The scariest words for small business owners
The scariest words, for most of us, are ‘Hi, I’m from the government and I’m here to help you’. and/or ‘I’m from BigCo and I want to buy from you’. Let me explain why I think most small business owners need a wealth warning about dealing with large organisations and government bodies.
Last month I celebrated, with my business partner Clare Francis, 25 years of starting and running our own micro enterprises.
Micro enterprises are 95% of all businesses in the UK and are classified by government as having less than ten employees. For twenty of those years I’ve also been trying to get a fairer deal, a level playing field with larger businesses, for micro enterprise owners/owner managers.
It’s not that we can’t succeed by ourselves – we do and we’re proud of our independence. It’s just that government give 90% of their help and funding for procurement, regulations, employment, business support and skills development to the 5% of UK enterprises that are bigger than us. Yet there are 4.5 million of us micro enterprises and we provide a third of all jobs. It is unfair.
I’ve started a government e-petition to ask government to report what they’re doing for micro enterprises. I hope you’ll sign it at: http://epetitions.direct.gov.uk/petitions/18396
Building Successful Relationships with Large Organisations
However, for twenty five years my own business has supplied government and large organisations with products and services. So what have I learned over all this time that I can pass onto start-ups and other small business owners?
My top tip is don’t waste your money and time in trying to gain an informal, preferential or parity relationship with government agencies and large public or private sector organisations, including banks. Make it strictly business, be very wary, very professional, negotiate with what is low cost to you and high value to them and confirm everything in writing.
To do the above is harder than it may seem. When they want something from you they can be very persuasive and very disarming. I’ve seen many supposedly hard-nosed celebrity entrepreneurs turn into pussycats when confronted by the power, status and hospitality of the largest companies and government.
Don’t Panic. Be Alert.
Recently we asked about 800 micro enterprise owners (the Enterprise Rockers @EnterpriseRocks) to nominate the large organisations and government bodies that they felt were micro enterprise friendly. We only got 4 nominations: Apple, Co-op, British Library and ACAS.
Of course you may need, like my business does, government agencies and large organisations as your customers but just be very careful how you build the buyer-supplier relationship.
Firstly, it is unlikely you can ever get into their trusted circle of preferred suppliers, certainly not for very long.
Secondly, they can be difficult customers because what the people, you’re dealing with, are performance measured on is not likely to be in your interest.
Thirdly, they hold the aces – you can’t afford to sue them but they can afford to sue you.
Take as an example late payment. Many of us are sick and tired of late payment from large organisations but daren’t complain to the media or go to court because of fear of losing future business.
Most large organisations, including government, don’t admit to late payment because they’ll claim that the supplier hasn’t done something they should have done – even if it is just having sent the invoice to the wrong person. Your bank won’t help you out of the late payment fix as they will only lend to you when you don’t need it.
Some of my close business owner friends, over the years, have gone from elation to struggling for survival because of this. A couple of them have gone under.
I’ve seen hundreds of small business owners totally shocked by the power large organisations have to make or break the business they’ve built.
Your lifeblood is your business building time
Large organisations can also suck the lifeblood out of your business. That lifeblood is your time. Corporate and government executive culture is about project management, bureaucracy, status, power, perks, quality processes, risk averseness, budget spending, supplier savings, building empires, career progression, corporate politics, constant online/offline communications and meetings, bloody, meetings. They are not focused on earning a living through satisfying customers in the way we are.
So achieving a win/win relationship with large organisations, in the private and public sector, is a matter of balance. Don’t let them take too much of your time. Avoid them becoming your survival income stream and/or preventing you getting other work in their sector. Stick to arm’s length, tightly worded, agreements. Be a consummate professional with them.
Ensure you make a profit by costing in the time they’ll take from your business building activities. Continue to maximise your time for winning new customers and keeping existing customers. Constantly improve your cash flow. Bootstrap, rather than borrow, wherever you can. Good Luck.