Caraway Tea’s Chapter 11 filing on June 9, 2025 highlights the fragility even mid-sized B2B suppliers face amid unpredictable markets. However, it can also serve as a wake-up call. Through solid forecasting, cash and lease management, transparent communication, and preparedness for volatility, business owners can build resilience—potentially averting a reorganization, or at least entering it from a stronger position.
1. Diversify Revenue Streams & Customer Base
Relying on a small number of major clients or co‑packing deals can expose your business to sudden shifts. Diversifying both product lines and customer segments helps buffer against downturns or contract loss.
2. Plan for Volatility
Caraway’s 2021 boom was followed by a dramatic slump. Build flexibility into your operations: consider scalable staffing, adjustable supply contracts, and lean inventory strategies to manage fluctuations.
3. Establish Strong Liquidity
Access to capital is critical—but borrowing is not a cure if revenue isn't sufficient to support debt service. Maintain cash reserves and prioritize profits, not just top-line growth.
4. Maintain Long-Term Leases or Ownership
Operating on a month‑to‑month lease undermines stability. Secure longer leases or property ownership for operational certainty and stronger position during negotiation.
5. Forecast Realistically, Not Optimistically
Forecasts must account for downturns and include multiple scenarios—best‑case, baseline, and stress (worst‑case) scenarios—to prepare for sudden demand shifts or external disruptions.
6. Communicate Transparently—with Stakeholders
Caraway’s silence—evident in no public acknowledgement on its website or social media—adds uncertainty. Regular, transparent communication with stakeholders (employees, customers, suppliers, and investors) builds trust and enables collaborative solutions in challenging times.
7. Monitor Profit Margins, Not Just Revenue
Even with projected revenue of $3 million, Caraway’s narrow pre‑tax margin (about 11%) offered little cushion. Track margin trends and cost structures closely, and optimize operations to preserve profitability.
8. Strengthen Cash Flow Management
Use rolling forecasts and monitor accounts receivable/payable. When cash becomes tight, prioritize payments and consider renegotiation—or alternative financing—early.
9. Scenario Plan for External Shocks
Global supply chain issues and post‑pandemic demand swings should have prompted early scenario planning. Conduct stress tests regularly, including best/worst-case scenarios for supply, demand, interest rates, and cost pressures.
10. Get Expert Advice Early
Engaging financial advisors or restructuring experts before a crisis can save a business from deeper distress. Early detection paired with professional guidance can facilitate smoother outcomes.