The impact of Carillion on small suppliers

It’s a sad fact that the biggest losers of the Carillion collapse are the myriad of small suppliers, especially in the construction sector, who relied on the giant for a significant amount of their business. They were left with unpaid invoices and, unlike the equally unfortunate pensioners of the company, will not get bailed out by the Pensions Authority or any other government agency.

But, you might say, didn’t Carillion sign up to the government initiative to pay their SME suppliers in 30 days?

True, but, like many large businesses which made the same commitment, words are cheap. In the end their own survival transcends their loyalty to their suppliers and the smaller you are the lower down the food-chain you will be at crunch time.

I know, I’m cynical.

Yes, but with good reason as this scenario has played out many times over, resulting in too many SME’s going out of business or at least suffering extreme financial distress when they find themselves at the butt end of a failed multinational fighting for survival.

OK, but if you are a small but growing business and a large multinational offers you the chance to work for them, what’s not to like. Well, the answer is not much, provided you do your homework and set your own rules for how you will become a supplier.

So here is my SURVIVAL KIT for becoming a sub-contractor to a major multinational:

• Do your homework, find out how they treat other small suppliers and subcontractors. If you don’t like what you see, walk away.
• Don’t let them become more than, say, 25% to 30% of your turnover
• READ THE CONTRACT and be sure to understand payment terms, service conditions and performance criteria.
• Make it your business to get to know the buyer, and the buyer’s boss. If the buyer you are dealing with leaves, their replacement may not be your friend.
• Find out if they have a history of under bidding and over running contracts. This is a serious red flag.
• Be dogged in chasing unpaid or late invoices. If you’re overly tolerant and allow payments to slide, then you are signalling that in a crunch you won’t shout as loudly as others.
• Take the time to be as granular as possible on the details of what you are to provide and be very picky about what constitutes completion and acceptance of your deliverables.
• Stay close to your contacts and nurture as many relationships as possible so as not to be exposed to the actions and decisions of one person at the company.
• Always remember that, especially in large companies, decisions may sometimes be made that protect the position of the person making them even at the expense of the best interests of the company. As a small business, your personal and business interests are closely aligned and it’s second nature to make decisions that benefit both. Not necessarily true in a large firm.
• Finally, always be willing to walk away, even if the job is not completed, if you see the warning signs. Some of the Carillion suppliers have commented that they knew the company was operating on razor thin margins and that should have rung the alarm bells.

SURVIVAL KIT for becoming a sub-contractor to a major multinational (3)

So, stay close, keep a constant look out for the red flags and don’t be afraid to fight your corner if you feel you are being taken advantage of.

There have been many successful partnerships between huge firms and small specialist suppliers, where everyone wins. Follow these tips and you can be one of them.

Article supplied by Garry Diver

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