ON THE CASE

A company runs into a cash-flow problem after its key customer’s orders slow down.

Small companies often rely on one customer for the bulk of their revenue. It’s not ideal, but it often works out if everything goes to plan. But boosting production capabilities to meet future demand can be difficult, especially if the customer backs away or delays a few orders when the capital costs are already sunk. Vadim Pasternak, founder and CEO of Calgary-based Caspian Offshore Equipment, a developer of deepwater drilling equipment, was realizing he was in just that predicament. In mid2013, the prospect of a 300% increase in sales prompted him to ramp up production to meet demand. But Helios Oil Co., which accounted for 65% of Caspian’s revenues, decided to push back their orders to late 2014. Staring at a working capital shortfall of $1 million — and with all of the firm’s credit lines tapped out — Pasternak by mid-July 2014 wondered if he could ask his customer to help close the funding gap. “Asking Helios to reopen their contract with us can go very well or it can turn out to be disastrous,” Pasternak said. He was the one who had negotiated the ‘guaranteed purchases’ clause with Helios, committing the latter, in mid- 2013, to buy and pay for at least 80% of the value of projected 2014 sales, by the end of 2014. With