A $20 million commitment in exchange for 10% off and 90-day terms means floating $200,000 before a single dollar arrives. Model the working capital before you answer, not after.
If a major retailer just offered your commercial team a $20 million volume commitment in exchange for a 10% discount and 90-day payment terms, this is what you do:
When your own money is on the line, a bad deal can start to look like relief. To a founder with cash tied up in inventory or an exhausted sales team trying to hit a quarterly target, the immediate reaction is to figure out how to get to yes. They want to make the deal work.
But look at the actual economics.
To fulfill that order, the supplier must fund production for three months before collecting a single dollar. That requires floating $200,000 in immediate cash just to finance the buyer’s demands.
The moment your team accepts those terms without securing anything in return, they establish a dangerous baseline. You are no longer growing a business. You are paying for the privilege of being on the shelf. The pressure of payroll and inventory clearing is real, but it causes teams to negotiate against themselves before the buyer even has to push back.
You have to model the true cost of the request before responding. Identify the exact working capital required to deliver the volume. Build a specific walk-away number based on hard economics rather than the emotional desire to close a deal.
Stop confusing revenue with survival.
Preparing for a conversation like this one?
The Maker Group gets commercial teams into the room with one position, one set of numbers, and a walk-away everyone can name.
Book a consultationFirst published by Matt Geddie on LinkedIn.