Caraway Tea’s Chapter 11 filing on June 9, 2025 highlights the fragility even mid-sized B2B suppliers face amid unpredictable markets. Any bankruptcy filing should serve as a wake-up call to existing businesses. Through solid forecasting, cash management, transparent communication, and preparedness for volatility, business owners can build operational 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 can expose your business to sudden economic shifts. Diversifying both product lines and customer segments helps buffer against downturns or contract loss. Many businesses have felt the effects of losing a few of their main customers when the economy sours. Plan accordingly for the future.
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. The biggest costs for small businesses are labor and rent. Think it through before expanding too quickly or taking on more than the core business model. Can you ramp up or ramp down as economic conditions fluctuate.
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. Watch out for companies loaning you money on your receivables or similar cash advance companies. Those companies charge high interest, have hidden fees and if you get in default they will take money directly out of the company's bank account. Many companies are forced out of business or into bankruptcy as a result as there cash flow becomes heavily impacted.
4. Maintain Long-Term Leases
Operating on a month‑to‑month lease undermines stability. Secure longer leases for operational certainty and stronger position during negotiation for example if you have to sell the business.
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. Keep the financials of the company up to date. Hire the right professionals.
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. Owners of companies need to track their income and expenses each and every month.
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—sooner than later.
9. Scenario Plan for External Shocks
Global supply chain issues , post‑pandemic demand swings, and tariff issues 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 the right advisors or restructuring experts before a crisis can save a business from deeper distress. Early detection paired with professional guidance and planning can facilitate smoother outcomes.
David A. Arietta, Esq. has over 30 years of experience in planning and dealing with small business issues, including the filing of bankruptcy if warranted in certain situations. Call him at (925) 472-8000 for a review of your situation.