When Small and Big Businesses Work Together It Can Be a Win for All
How do you work with a big business?
Despite the differences in scale, partnerships between small and large companies can be effective and beneficial to both. Larger firms will work with small businesses in a number of ways, including:
- providing small companies with technology they need
- license innovation or products from smaller firms
- use small businesses as a vendor
- provide smaller businesses with access to new , larger markets
- acquire smaller firms
- invest capital in small businesses
For example, Nottingham Spirk focuses on providing innovative product solutions for larger client companies. Its successes over the years include the Pepto-Bismol® dosage measuring cap, the Dirt Devil® vacuum, and the parentally ubiquitous Little Tikes® toddler cars. A counter-example from the world of giants is Procter & GambleTM, which manages hundreds of relationships with small companies that act like innovation engines.
Akron-based Ecology CoatingsTM, which makes protective and decorative coatings for industrial products, used partnerships differently. Early on, the company had technology but no sales and marketing, so it licensed its products and technologies within specific market segments for annual cash and breathing room to build its own marketing and sales infrastructure. DuPont® got the North American automotive business. Ecology CoatingsTM passed a propane tank rental company client and all propane tank work to a major coatings company for a six-figure revenue stream.
But don’t be pie-eyed about opportunities, as there can be potentially big downsides to working with larger firms. Payments can run late, with 90- to 120-day terms being common. Corporate culture may be inflexible and any decision process can involve many people and take much longer than small businesses are used to. Large retail chains can be demanding, for example, on how you do business and how you package products. Consequently, this can lead to lower margins.
To explore the possibilities of big business partners, one possibility may be with matchmaking programs that help bring small and big companies together. The Women’s Business Enterprise National Council has programs that connect corporations and governments to women-owned companies. The Small Business Administration often runs matchmaking events during National Small Business Week.
Many large companies have supplier diversity programs for companies that are minority-, disabled-, woman- or veteran-owned. Networking can also be an excellent tool, as someone you know may be able to direct you to opportunities.
If you do get wind of partnering opportunities, here are a few things to keep in mind:
- Look for partners that make strategic sense, and be picky about the deals you do.
- Be ready with a strong pitch and your financials, because the big company wants to know that you’ll be stable and predictable.
- Remember that managing any partnership takes time and energy; be sure to keep your focus.
- Stay flexible and avoid overly broad, exclusive deals that could cut off future opportunities.
- Understand what you and they get out of a partnership.