The majority of large companies issue less than a third of contracts to small firms according to a recent Telegraph article. While small businesses were given credit for efficiency, flexibility and being in touch with customer needs, the article suggests that this may be not enough to win business from big companies. Large companies have concerns about small businesses’ financial stability and their compliance with standards and regulations.
Looking from the buyer’s perspective when trying to win business
A conversation with the MD of a large international group sticks in my mind. His company had replaced a small but critical supplier and the reason wasn’t to do with quality, service or price. It was simply that the supplier’s accounts were out of date and they couldn’t be sure about its financial stability.
While continuity of supply or service may be one concern, avoiding reputational damage is another. The horsemeat scandal is an example of how supply chain problems can damage reputations. SMEs need to look in from the outside. Would your practices stand up to outside scrutiny? Could they give rise to adverse publicity? What standards do you expect from your own suppliers?
You may have heard the expression “no one ever got fired for buying IBM”. Buyers want to protect their company… as well as their own backsides! No matter how good they are, SMEs may have to demonstrate their credentials.
Making sure that a business win is not a poisoned chalice
Winning a lot of business from a large customer can be a feather in the cap. It can also create risks that need to be managed, such as over-dependency, cash flow problems and the need to continue to keep other customers happy. A big business win can be beneficial but can also be disruptive. It is not unknown for a small business to go under as a result of biting off more than it can chew!
The Finance function has an important role to play in helping stay on track. The true benefit of having up to date accounting goes well beyond ticking a box to help win business! If you’d like to find out more it may be worth reading my article 10 questions for proactive directors to ask about their finance function; alternatively you can contact me, David Lewis, on 07836 331677 or e-mail firstname.lastname@example.org.
The original Telegraph article it can be found here.