Supply chain · 16 January 2017

Big and small business collaborations: They’re after your “je ne sais quoi”

Virtue Drinks
Virtue Drinks founder: “You need to demonstrate to big buyers how you’ll provide them with the margins they need.”

Small businesses are often characterised as the underdog when large corporate companies spring up around them, pricing them out of the market.

It doesn’t have to be this way –  small businesses are the lifeblood of the UK economy, and with properly-managed business collaborations they can add their own distinctive character and innovation to the corporate giants.


Why do small companies want business collaborations with bigger brands?

  • Small businesses sometimes view a big firm as a leg-up, or a way in to an industry
  • It can be expensive and time consuming bidding for contracts, and larger businesses are often better equipped to deal with this
  • Having a well-known firm or organisation on your side can help build the small business’ reputation, which in the future could lead to more work
  • Business collaborations can fund projects and ideas the small firms would be otherwise unable to action
  • They often come with a large ready-made customer base that can be tapped into.

While these are all great attributes of working with a large company, it is important not to play down the small business’ contribution.

A small business can offer “off-the-shelf” innovation, niche solutions, agility and local knowledge that can help position it among the big players.

On a practical level, there are several ways in which business collaborations can happen between large and small businesses: as  partners, stockists or distributors.


Big business as distributor

One way of getting a leg-up from a big business is using them to distribute your products. For example, if you make toys, you might want a large toy store to act as a stockist. If you make food or drinks, you might want to break into the main supermarkets.

The benefit of this for small businesses is that it is instantly in the public eye. Say you make a chocolate bar – you’re more likely to accrue sales if that bar sits alongside all the other confectionery in a brick and mortar supermarket than if you only sell them in bulk boxes through ecommerce.

However, getting stocked by a big company or supermarket can be difficult, especially as sometimes it means replacing a brand currently on the shelf.

Rahi Daneshmand, founder of Virtue Drinks, knows this process well as he currently lists big retailers like Ocado, Holland & Barrett and WH Smith among his stockists.

He explained that when you are replacing a brand: “You need to demonstrate to buyers why your product will sell better, why it is better suited to their customers, and also provide them with the margins they need.”

It can be difficult, and you need to be prepared to face rejection. Daneshmand said: “The process takes a lot of persistence. I would suggest figuring out which retailers your target customers will most likely shop in and have a targeted approach.”

Big businesses, such as supermarkets and chain stores, are always on the lookout for new products to broaden the offering to consumers. If these kind of companies are allowed to stock a small business’ innovative product, it reflects well.

Each need the cachet of the innovative startup in much the same way the small business needs the well-established corporate.


Small business as innovator

Small businesses are often at the forefront of innovation and technology. Tech startups and disruptive businesses are more agile than a large business – there are fewer decision makers to go through, less red tape, fewer legacy systems in place.

In some instances, it can be cheaper for a large firm to find a small business that is already working on the solution or technology it needs than to produce it in-house. This can lead to new business partnerships, and in some cases financial help for the small business’ ongoing projects.


Being part of the supply chain

In some cases, a small business may have a large business client to serve as part of a supply chain.

This can be a good way to piggy-back on larger deals, and indeed many small businesses believe this is the only way to gain access to such contracts.

In this scenario, the small business in question must be perfectly oiled and polished so as to meet the demands of its larger business client. A late or faulty delivery can have disastrous knock-on effects and cost you a lucrative arrangement.

Of course, you are unlikely to win the contract in the first place if your business is poorly administrated or shoddily run, but be realistic about which deals you bid for.

Don’t get caught out and end up promising something you can’t deliver – it is a sure-fire way to damage your brand’s reputation.


A word to the wise

There is no doubt that it can be intimidating for a small business stepping up to the plate and entering the world of big business – but don’t let yourself get bullied, or taken for a ride.

If a big business wants to collaborate with you it is because you are doing something right. Be careful about how much equity you hand over in exchange for funding your projects, it is important to retain control of your company.

And lastly – know your worth. You need to be able to demonstrate value to get the big business on your side in the first place, but once that has happened you continue to offer them value throughout business collaborations. Don’t let them steamroll you, and be sure to take credit when it is deserved.

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ABOUT THE EXPERT

Letitia Booty is a special projects journalist for Business Advice. She has a BA in English Literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.

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