The full ramifications of the recent collapse of construction giant Carillion are still to become clear, but it reminded me of, amongst other things, the fine line between success and failure. This is not the platform for political comment about the whys and wherefores of whether Carillion should have been awarded some of the recent contracts that it got – there will be plenty of column inches allocated to that in other publications. No, this is a question of how a company employing 20,000 people crosses the line from being an expanding provider of services in various parts of the public sector to a disgraced company in liquidation that has left many smaller businesses in something of a mess.

The goal becomes size at all costs
Overtrading is a phenomenon that has plagued growing businesses for centuries. Companies that have aggressive expansion plans can be the darlings of industry and government, with confident, plausible entrepreneurs at the helm. Some of the companies succeed and are well-managed, but for others, the goal becomes size at all costs and the iceberg is just around the corner. An over-aggressive attitude to growth too often leads to a company being unable to obtain sufficient finance for its operations, which will eventually lead to it simply running out of money.

Sadly, before they start to see the bigger picture of the failure for which they are heading, companies that are overtrading will take short-term actions that they believe will help them through the cash flow difficulties they are facing. Actions such as slowing down the payment of bills to suppliers. Ultimately, they achieve nothing more than delaying the inevitable for the company concerned, but the impact on their suppliers who have not been paid can be catastrophic. Many of those suppliers are small businesses that can ill afford customers such as Carillion taking 30 days to pay their bill, let alone the 90 or even 120 days that major companies seem to consider their right to take to settle their account. Sadly, the eventual impact on some of these small businesses will be that they are forced to close.

The warning signs are obvious
The warning signs to those small businesses are obvious, but there is often nothing that they can do about it without putting their activity with that major customer at stake. In the end they may prove to have been better off without that big company’s business, but by the time they work that out it’s too late. It’s long been good business practice not to have all your eggs in one basket and that remains true today.

Regular readers of this column will be well aware of what I think of the business practices of large businesses, all of which are bullies to small local ones. I just hope the fallout from Carillion won’t do too much damage to the county’s small business economy.