When Half the Sales Depend on Five Buyers Family Office Private Wealth Journal · Editorial research desk Family Office Private Wealth Journal · 2026-11-02 CC BY 4.0 · https://creativecommons.org/licenses/by/4.0/ Source: https://journal.research.university/journals/family-office-private-wealth/articles/expansion-10-1371-journal-pone-0259689-solutions Abstract A direct-investment committee can distinguish concentration from contractual dependence by tracing customer shares through tooling commitments, replacement timelines and cash availability. This AI-assisted editorial analysis proposes a diligence procedure; it reports no new investment results. Two suppliers, the same headline Two suppliers each earn half their sales from their five largest buyers. At the first supplier each buyer accounts for ten percent. At the second the shares are thirty, five, five, five and five percent. The headline exposure is identical. Using fractions of sales, the sum of squared shares is 0.05 for the first supplier and 0.10 for the second. A committee comparing the two can now see something its first screen concealed. It still does not know which supplier could withstand a lost order. The illustration is hypothetical; neither supplier is an observation taken from the study. Gao, Ma and Wang examine both the combined sales share of major customers and a measure that squares their individual shares. The distinction matters for a family office considering a direct stake in an operating company: one measure reveals how much business sits inside a group, while the other gives greater weight to the largest buyer. Neither describes the contract governing a single sale. Use both to select the agreements that deserve closer reading. What the fitted curve means The authors study Chinese listed firms using disclosures from 2008 through 2018. Their screened sample contains 12,365 firm-year observations from 2,555 firms. One outcome called risk-taking is calculated from historical variation in return on assets. It measures variation in an accounting result. It does not directly measure the probability of losing a key contract, a founder's appetite for risk, or the family's ability to fund a rescue. In particular, a business could show steady past earnings while facing a renewal date that will determine its survival. The paper reports a curved association: at different levels of concentration the fitted relationship with earnings variability changes direction. Stable customers may share information or make a supplier's investments easier to plan. Dependence may also let a powerful buyer demand concessions after a supplier has already paid for dedicated capacity. Those explanations give the committee two competing questions to investigate. A statistical turning point in a listed-company sample cannot tell a private manufacturer what fraction of its sales it ought to obtain from one buyer. The voluntary disclosure setting and sample exclusions further limit transfer. The authors' robustness checks do not make a buyer's departure a randomized event. Reconstruct the exposure Ask the controller to reconcile trailing sales by billed customer to the ledger and to map each customer to the purchasing group that can move its orders. Preserve both views. Five subsidiaries billed independently may negotiate as one group; two divisions of one parent may actually have different sourcing authority. Record the evidence for either conclusion and flag uncertain affiliations. State the denominator, time period and treatment of credits. The square-share calculation in the illustration covers only the five largest buyers. Changing the number of buyers or switching between fractions and percentages changes the value; record the convention beside every result. Then ask the commercial lead to choose the relationship management believes is most protective. What did the buyer actually provide: a binding minimum order, an indicative forecast, or merely a history of repeat purchases? Link the answer to the signed agreement and the corresponding order history. Identify who owns dedicated tools, whether they can be transferred, and which party pays when designs change. Record disagreements between the sales team's explanation and the contract. A repeat buyer might be dependable without offering contractual protection; the committee needs to know which proposition its decision relies on. Price the time needed to replace a buyer Use the second fictional supplier to rehearse a delayed renewal. Model a reduction in the largest buyer's orders separately from a delay in payment on invoices already issued. Reduced orders remove future contribution margin; delayed receipts create a cash timing problem even if the margin is ultimately earned. Combining the two as a single revenue haircut obscures when cash is needed and may double count losses. Ask operations how long a different buyer would take to qualify the product, and which labor and tooling commitments would remain during that interval. The treasurer should translate those assumptions into a monthly cash bridge, with opening cash, collectible receivables, committed payments and available borrowing shown separately. Test replacement time against the date of the lowest cash balance. A line of credit supported by the lost receivables may shrink precisely when it is needed. Model its actual borrowing conditions. Keep any prospective family capital outside the base case unless a person with authority has documented the commitment. Decision and stopping rule The investment chair should minute the strongest case for the anchor relationship and the most plausible mechanism for a damaging hold-up. State which observation would change the decision: for example, enforceable minimum volume could support the base case, while a discretionary forecast would move that volume into a scenario. Set a date and an owner for checking the next renewal or qualification milestone. Preserve the model used at approval so the board can compare what happened with what it assumed. Pause the decision if buyer identities cannot be reconciled to the ledger, material contracts are unavailable, or a downside case produces a cash deficit without identified funding. A pause calls for specific missing evidence; it does not establish that a concentrated supplier is a poor investment. A committee may instead change price, staged funding or information rights after examining the evidence. This is an AI-assisted editorial application to diligence. The study did not test this procedure, a private-company allocation rule, or family-office returns. Source, attribution and limits [1] Di Gao; Jiangming Ma; Yiru Wang. Does the risk of major customer need to be balanced? The role of customer concentration in corporate governance. PLOS ONE (2021-11-09). https://doi.org/10.1371/journal.pone.0259689. CC BY 4.0. Chinese listed firms with available disclosures, 2008–2018. Voluntary reporting, excluded firms and observational design limit inference and transfer. Accounting volatility is not probability of customer loss. Inconsistent coefficient and curve wording make a numerical concentration cutoff especially inappropriate. Prepared by the Family Office Private Wealth Journal editorial research desk with AI assistance at the direction of Dr. Freedom Cheteni. Original research authors retain full credit and are not authors or endorsers of this companion. This proposed process has not been evaluated in a new empirical study; no independent peer-review acceptance is claimed. This is educational analysis, not individualized investment, legal or tax advice. Rights: © 2026 The Research University. © 2026 The Research University. This original editorial text is licensed Creative Commons Attribution 4.0 International. Attribute the title, editorial research desk and publisher, link to the license and indicate changes. Underlying research, talks and recordings retain their separate attribution and rights. Edition changes: Original AI-assisted editorial synthesis. Research findings, transcript themes and proposed practices remain distinct. No new participant data or independent peer-review acceptance is claimed.