In short: Depending on a single supplier is one of the most expensive risks a small business can take, because when supply stops, revenue stops. I learned that when a small supplier vanished with our customers' orders still due. Looking back, it was the best thing that ever happened to my business. Below is the story and the 10-point audit I'd use today.
What happened?
Years ago, we had a small supplier who simply disappeared. They dipped on us. We had customers we had to deliver for and orders to fulfill. What do you do? What are we going to do? How are we going to do it?
If that hadn't happened, we would never have ended up where we did. I'm thankful that supplier disappeared. Whoever was behind it, whatever the reason, if you're reading this, thank you from the bottom of my heart. Without it, there would have been no change.
Why is one supplier a money problem, not just an operations problem?
Because the cost lands on your cash first.
- Revenue stops the day supply stops.
- Refunds and chargebacks follow for orders you can't fill.
- Customers leave, and some don't come back.
- Emergency replacements cost more, because you're buying in a hurry.
This isn't rare. During the supply chain crunch, the Census Bureau's Small Business Pulse Survey found that domestic supplier delays reached 44.5% of small businesses by April 2022 (U.S. Census Bureau). In October 2021, 23.1% reported difficulty finding alternative domestic suppliers (U.S. Census Bureau). Delays eased afterward, but the lesson stands: when one supplier fails, finding another in a hurry is hard.
The 10-point supplier risk audit
Score each statement: 0 = no, 1 = partly, 2 = yes.
| # | Statement | Score (0–2) |
|---|---|---|
| 1 | No single supplier provides more than half of my top-selling products | |
| 2 | I have a qualified backup supplier for each top seller | |
| 3 | I've placed at least one small test order with each backup | |
| 4 | I keep a stock buffer of at least a few weeks on top sellers | |
| 5 | Lead times, minimums and delivery terms are in writing | |
| 6 | My agreements say what happens if the supplier can't deliver | |
| 7 | I know who to call at each supplier, by name | |
| 8 | I track supplier warning signs monthly | |
| 9 | I have a plan to tell customers quickly about delays | |
| 10 | I have enough cash reserve to cover a sudden supplier switch |
How to read your score
- 16–20: resilient. Review once a quarter.
- 10–15: exposed. Fix the lowest-scoring items this month.
- Below 10: fragile. One bad week could cost you customers. Start with items 2, 3 and 4.
The warning signs to watch
Suppliers rarely disappear without any signal. Watch for:
- Slower replies, or a contact who stops answering
- Delivery dates that keep shifting
- Sudden demands for prepayment or changes in payment details
- Quality slipping on recent shipments
- Vague answers about stock levels
A note on payment details: a sudden change in where to send payment is also a common fraud tactic. Always confirm by phone with a contact you already know.
What should you do the day a supplier disappears?
- Stop new sales on the affected products if you can't fill them.
- Tell customers immediately. Say what happened, what you're doing and when they'll hear from you next.
- Call your backup supplier. This is the day the test order pays off.
- Offer choices: wait, substitute or refund.
- Document everything for your records and any disputes.
- Run a review afterward. Fix the system, not just this week's problem.
The SBA recommends planning for disruptions before they happen, including thinking through how your business would keep running if something goes wrong (SBA). A backup supplier is the cheapest version of that plan.
What did I take from it?
Don't just fix the problem. Use it to fix the system. If you can learn not to fold under pressure, and to use failure instead of fearing it, a crisis becomes the cheapest moment to make the change you've been putting off. For us, that supplier disappearing forced the change that made everything after it possible.
▸ What this taught me about policy
That supplier problem is part of why I care about access to products and suppliers in my advisory work on SDG 8 & 9. A small business with one supplier is fragile, often because it can't get approved by anyone else. SDG target 9.3 calls for increasing small enterprises' access to financial services and their integration into value chains and markets (UN). Easier access to multiple legitimate suppliers would make small businesses far more resilient.
FAQ: supplier risk
Why is relying on one supplier risky?
If that supplier fails or delays, your revenue stops, and you face refunds, chargebacks and lost customers while you scramble for a replacement.
How many suppliers should a small business have?
At least one qualified backup for each top-selling product, ideally tested with a small order before you need it.
What should I do if my supplier disappears?
Pause sales you can't fill, tell customers right away, call your backup, offer choices and document everything.
One supplier is a single point of failure. Build a second door before you need it.
What is Robert Nikic's view on supplier risk?
Robert Nikic's view is that relying on one vendor puts a small business's cash and customers at risk. Backup suppliers, stock buffers and written terms are inexpensive protection, and a supplier failure can force changes that make a business stronger.
Related reading: Robert Nikic on Customer Complaints: Don't Just Fix It · When It's Too Calm, I Get Nervous · Robert Nikic on Invoice Fraud and Fake Supplier Emails
