Remember Outboard Marine Corporation (OMC)?

At its peak, OMC was a multibillion-dollar Fortune 500 company behind Outboard giants Evinrude and Johnson, along with major boat brands like Chris-Craft, Four Winns, Lowe, Princecraft and Stratos.

In 2000, OMC sold roughly 100,000 outboard motors and controlled about 1/3 of the outboard motor market.

Big. Established. Iconic brands. Massive market share. And on December 22, 2000, OMC filed for bankruptcy. About 7,000 employees were laid off.

Imagine being a supplier in 2000 and hearing:

“OMC? We’re not worried about them. Look how big they are.”

Sound familiar? Enron. Lehman Brothers. Sears. Toys “R” Us. First Brands. And OMC.

“They’re too big to fail” has crushed many a DSO, supplier balance sheet, and Bank Covenant.

The lesson isn't that every large customer is a bad risk. The lesson is that size is not a credit strategy.

Great companies intentionally decide which risks they're willing to retain — and which ones could hurt badly enough that they should be transferred.

Because the best time to have that conversation is before the big company that “can't fail”…

fails. Again.

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