Many small business owners I speak to are looking for their next big client, or the mythical million-dollar deal that will change everything; the assumption being that greater returns will come with less drama and procurement hurdles.
A barrage of LinkedIn posts from small business influencers and consultants advising others to focus on a few big clients seem to echo this sentiment.
But my definition of a big deal is slightly different. Through the power of community, partnerships formed with other SMEs have real and lasting value, compounded over time as they grow. In other words, small businesses canbeanequally a big deal.
Small business owners who choose to overlook SMEs to exclusively work with big firms are missing an opportunity.
As a small business owner who has been running a regional firm the past 13 years, I appreciate the appeal of landing a big fish. Our cash flow, opportunities and potential can explode overnight with the right deal.
On the contrary, servicing smaller clients often means dealing with more stock and services, as well as more receivables and invoices to chase. Small business clients by definition aren’t the biggest spenders and individually they have lesser sway over our revenue.
A client base of larger corporates can mean more complex service requirements. If you’re selling perishables, a major client may need a firm date for a high volume order with the maximum expiration term.
Timely fulfilment requires upfront capital investment but with standard payment terms of 90 or 120 days. In the meantime, working capital, salaries and other liabilities sit with the SME, who often find themselves cash- and resource-strapped.
Returns, claims and disputes can take months to resolve, further and smaller players with a tight cash flow will face the inevitable strain and lost opportunities to invest in other areas of the business. It’s not unusual for the breakdown in cash flow from a single client to cause an SME to fold altogether.
Working with SMEs meanwhile has its advantages. Leaner operations can be agile in responding to market and business needs, including price flexibility and product customisation to support the needs of fellow small business owners.
SMEs often have specialised capabilities
Small businesses often have niche capabilities that even the largest multinationals covet. Take Innocent Drinks, a UK smoothie company that Coca-Cola first invested in in 2009, increasing their stake to near full ownership as they expanded globally. Investing in and eventually acquiring Innocent was an easy way for Coca-Cola to expand its footprint in the sustainable and health market rather than starting from a new line of healthy drinks from scratch.
Innocent already had an existing fan base that’s ready to buy and help Coca-Cola to succeed in this emerging segment. The knowledge transfer from Innocent Drinks also benefitted Coca-Cola in its operations, including sustainable sourcing of ingredients.
Flexibility in customising prices and offerings
While big firms can offer a wide range of products and services, SMEs offerings are often flexibly structured and priced, in part thanks to the proximity of the customer to a decision maker who can tailor a solution on the spot, without the need for complex approvals.
If you are procuring services such as web development or performance optimisation from a boutique supplier, you’ll have more leeway in customising your service package and requesting better prices or terms. With a large firm, increased red tape is a challenge to accommodating customer requests outside of the norm.
Growing together
The best business partnerships are the ones that are forged over the years. For small businesses, it’s not about looking at where the other partner is now. It’s about looking at the potential to expand and grow together, and collaborating on new opportunities. While there are also opportunities with a big client, they have less incentive to grow with an SME.
When working with an SME, your money supports a developing team, rather than executive bonuses. You’re likely helping to grow the business and dreams of people you know. Mutual partnerships between small businesses don’t just build revenue – they build resilience. And when faced with financial difficulties, SME owners in general can exercise leeway in supporting each other.
Working with large firms means standardised rules, bureaucracy and processes, which may not be as sympathetic to the plight of small businesses.
At the end of the day, SMEs benefit from working with a diversified client base including both large and smaller enterprises. Networking and partnering with SMEs alongside more major clients distributes strain cash flow and operations. It also mitigates risk from external factors that challenge one industry sector in particular – of which the COVID pandemic provides a lasting example.
SMEs devoting their entirety to chasing the proverbial big fish risk becoming a Captain Ahab for our times. Beware that the big whale may come at a price too steep for some businesses to pay.
