Plan for customer collapse

The collapse of REDGroup Retail, owner of the Borders and Angus & Robertson chains, still have me thinking – about everything from poor planning to poor cashflow management to poor customer relationship management.

But it’s also got me thinking about what would happen to my business, Taskmaster Enterprises, if we lost a major customer. That’s the reality facing many companies in the publishing sector right now.

This is something worth planning for. The sudden demise of a customer can have terrible knock-on effects for suppliers if they find themselves overly exposed – say, with more than 20% of their sales coming from one source.

Start by looking at your customer base. Who are your biggest customers, and how much of your sales do they represent?

Now take a look at their condition. Have they been struggling to pay their bills? Or reducing their orders dramatically? This could be a sign of trouble to come.

Now stress test your cashflow statement. If one big customer goes under, what happens to your business? Do you need to consider diversification?

If you are in an industry that is currently struggling – retail and property spring to mind – you must get this done – today!