It's not hard to dream as an entrepreneur. You think your product/service is the best there is out there and you think everyone is going to buy it. It's almost mandatory to think this way - you have to be excessively confident and determined in order to drive your new business on toward success.
But of course it's rarely realistic - particularly if you are just starting out.
Is it really likely that you'll see your product stocked in Tesco, or served to passengers on a Virgin Atlantic flight? For most, the answer is no, in the main because they haven't been able to demonstrate their ability to do business with their prospective buyer. There's two elements to this; you actually have to be ready and you have to understand what buyers are looking for in order to be able to demonstrate that you are.
Here's 5 tips for start-ups looking to do business with big business:
1/ Figure out how your target company works
Ok, so you've identified a target, but how do they operate? You must be in possession of a basic level of knowledge before you proceed, so that you can demonstrate your credibility and your preparedness. At this point, you can pick up the phone and have a general chat with whomever answers - they don't have to be in procurement to know some basic facts do they? Buyers get hundreds of unsolicited calls from people looking to sell to them - what do you think that feels like? Or, put another way, would you like to discuss yet another potential PPI claim? Someone not in procurement however could well be happy to chat to you about it - they won't get that kind of call very often - use this to your advantage.
Does your target buy centrally, through individual outlets , or through a third party? Find out first so you don't waste your time and realise that this knowledge will serve you well further down the line. For example, if a third party is involved, you need consider the fact that your target, the third party and your own company will need to take a margin from any deal you may strike. Will this work for you? Can you reduce your own costs sufficiently?
If you need to supply your target directly, do they have a small number of distribution centres like Amazon or Ocado, or would you be responsible for delivering to multiple locations whenever needed? Are you set up to do this in terms of storage and manpower and what is the cost implication?
There's one great piece of advice that's relevant here, that I'll repeat later on; if the numbers don't work, it will hurt you and your relationship with your target in the long run - it's really not worth it, I absolutely promise you. In addition, a good buyer will see this and turn you away, so you're wasting everyone's time by thinking that you can survive on a tiny margin, or by stretching the limits of your operational capacity.
2/ Don't spam buyers with email - use your network
It's really important to find out who to talk to for maximum impact. It's not always the most senior person - indeed the larger the organisation in question, the less likely it is to be the senior person. Find out if there is a buyer that has your specific product/service within their remit and find out how much they can sanction/what permissions they have with respect to purchasing. Then it's time to make contact.
The mistake everyone makes when they are new to this (myself included), is to email the respective buyer and then chase - repeatedly. Look at this from the buyer's perspective - they don't know you, they don't know anything about your offering and they receive hundreds of unsolicited emails of a similar nature every week. Wouldn't you get tired of reading them?
Also, is email really the way you want to introduce yourself? By email? I've never bought anything directly because of an email unless I know the company well (and am therefore on their mailing list), I assume you are the same? Do you think the buyer might be too?
Whilst I don't pretend this is easy, the best way to introduce yourself is to meet someone from your target organisation, usually at a networking event of some description. Buyers are always on the lookout for new suppliers - that's their job. You go to them, whichever events they are likely to attend.
3/ Don't assume that your product/service is right for the buyer - know what they are looking for
It really doesn't matter how great your offering, if it's not right for the buyer, that's that. So, take time to research how your offering will fit in - it is really a straight replacement, or will the organisation have to change the way they work to accommodate? The latter isn't necessarily a bad thing by the way - you could be very successful by identifying this fact before you meet you buyer and then offering suggestions/support to facilitate this change.
Are you offering innovation? If so, it might be harder to sell your 'grand vision' to the buyer - after all, the more innovative the offering, the greater the risk they are taking. Consider what you're asking of the organisation and if necessary, offer a diluted beta test and work with them to gradually progress to a full offering if the introduction goes well. This shows you're thinking like a buyer and are willing to work with them to achieve a shared goal.
Finally, your offering may be spot on, the buyer may love it, but you might just be out of cycle. Most things in large organisations are procured in cycles, meaning that, for example, napkins may only go through a procurement exercise once every 3 years. Find out the cycle for your product or service and bear this in mind. If you make contact, do so with the caveat that you are aware you're out of cycle and that you'll get back in touch later on - find out precisely when the procurement process will be started for your offering (3 months before, 6 months before?) and put a note in your diary.
4/ When negotiating, figure out what the buyer really wants.
The mistake most small businesses make, is to assume that they can only win business by competing on price and then suffering when they realise that their margins just cannot sustain the contract. Look at it another way, the key thing for buyers is confidence - can you actually deliver what you say you can? The main reason most small suppliers don't even get a look in, is because buyers can't be sure of their reliability - so that's what you need to demonstrate first and foremost.
You'll be able to do this by researching well and showing this knowledge to the buyer; the fact that you know these things and have adjusted your approach to accommodate is a really good sign. You should also be willing to share your margins with the buyer. They actually want you to make a decent margin, because it will give them confidence that the arrangement works for you - and it ensures that you care about the contract!
Beyond that, find out if their key driver is price or value-add. Many more organisations these days are looking for how they can offer better value to their clients, so rather than just supplying plain old product A to them, can you throw something else into the mix that protects your margin and gives them a real sense of value for money. Show that you care about their clients as much as they do.
Also, remember that it's absolutely fine to take your time in negotiations. It's perfectly normal practice to ask for breaks during meetings to give you the chance to step outside and re-group/re-calculate.
5/ Don't try to hide the fact that you are a start-up, use it to your advantage
Being a start-up may give you some inherent disadvantages when negotiating with large organisations - you may have lower margins, less operational capacity and less ability to absorb shocks that would be preferred. You can't change those things though, so be honest and transparent with your prospective buyer - and then play to your strengths.
It's likely that you can be more innovative, react faster and actually care more about your relationship with that large organisation. These are the advantages that you need to project when pitching.
Finally, remember - if the numbers don't work, it will hurt you and your relationship with your target in the long run - it's really not worth it. In addition, a good buyer will see this and turn you away, so you're wasting everyone's time by thinking that you can survive on a tiny margin, or by stretching the limits of your operational capacity.