After having been at the helm of HP’s Supplier Diversity and Small Business Programs for several years, I have had the pleasure of meeting with, and presenting to literally tens of thousands of small businesses around the world. Over the years I have been asked, time and time again, some form of the following question: “What advice do you have for small businesses that want to do business with big businesses?”
The response is always a complicated one, and usually begins with me saying “Well…how much time do you have?” There are several areas on which a small business owner should focus, ranging from tactical day-to-day operational issues on one end of the spectrum – to complicated issues of innovation and long term strategic planning on the other.
One key theme is consistent for ALL small businesses : before attempting to sell goods or services to large corporations, you must prioritize a deep, comprehensive F.O.C.U.S. on the fundamentals.
We’ll discuss each of the five pillars of F.O.C.U.S. in detail in future blog posts. For now, a brief summary of each of the elements:
Simply stated, Small Businesses must have their financial houses in order. Corporations are VERY risk averse and look to transfer risk wherever possible. Many corporations practice periodic supply base risk reviews and eliminate from their rolls of suppliers those which represent an inordinate amount of risk. For a small business this can mean that even if you’ve got your foot in the door with a company and you’re years into an engagement, you still stand to lose that business if a periodic review of your credit/risk profile shows that you’re in a yellow or red zone. (Note: our good friends at Dun & Bradstreet offer products to assist small business in understanding their risk rating)
Related to “Financials”, corporate risk profiling involves a review of the legal operating structure form adopted by the small businesses to which they subcontract. A Small Business must select the entity form (ex. Sole proprietorship; partnership; corporation; etc.) which allows it to properly allocate risks and rewards, while at the same time keeping in mind the risk balancing requirements of their corporate customers.
Classifications & Certifications :
Small Businesses should be prepared to represent their goods and services in the context of North American Industry Standard Classification System (NAICS) or Standard Industrial Classification (SIC) codes. These codes are particularly important to corporation who either a) source directly to the US Federal Government, or c) source to other corporations which are prime contractors to the US federal government. It is important to know how you stack up against your competitors with the same classifications, and to make it easy for your corporate customers to know in which classifications you operate.
Additionally, Corporations routinely set subcontracting goals around spend with businesses certified by any of a number of certifying organizations (Examples: National Minority Supplier Development Council ; Women’s Enterprise Business National Council ; WEConnect International ; etc.). Small Businesses should have a strategy around which certifications for which they may qualify and an understanding of which certifications are valued by their target customers.
Unique Selling Proposition :
Small Businesses must be able to articlate, in a very crisp and clear way, what differentiates them from their competitors. In most cases a Small Business will find it difficult to compete against large businesses for corporate contracts solely on the basis of price. A Small Business may find it equally difficult to compete on the basis of global scale. A Small Business USP should be focused around innovation, partnership and agility.
The message is, quite simply, “have a plan”. Many corporations are actively transitioning from spot in time commodity type supplier relationships, to true strategic supplier partnerships that span several years. Beyond grading on “traditional” sourcing grading criteria such as price, quality, and assurance of supply – a corporate buyer will want to know where are you are going, that you have a vision and plan, and that you can add long term strategic value.
Let’s all spend some time refining our F.O.C.U.S.