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What to Do When Customers Don't Pay Protect yourself.

By Margaret Littman

This story appears in the October 2016 issue of Entrepreneur. Subscribe »

Chris DeLorenzo
Mitchell Compton

Mitchell Compton II's success was starting to freak him out. He cofounded the San Diego-based Coconut Beach, which sells a line of coconut chips and drinks, and debuted the products at a natural-foods trade show in March 2015. Orders came in rapidly; he soon got up to $1 million in sales. But then he started wondering: How reliable are some of these people? "We had to figure out how to mitigate our worry over not getting paid in a timely manner, or at all," Compton says.

Related: How to Check a Customer's Credit Worthiness

He decided to play it safe: He told many vendors that he simply couldn't sell to them at the time. And it went on like this for months, with Compton turning down business because he wasn't sure when he'd get paid.

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