You read a lot in the press at the moment about how to survive the recession. What about the longer-term?

I believe the key to business success is not so much succeeding against your rivals, as succeeding in partnership with your customers and suppliers – partnership being the key word. When I started Shared Earth in 1986, I had little capital and was taught on a business course that you should manage cash flow at all costs. I took this to an extreme, ignoring reminders from my suppliers, often final reminders, sometimes even waiting for the threat of court action before paying.

If sales are dire and you don’t have the money, that may be your only option. But my sales weren’t dire and I started to think, I’m running a fair trade company, is this fair? Clearly it wasn’t and I decided to make it a principle to pay on time. This has paid off many times. Business is not just about cut-throat competition, it’s also about creating good relationships.

Like many, Shared Earth is suffering from cash flow problems in this recession. One principle of fair trade is that you pay suppliers in advance – usually 50% - so they can purchase raw materials and not fall into the hands of loan sharks. So when we had a large order from Oxfam in April, I was worried. It would take 3 months to produce, two to reach our warehouse, and another month until we received payment.

Cash flow was a big issue – but it’s hard to turn a large order down. In the UK we worry about redundancy or bankruptcy, but at least we have a social security system. In countries like India there is none. Producers who are out of work will sometimes, literally, be unable to feed their children. I didn’t want to turn the order down. So I approached our suppliers for help.

The rewards for paying on time became apparent immediately. Most of our overseas suppliers either reduced our advance payments or offered to accept payment on receipt of the goods. In the UK, most agreed immediately to extended credit. “Don’t worry – pay your bills in September,” said one in April. That’s five months credit! Two others followed with the same generous offer. “Pay half as you order, half when you can afford to,” said another. Instead of grabbing extra credit by waiting for final reminders, we’re being offered it gladly, and more.

Business is about partnership. When times are hard, if you have good relations with your suppliers, it’s a lot easier to work together to keep each other going. We have had such support from our suppliers that we haven’t even needed to take up all their offers of help.

For the wholesalers who may be reading this, it works the other way too. If suppliers are generous to you, you almost always repay them with greater loyalty, often with larger orders. In a recession, that’s important!

(from Jeremy Piercy’s regular column in Gifts Today)

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