March 7 - Arcane Practices of Selling to Large Businesses

Just about anyone who interacts with large corporations wonders at their strange policies and procedures. As a participant in a very small business who does business with very large businesses, I get to navigate this veritable minefield of “gotchas” from time to time when trying to sell my products and services. Normally you’d think that all you have to do to do business is convince someone with money that what you have to sell is worth the exchange, much like we experience when we go to the store and decide whether to buy Coke or Pepsi. Not so, selling to a large corporation.

After you convince someone that they want to buy your product, you then have to navigate an organization known as “purchasing” whose purpose is to perform the actual spending act that your customer had budget for. Now you have to convince the folks in this organization, too, and they have different qualifiers. They aren’t concerned with your product’s or service’s ability to solve problems for their co-worker. They are concerned with the question of are you worthy to do business with corporation XYZ.

Worthiness is composed of many things, almost wholly unrelated to what you do to make money. Are you ISO 9000 certified? Do you have corporate revenues of $50,000,000 per year? Do you carry liability insurance of $1,000,000 per incidence? Are you Sarbanes-Oxley compliant (even if you are not legally required to be, in which case, how would you know?) Have you executed a vendor approval legal agreement? Are your accounting systems compatible with their accounting systems? Have you implemented 6Sigma (a gamers quality system if there ever was one)? And, my personal favorite, have you negotiated the standard corporate discount (often before the price of the product has been set)? To someone anxious to make a sale, this list seems interminable and satisfaction of the terms insurmountable.

For those that work with professional salespeople in the technical world, know that knowledge of how to navigate this business process landmine is one of their most valuable contributions to the process. These folks often understand these processes better than the customers themselves. I’ve found it usual that salespeople know far more about corporate structure and practices than I do in most large companies I’ve worked for and they’ve certainly helped me get products into my customers and get money out.

Large providers who have already got themselves on the “preferred provider” list like things this way. They take advantage of it to keep small providers from competing with new ideas and products. Contrary to conventional wisdom, they also take advantage of this to keep small providers from competing on price. Large corporations are supposed to be enjoying “economies of scale”. In reality large providers also have all those purchasing in-efficiencies along with a lot of other bureaucratic overhead (a topic for another day) which more than eliminate the benefits of scale. Unfortunately, one of the greatest costs a small business has is cost of sales. The sales process represents a huge investment in resources (time, money, material, personnel) for something that does not have an assured product. By promoting this purchasing situation, large corporations vastly increase cost of sales for small companies while nearly completely bypassing these costs, themselves.
So what is a small company to do? Aside from actually satisfying the requirements, there are exactly three practices that I’ve seen work which may or may not be palatable or practical.

The first is to be acquired by a large company that already meets the requirements. If the sale is large, this may be just the exit strategy you need to profit from your small business. With the right acquisition deal, you may even still enjoy doing what you are passionate about, though under the umbrella of a new corporation.

The second is to find a large corporation willing to work as a proxy for yours. You’ll have to negotiate qualification with them, but it should be a much lower burden. These companies are often called distributors or aggregators, though any current provider to your customer will suffice. They have already become qualified vendors. In many cases this is the sole purpose for their existence. The disadvantage with this approach is the traditional cost of the middleman. They have to make money also, after all.

The third is a bit of a trick and takes some time and foresight. Identify a small company with a low barrier to sales that, and this part is key, is very likely to be acquired by the large company you want to do business with. Once the acquisition is complete, you are already on the approved vendor list. This takes time, but so does the standard approval process. The benefit is that you also get to sell to the acquiree in the meantime at zero additional sales effort.

This all highlights one of the major inanities of being an approved vendor. You only need to scale the barriers to get on the list, not to stay on the list. Once you are on the list, enjoy it and consider how you can use that to help other small companies and thereby find profit.