I talked recently to a friend in another state who’s business just filed for bankruptcy.  After 28 years in business, always profitable and always successful, they were going under.  About 3 years ago they decided they needed to grow their business more rapidly, and went looking for the shortest path to that goal.  That path led them to Wal-Mart.

Upon securing orders from Wal-Mart, their business grew each month.  Before long they had doubled their workforce and were adding onto their building.  It was a heady time.  It seemed like the rocketship ride into the cosmos would never end.  They laid in huge inventories, because as you know, when Wal-Mart orders they want it shipped today.  So they had huge inventories of both raw materials and finished product.  They had a huge payroll and huge payments on expansions to a building that had previously been paid off for years.  All of which was fine, because the money coming in from Wal-Mart covered all of that and more.

Then one day the party was over.  No notice, no warning, no discussion that the product wasn’t selling or was no longer as popular — nothing.  One day the orders just stopped coming.  After a couple of weeks of no orders (when there had previously been orders almost every day,) the worst was confirmed.  Wal-Mart had turned on a dime and gone a different direction.  Sorry.  Wish you the best.

And just like that, a business that had fed, clothed and housed over 250 families for nearly thirty years was gone.  Not just faded away, like often happens to businesses whose products lose their appeal, but gone in an ugly bankruptcy that left many local suppliers hurt and angry.  My friend went from being a pillar of strength in his community to a pariah.  He had to discontinue his attendance at chamber of commerce meetings and many other public-oriented things he loved.  The community he had helped and served for years was basically turning it’s back on him.

I guess the moral to this story is this:  if one customer is big enough that it’s departure would seriously hurt your business, you need to diversify and you need to do it know.  It’s way better to have 20 customers who do $500,000 per year with you than to have two customers who do $5 million each.  That’s not to say you shouldn’t do business with Wal-Mart (or other big, national customers.)  What does say is that if you take on Wal-Mart, you’d better get busy adding a huge number of little guys (so that Wal-Mart’s percentage of your total business goes down.)  And you’d better do that like your life depends on it.  Because Wal-Mart doesn’t do business with anyone forever.  Landing Wal-Mart as a customer is no time to breathe a big sigh of relief and think your ship has come in.  Your troubles have just begun.  Because after all, when you live by the big customer, it’s likely you’re going to die by the big customer.