How much of your revenue should one employer be?

One large employer contract can carry a practice, until it doesn't renew. Know what share of your revenue each employer is, and what happens to your break-even if the largest one leaves. Plan for that answer while things are going well.

Measure it

Divide each employer's monthly revenue by your total monthly revenue. Do it for your largest employer, and for all employers together.

In a made-up example, your practice brings in $40,000 a month. Your largest employer pays $9,000, or 22.5%. All employers together pay $14,000, or 35%.

Test the loss

Now take the largest contract away. Revenue drops to $31,000. If your monthly costs are $33,000, you're $2,000 short each month until you replace it or cut costs. Some of those members may stay as individuals, which softens the drop. Here's how to find your break-even.

There's no single right number

I'd watch two things rather than a fixed limit:

• Whether losing your largest employer would put you below break-even.
• How many months of cash you'd have to replace it. Check your runway.

Ways to lower the risk

• Keep growing your individual panel alongside employer contracts.
• Sign more, smaller employers instead of one large one.
• Stagger renewal dates so contracts don't all end in the same month.
• Build a cash reserve sized to the largest contract. Here's how to build a reserve.
• Avoid hiring for one contract unless the contract covers the cost and its term is long enough.

Watch it at renewal

A large employer knows it's large. Prepare more for its renewal than for any other. Here's how to prepare.

What I'd do this week

• Work out each employer's share of last month's revenue.
• Run your break-even with the largest contract removed.
• List each employer's renewal date and check for clusters.

Common questions

Is 20% from one employer too much?
It depends on your costs and cash. Run the break-even test. If losing it puts you under, plan for it now.

Should I turn down a large employer to avoid concentration?
Not necessarily. Sign it with a cap, a longer term or a reserve plan instead.

How do I see this each month?
Have your bookkeeper tag revenue by employer. Then the share is a quick calculation from the P&L.