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Wednesday, August 12, 2009

One of My Key Suppliers Has Gone Bust

If a key supplier of your business becomes insolvent or ceases to trade this can have huge impact on your own business. With insolvency many people concentrate on the losses to the suppliers of the business, and ignore the consequences on the purchasers.

If you are a purchaser from a business, it may make a huge difference to you if one of your main suppliers ceases to trade. If that supplier is one which supplies a product that you cannot readily get anywhere else, then trouble may be in the offing.

You need to maintain a dialogue with your supplier, especially where you have an operation which relies in real time delivery. With many such businesses, an insolvency practitioner or turnaround expert may well have been advising for a while. If that is the case you will generally be better off as he will have talked to you about the company's problems and sought to make you part of the solution, by maybe asking for payments up front to ease cashflow, in return for a cut in price.

If you have not been consulted you should speak to the insolvency practitioner as soon as possible anyway as there may well be stock you can pick up at a discount whilst you source an alternative supplier or there may be an opportunity to laterally diversify the business by controlling the supply yourself by buying the defunct business.

In reality I suspect that what you may find is that the old company will be closed down but of the underlying business is basically sound, you will see the existing management buy the business and keep it going without too much disruption. They will have arranged a pre-pack sale of the business, to save jobs and the underlying trade, and so whilst you may experience a slight disruption, fundamentally you will be unaffected.


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