If you’re hoping to cater to corporate giants as prime customers, be careful what you wish for: Although large contracts generally help you move more inventory and enable you to hire new employees, the increased business may not necessarily lead to higher profits.
The Intuit Small Business Blog asked Cynthia Kay (pictured), entrepreneur, speaker, and author of Small Business for Big Thinkers, to weigh in on the advantages and challenges of working with big corporate clients.
ISBB: What are the challenges that small businesses face when trying to land big-business contracts?
Kay: To begin with, larger global firms are often concerned about a small supplier’s business sustainability. Does the small company have the people, technology, and financial resources to deliver what they promise? For example, if the supplier is on the service side, the potential customer may be worried about whether or not the business can sustain itself if the owner or other key individuals are unable to work or leave the company. Show potential customers that your business isn’t dependent on any one person to sustain successful operations.
Next, will they still be able to complete the work? Small companies need to demonstrate a stable and productive workforce. On the manufacturing side, large companies are concerned that small suppliers might not have the resources to stay current technologically vs. a bigger player. Here, the small supplier needs to show that they have a plan to stay up-to-date and the resources to invest in new technology.
Another challenge is the financial picture: Big companies will want to see evidence of strong financial performance. They want to know that the supplier will be able to deal with the inevitable spikes in business and still keep their doors open.
Finally, when trying to land a big account, the small firm may not be able to serve the large firm across the country or [around] the globe. Big companies like the convenience of a supplier that can serve them wherever and whenever they are needed.
How do small-business owners decide whether big-business contracts are appropriate for their operation?
Owners need to be realistic about the types of contracts they pursue and the size of those contracts.
First, they should never go after work that is not a part of their core capability. It takes too long to build a capability, and it can deplete resources that might be better deployed in their area of expertise.
If the work is within their core capability, consider the volume of work that the contract will bring to the company. Owners should evaluate whether they currently have the people, machinery, and technology to do the job. If they don’t, can they ramp up quickly? Getting the contract is just the start; there is a lot of hard work ahead, and big-business customers can be demanding.
Knowing when to compete and when to walk away is essential. It does a small business little good if the big client is “sucking up” so much of their capacity that it doesn’t allow them to meet the commitments to other customers.
Is there a certain appearance (website, multiple locations, etc.) that a small business should have to catch the eye of a larger one?
The business has to be credible and look credible. The company’s website should provide current information, be well-designed, and have customer testimonials. Nothing is better than a third-party endorsement!
Big customers also look at the facilities and workforce. Does it reflect a progressive, technologically advanced company? Do the employees reflect the brand?
But, it’s about more than just the “look” of the business. What really catches the eye of larger businesses is the approach you take to responding to what they need. Be creative, show that you understand their business, and propose ideas that will help them achieve their goals — whether that is saving money, improving delivery times, or providing a better product or service.
What are the harsh realities that small-business owners should consider before talking to big businesses?
Big-business customers are demanding. They have complex needs, and they want a level of responsiveness that smaller customers don’t require. They expect you to deliver in short time frames and, if they’re doing a lot of business with you, they’ll want to negotiate the best possible pricing.
Once a small business starts dealing with large customers, it can be tricky to navigate the complexities of their purchasing systems, the layers of management, and sometimes-confusing processes.
Many large companies have 90-day payment terms, which can strain a supplier’s cash flow. Some companies do have a supplier financing program so that payment can be received in 15 days, but the supplier needs to discount and that cuts into profits. A small firm will need to be able to manage the large company’s extended payments.
What attributes should small-business owners play up to differentiate themselves from larger competitors?
Despite what many business owners believe, it’s not all about price. Larger businesses like small businesses, especially when they see the value that they bring.
So, here are a few things to play up:
A smaller supplier should tell the large business that it will get the attention of, and work directly with, the owner or senior manager. That is often not the case when working with a large supplier. Smaller suppliers should emphasize their ability to respond quickly. Our organizations are pretty flexible, and we don’t have a corporate 8 a.m. to 5 p.m. mentality. If you need us, we are there, sometimes 24/7.
Smaller suppliers should also showcase their ability to bring new and fresh ideas.
Finally, while many larger suppliers are working to be lean, smaller suppliers are lean by design. They provide a great value and don’t waste their customers’ time or money. Small-business owners spend their client’s money as if it was their own. If one of my big clients asks me to do something that will cost them more money than it should, I tell them. They appreciate that we think of them and don’t just blindly do what is asked at an unnecessary cost to them.