source or is labeled as RocketLevel's own working figure. Read the sourcing standard.

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