Successfully working with big-name Fortune 500 companies to get your product in front of their consumers can be both incredibly rewarding and tricky for a small business learning the ropes. It’s important to know what you are getting your company into before you dive head first into a supply chain deal that might look great on paper but may not actually be so good for your business at all.
If you believe your business has progressed to the point of seeking these kinds of supplier relationships, consider taking the following steps to help make sure you’re fully prepared before you enter the negotiation phase.
1. Do your homework
There is a lot of information out there about supplier programs, and your first assignment is to use these resources to find out which companies might be a fit for what your company produces.
Every program is different. For instance, let’s say you have something you’d like to get into a big-box store. You need to be familiar with their store, the products they carry and who shops there. Walk the aisles of your local store. Note what is unique about the store and the particular products it sells. Look around at who is shopping there. Determine whether or not you think your product is a fit. Understand and be able to articulate what is unique about your products or services. There is only so much shelf space. Is there a competing product you could displace?
The homework that you do can be critical to positioning your product and its benefits in the event you speak with a Fortune 500 supply chain decision maker.
2. Seek out possible diversity programs
Did you know that 93 percent of Fortune 100 companies have supplier programs designed to encourage contracts with small-business owners? And many Fortune 500 companies have diversity programs designed specifically for women-, minority- and veteran-owned businesses. You can find 93 of those businesses and their programs here.
One note of caution: generally these programs require 51 percent ownership to qualify.
3. Understand your deal terms including net-pay terms
All large companies are going to have different types of deal terms and you should read the fine print every time. No matter how excited you are, don’t just sign on the dotted line. This is the time you want to have a lawyer on call that can review any offers and contract language. And ask questions. Don’t think that you have to act like you know it all.
There are some big-box stores that will charge your company back for any unsold products. Would your business be able to handle that kind of cost? You also need to know when you are going to get paid. Are you going to be the last company in the supply chain to get paid? Are you going to have to carry net-payment terms of 30, 60, 90 or 120 days? Really consider how your business will fare under long net-payment terms.
Thankfully, in 2011, the White House launched the QuickPay initiative requiring federal agencies to pay the smallest of the businesses in their supply chain first. Launched in 2014, the administration’s SupplierPay program similarly urges private companies to pay smaller companies faster, but just a small number of companies have signed up. You’ll want to make sure you know your terms before you sign on the dotted line.
4. Get your finances in order
Just like all the other parts of your business, you should make sure that your financial recordkeeping and accounting are in shape. For instance, the company I work for, Dun & Bradstreet Credibility Corp, provides a D&B D-U-N-S® Number, which most supplier programs require and is linked directly to your D&B® business credit report. Some programs may require that your D&B® Supplier Evaluation Risk (SER) rating in your business credit report meet minimum requirements. (Anything above the minimum number is usually considered too risky.)
Companies tend to do business with companies they feel they can trust to deliver what they need. Bids could be lost and contracts dropped if credit is an issue and the company you want to do business with won’t want to work with a business that would represent too high a risk.
consider whether you are keeping your own house in order.
5. Be sure that you can deliver the product you’ve promised
If you have a product that has been selling well in smaller retailers and you want to introduce to larger businesses, or you are a manufacturer that has a part being used on a small scale that you are now selling in to a supply chain program, you’ll want to know how you will respond to much bigger orders while still maintaining quality, on-time delivery and profits.
Some companies need larger space or need to move production of products overseas. Let’s say you are producing a new type of guitar and have been hand producing them up until now. You have interest from a major retailer and they want the product in store by a certain date. Are you able to respond quickly? Be prepared to address your plans to scale your business to keep up with demand.
When it comes to participating in supplier programs, especially with Fortune 500 companies, knowledge really is power. Understanding as much as possible about the Fortune 500 business you are approaching can help separate your company from other small businesses entering the supply chain.
Related: How Do I Get Into Big-Box Stores? What Shark Tank’s Barbara Corcoran Told This Entrepreneur.