Dealing with large companies can be a far from straightforward matter. Their buying processes will look opaque to many small entities, and some blue chip organisations or household names will have procurement procedures that prove difficult to navigate for the smaller business.
Pitching to big customers
The good news, says Emma Scott, representation manager at the Chartered Institute of Purchasing and Supply, is that while small and medium-sized entities often find it difficult to compete on price, their ability to be flexible and to adapt more quickly than their bigger counterparts can make them more attractive to prospective customers.
“They are able to offer a closer working relationship, potentially with access to the Managing Director,” says Emma. “They are also often willing to be far more collaborative in the way they work, rather than just being a cog in the wheel. Often they can bring a lot of creativity and innovation to the working relationship. Playing up those attributes in the pitching process can bring considerable rewards.”
Entrepreneurs don’t always have to go it alone. Entrepreneurial businesses can, on occasion, win points by clubbing together. For instance, The London Olympics website for suppliers includes opportunities for companies to enter into joint tenders. “This is a trend that is gaining more and more ground, in both the private and the public sector”, says Emma. “And in the public sector, in particular, efforts to level the playing field for smaller bidders are starting to be felt”.
Flexibility is key when it comes to making it onto a buyer’s preferred supplier list. Conversely, so is being specific in identifying and complying with a prospect’s needs. Approved vendor programmes will give many clues on this and sales experts advise studying target companies closely to learn about their requirements, getting to know as many decision makers and influencers as possible.
However, it’s worth bearing in mind that personnel in large companies can change frequently. Management changes and even mergers and acquisitions can lead to a different approach, meaning a small business might have to begin the relationship-building process from scratch.
Among larger buyers, there have been instances where technology has been used as a barrier to entry. For instance, parts of the NHS require electronic data interchange (EDI) access to be in place ahead of a tender, even in the case of first-time, would-be suppliers. Other technological requirements have proven to be too onerous for smaller entrepreneurial businesses to surmount.
Emma argues that EDI-based systems are becoming less prevalent, however. “Increasingly, procurement systems are web based and therefore much more accessible. They also require less cash, ability and time investment. If you combine that with an organisation that knows how to use social media to build its profile and showcase its abilities, you begin to draw closer to a winning formula”, she says.
Squeezing smaller suppliers – avoiding risk
In all industries and geographies, sales and procurement experts counsel against putting all your eggs in one basket. The demands that bigger players can exert on their supply chain are well documented. However, while cautionary tales of big customers squeezing smaller suppliers on price abound, there is currently a big drive for organisations to look to source their needs from a local supply base. Last year’s earthquake in Japan – and other natural disasters – are capable of wiping out the supply base of household names at a stroke, Emma points out.
Meanwhile, consumer-driven demand for local, specialist produce should help UK-based companies promote their offerings more effectively. That’s particularly the case in the food market, she believes, where specialist suppliers may need to fight to get a foothold with bigger retailers. A certain amount of pain in the early years might be a realistic prospect for companies that have set their sights on eventually winning orders from the big supermarket groups.
On the upside, supplying a range of smaller outlets does provide a good grounding in the discipline of making a business attractive to a range of customers. It is an approach that also helps businesses avoid cashflow risk and it means they can avoid a situation where working capital is tied up in supplying only a handful of bigger customers.
Small is beautiful
As global markets become less predictable and therefore more risky, bigger industry players are becoming more and more receptive to SMEs and small entrepreneurial businesses, says Emma.
Networking and understanding your market as much as possible is increasingly important, she says, as is a canny look at the housekeeping. “Concentrate on driving down costs all the time,” she advises. “If you’re making your profit margin wider, you are protecting yourself and making your business better off.”
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