For a small business, winning work from one of the big boys can mark a landmark in the life of an entrepreneur – but for many it’s becoming a millstone rather than a milestone.
I was reading last week that there is a “crisis of trust” in big business among small and medium-sized enterprises (SMEs), much of which is caused by aggressive late payment practices.
According to a survey of 4,000 UK SMEs by the Forum of Private Business, more than half have experienced significant problems with late payment and 46 per cent feel powerless to negotiate supplier terms. In addition, 70 per cent stated that behavioural late payment is a problem.
In every walk of life there is a food chain based on size, and business is no different. Big companies are the lions of the economic savanna. Obviously, there’s no chance the gazelles will form a supplier agreement with the king of the jungle, but big companies do prowl the business world with arrogance, which can make small enterprises a next meal.
Big business has always dictated the rules of the game and is not averse to
taking its ball home if things aren’t going its way. And SMEs are stood like kids in the playground hoping to be picked for the big company’s supply chain team.
This power makes it very easy for big business to make life difficult for small firms. The same poll by the Forum of Private Business highlighted this with nearly half of the SMEs questioned revealing that big companies are not interested in fostering long-term relationships or negotiating payment terms.
For some small firms, this is an alien concept and hard to deal with. Most will have employed the SME mentality of growing their businesses by establishing strong relationships with customers and suppliers for mutually-beneficial results. Suddenly they are in the corporate bear pit where the only winner is the big beast and its shareholders.
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Of course, all of this doesn’t mean that SMEs should avoid big business like the plague. On a positive note, the poll revealed that 80 per cent of those surveyed believe that the UK’s larger private family-owned firms are the most trustworthy enterprises and some, like farmers supplying supermarkets or component manufacturers selling to car makers, need those relationships.
However, the majority of small businesses need think long and hard about whether it’s a road they want to travel.
Sometimes the reward of landing the big fish is diminished by the problems it causes and all a firm is left with is the bragging rights of having the company on its books, which doesn’t put food on the table.
There is also the danger for some businesses, particularly smaller or newer enterprises, of putting all their eggs in one basket. Big contracts that dominate a firm’s turnover are only good when the sun is shining.
So while it may give entrepreneurs an immense sense of pride to win work from big business, it is more prudent to spread the load. The SMEs polled by the Forum of Private Business agree with more than half broadening their client base to minimise any future disruption to their cash flow.
The culture of the relationships between big business and SMEs really does need to change, but turning that particular oil tanker is not a quick job. Therefore small firms that want to work with big business also needs to make sure they can live without them too.
Entrepreneurial businesses working together are the future of the economy. After all, there are 5.2m SMEs and many are keen to trade with each other.
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