Our EOS business depends on one major supplier. Should we fix that before putting the company on the market?

Question

Tyler Smith · Accepted Answer

Assess the exposure before going to market, and reduce it where commercially practical. Strong internal execution does not remove the risk that an outside supplier could interrupt delivery, change pricing or refuse to continue an arrangement after a sale.

The distinction between a well-run EOS company and an exit-ready business matters here. Your team may manage the supplier relationship effectively today, while a buyer still sees a dependency that could undermine future performance.

Put the specific exposure on the Issues List rather than recording a vague concern about supplier concentration. Establish:
- Which products or services depend on that supplier.
- How long a disruption could last before customers are affected.
- Whether alternatives have been tested, not merely identified.
- What switching would cost and how it would affect quality or margins.
- Whether contracts contain relevant termination, assignment or change-of-control provisions, with counsel reviewing the language.

Use IDS to determine the underlying constraint. It might be technical qualification, purchasing economics, unavailable capacity or a relationship held by one individual. Assign a Rock to the most material remedy, with measurable completion criteria.

Do not add a second supplier simply to improve the appearance of readiness. An unqualified alternative can introduce more risk than it removes.

If diversification is impractical, prepare evidence of the existing arrangement's durability, contingency options and remaining limitations. The recommendation is credible resilience, not a claim that every dependency has disappeared.