In an ideal world, you would have eight to 12 clients, your largest client(s) would represent 25% of your fee billings, and no client would be so small that they were unprofitable. Obviously any client can be too large. In fact, the yellow light should come on when they approach 25%. The light should change to red if they represent 35%, if only because many firms do not recover from the loss of a client larger than that.
Less obvious is the fact that clients shouldn’t be too small, either. The reasoning you provide these smaller prospects before you accept their work is this: “We would LIKE to work for you, but we have found that only clients of a certain size allow us to a) learn their situation deeply enough to do effective work and b) make a profit during that process.”