Small business trouble can mirror what’s going on with large companies and the stock market.

Unfortunately, I got a dose of that this past fall. I suspect many of us small business owners will be working through these problems in 2008, and I’d be interested to know what others have done in response, or done to prevent it.

A major customer of mine declared personal bankruptcy while owing to my company a significant amount of money.

Up until that time I had known he was having trouble paying the bills, but I had taken comfort in a few things, such as...

1. His history of good communication about bill payment
2. His significant net worth
3. His strong credit history
4. His assurances his company would pay all its bills, in full

The bankruptcy took me by surprise, and in the short run caused my business a significant disruption. Worse, he lives in Florida, a state that is known for being friendly to people declaring bankruptcy. He can keep his $800,000 house in addition to his nearly $3 million net worth because it is held mostly in retirement accounts.

His main problem, I found out later, is that he owed far more to at least one other company than to mine, and he could not negotiate his way to a settlement of the debt.

My mistake, I realize now, is in not understanding how indebted he was to another company. Even if he could have reached some reasonable agreement with me, he still had the other major creditor hanging over his head. I never should have exposed my company to him in the first place.

I went through the well-known stages of grief (denial, anger, bargaining, depression, acceptance) after I found out.

The research that would have been required in advance of extending credit to him would have been difficult. But I’m now extra vigilant about this happening in other situations.

In the end, there is not a ton I can do except move on and try to avoid this kind of thing disrupting my business again. Any Bizbox readers have this happen to them?