Many small and medium-sized enterprises (SMEs) are risking everything by depending on one client for the majority of their turnover.
Many small and medium-sized enterprises (SMEs) are risking everything by depending on one client for the majority of their turnover
According to a survey from Close Invoice Finance, a tenth of the UK’s small businesses report that more than half of their turnover comes from a single client.
David Thomson, chief executive of Close Invoice Finance, comments, ‘By relying heavily on one customer, companies put themselves at risk of business failure should this customer fall into financial difficulty.’
Alex Macpherson, chief executive of Octopus Ventures, says: ‘You only need to look at the effect of Zavvi collaping because of its relationship with Woollies, to see the impact of having too close a relationship with another company.
‘Small businesses have the advantage of being nimble and quick. They should try and build their customer base as much as possible to mitigate any risks.’
According to the latest figures from the Insolvency Service, 4,607 companies went into compulsory liquidation or creditors’ voluntary liquidation during the fourth quarter of 2008 in England and Wales. This is a rise of 11.9 per cent on the previous quarter and an increase of 51.6 per cent on the same period a year ago.
Of the 500 small businesses surveyed by Close, three in five have no insurance to protect against customer default.