When a small business partners with a household name, they get access to customers they could never have reached alone. How, though, do you work with the giants and avoid being swallowed alive?
Every year, Enterprise Nation hosts The Exchange series, linking small businesses with buyers from bigger companies in food, fashion, homewares, beauty, government and technology. Emma Jones from Enterprise Nation explains how to make a partnership work for you.
It should go without saying that large and small companies are very different beasts. It can be a challenge for both sides to see things from the other's point of view.
A big business needs the processes in place and the hierarchies of people to help them cater to millions of customers. A small company tends to be more agile. Small has to understand that big needs systems to work efficiently, and big has to understand that small moves at lightning speed but may need some mentoring to ensure all the details are dealt with.
Supplying government has always been a challenge for smaller companies because of the administrative burden. The government, though, has a target of spending £1 in every £3 with small businesses by 2020. To help make that possible, tier one suppliers can act as intermediaries between the small business and the government department. The tier one company deals with the administration and documentation so that the supplier can get on with actual supply.
Having said that, small businesses do need to be mature and professional. There's no shortcut to having good practices and processes, especially in areas such as health and safety.
In the past, larger companies have had the reputation of not paying within a timeframe required by smaller companies. At Enterprise Nation, we introduced a major retailer, for example, and the first order for this two-person start-up was destined for 400 stores. They had no idea how they would make all this stock and then wait 90 days for payment.
Fortunately, we've seen huge advances in the last year thanks to the Prompt Payment Code. Lots of companies have signed up and committed to paying small business suppliers within 30 days. Some have gone further. Waitrose, for example, says they will pay within seven days, which is just incredible.
The other area of progress is in invoice factoring. A smaller supplier can sell the promise of payment, the invoice, to a factoring company, which means the supplier can make and deliver the order, and the factor is paid when the big company settles their bill. HSBC, for example, provides a factoring facility service, which allows companies to raise cash against unpaid invoices and have their customer payments collected and managed by the bank.
It's tempting to think that the large company holds all the cards, but it's actually a relationship that benefits both sides. Big companies repeatedly tell us that they want to work with small ones because they get authenticity of product. They get a story, a personality, innovation and entrepreneurial energy. And, of course, the smaller company gets a route to market and an opportunity to learn from their partner.
The small supplier needs to identify where they can contribute to the larger company and make that a part of the relationship-building. From then, it's about delivering what you promised to deliver. With integrity of product and delivery, you create a balanced and equal relationship.
It's tempting to think that the large company holds all the cards, but it's actually a relationship that benefits both sides.
A question we get asked a lot is how far a small business should bend to the requirements of the larger partner. One area in which you absolutely have to stand your ground is your brand.
There's an excellent example in Jimmy's Iced Coffee, which was started by a guy called Jim Cregan. He sold his iced coffee drink into the big retailers and is now doing phenomenally well. He is obstinate about keeping the look and feel of his brand. He dresses up in coffee cartons; he does crazy raps. If a big retailer asked him not to, then that would run counter to the brand's fun image and that's risky.
Where you can be a bit more flexible is on costing. This is especially true when trying to win your first big customer because you want to build your credibility and show others what you can do. You have to be realistic about not hurting the business, but a little room for manoeuvre is not a show of weakness.
You have to be realistic about not hurting the business, but a little room for manoeuvre is not a show of weakness.