For many small businesses, becoming a supplier to a major corporation can be transformative. A large lucrative contract can bring a significant increase in revenues as well as attract other large corporate customers. However, getting a large corporate contract can also be a daunting task and there can be risks involved in becoming a supplier to a large corporation such as increased costs to manage a larger client’s needs, longer payment cycles by a corporate customer, and not having the capital needed to fulfill a corporate client’s order. The following are tips on how you can prepare and potentially put your best foot forward.
1) Plan in Advance
Becoming a supplier to a large corporation can bring a considerable increase in revenue, but it can also require a significant capital investment to fulfill the needs of a larger customer. A small company may find itself having to hire additional staff, purchase more material, increase its inventory and invest in technology compatible with a larger customer’s automated systems. Moreover, the screening process for supplier selection can be intimidating as large corporations assess a small business’ financial health and examine its business credit to make sure it is reliable and stable. Planning ahead, optimizing working capital, building cash reserves and establishing business credit can be key to becoming a large company supplier.
2) Understand your value proposition
What makes a small company or product unique? Frequently, small businesses cannot compete in price with larger suppliers since they can’t achieve economies of scale comparable to larger companies. Additionally, until recently, many larger corporations have put an emphasis on cost containment and increased efficiency resulting in a greater reliance on larger suppliers. But there is value smaller companies can provide that larger companies typically can’t. Understanding a corporation’s unique needs can help a small supplier figure out what it can offer. Does that large corporation need faster service, a unique solution or product design, higher quality goods or a more localized presence? Often smaller localized suppliers can offer exclusive knowledge about a local market providing their large customers a competitive advantage. Small suppliers are also often more flexible and can make changes much more quickly due to the lack of bureaucracy. Larger suppliers may have to contend with a lengthy process to implement changes whereas, smaller suppliers have the advantage of having smaller operations and thus shorter channels to modify any product or service. Understanding the needs of a potential customer and recognizing its unique value can give a small company the competitive edge.
3) Consider partnering with another supplier
One of the most common hurdles for small businesses to overcome is establishing a relationship with a potential large company customer. Not only is it difficult finding out whom to contact, but also to establish a relationship with the appropriate person. Additionally, small companies may find themselves simply not financially ready to take on a larger corporation as a customer. In this situation, partnering with another supplier may be the way to break into a larger corporation’s supply chain. The benefits include lower investment, an opportunity to learn about the larger corporation’s needs and processes, and a way to grow incrementally.
Becoming a supplier to a corporation can require significant planning not only to evaluate whether it is the right step for a small business but also to prepare for delivering the goods and becoming a valued supplier.