THE SIX THINGS EVERY SMALL BUSINESS OR STARTUP NEEDS TO KNOW ABOUT WORKING WITH BIG BUSINESS


I’m Piers Linney and this is Scale Up. I really believe that
there’s huge potential to create value through
collaborations between large companies or large enterprises and small businesses or even startups. So you got the large companies, let’s call them big
companies for the purposes of this video, they’ve got customers, processes, resources, distribution. And smaller businesses they’re
nimble, they can respond to dynamic markets, changing trends and customer feedback really quickly. They tend to be more innovative and they can attract and
develop better talent. However, partnering with
big companies is not easy and it often leads to
failure and frustration. I know, because I’ve been there. I have sold to, and partnered
with, FSTE-100 companies, these are like your
Fortune 500s in the US. Sometimes successfully
and other times it has led to time-consuming and expensive failures, despite the best efforts of
literally everyone involved. Collaborations range from
supplier and customer relationships to product development to sales and marketing to
distribution and licensing. So in this video I’m
going through my six Cs, the six things that you need
to consider, very carefully, before and during any
collaboration with a big company. I’m also gonna add another
bonus C at the end of the video if you keep watching which,
although it’s more subtle, being aware of it can
make a material difference to your chance of securing opportunities and also then making them work. So if that sounds of interest, please subscribe to my channel
and hit the like button. So, let’s get into it! (upbeat funky music) These are six things any
startup or small business needs to consider to work
successfully with a big company. Now it doesn’t really
matter what the relationship is although my six Cs are
relevant to commercial relationships where time, money and energy will be invested and some
sort of economic return is expected by both parties. Now I’ve got great experiences
and really terrible experiences of working with
large enterprises ranging from some of the worlds biggest telcos to multi-national consultancies, some of the worlds largest
software companies. Even if you are responding
to a tender and you win it, you need to factor in my
six Cs into the process, the relationship afterwards
and this is to avoid costly and resource-sapping engagements
that end up going nowhere. So on paper it makes huge
sense to combine the innovation and speed of small businesses
with the customers, distribution, resources and even the data that big companies have. Although it is not easy
it certainly does not mean that you shouldn’t try
working with big companies. As a small business,
there is huge potential and my six Cs are designed
to enable you to enter into the relationship with your eyes open, reduce the risk and maximize
your chances of success. Number one – collaboration. Now, this may sound obvious, but there needs to be a real
collaboration, a partnership. To make it work you need to
be entering into a partnership so trying to engineer and be
clever some zero sum game. It’s not gonna work, even
if you pull a fast one and you manage to talk a large big company into something that is far
more beneficial for you and your business than them, you run the risk of a personnel change or some internal review
and a light being shone on your deal that results
in it being changed or even summarily terminated. You need to create a collaboration
– one where those working for the big company can
see how it adds value to their business as you can
see it adding value to yours. A partnership, and you’ve seen it before, where one and one equals more than two. And that’s the heart of the relationship and even if you cover the
other six Cs I’m going through like a boss, and if you’re
not creating a fully collaborative relationship
then the wheels inevitably are gonna fall off. Number two – champions. People do business with people. This is the basic sales tactic, but you need to have
champions for your business, champions for your product
or service and even champions for you – the sales director,
the CEO or the founder. They will help you sell
internally and will stick up for your business and you
when it’s required to overcome the inevitable challenges when they arise. The most important thing
you need to remember though is you need more than one champion. You may spend 12 months
engaging with a big company and even sign the deal and
establish a great relationship with an internal lead and senior champion to wake up one morning
and find they’ve moved on to the competition or another role. Or have even emigrated. And I’ve experience all three scenarios as it happens all of the time. Their replacement may have
a different strategic plan or even just a perception,
a different perception, of the value of the relationship. They may already be championing
some of your competitors which is a nightmare. Such shocks can be difficult to avoid as sometimes whole layers of management can disappear in a big
company reorganization overnight with no notice. To minimize the risk of
losing your key relationships, you need to establish a matrix of contacts across big companies. I have sat in meetings
where my team of three that can make all of the
decisions there and then almost on the spot have faced
off to 15 even more people that arrange pre-meetings and take notes before the main meeting. You need senior champions
to cut through the noise and avoid decisions being
made by a committee. This might include senior management, it might include the person
your contact even reports to and other people in different
departments such as product, finance, commercial, procurement,
engineering or even sales. Explain that it’s
important that you do this for the very reason I have explained and, although you have to approach
building relationships with somebody’s boss quite carefully, ’cause they might wanna know why, don’t take no for an answer. Number three – commitment. If you know deep down
that you’re not committed to collaborating with this big company or you sense that the big
company you are talking to is just fishing for ideas trying to find out what you’re
doing, then just walk away. You are wasting your time. Even a long and detailed tender process does not mean that a large
enterprise is necessarily committed, they are setup
and have whole departments to commence, run and
manage these processes. A big company can conduct
an 18 month tender process and then walk away from the
outcome before contracts are signed due to a change of strategy or even basic priorities. If you are not committed or
even not just quite ready, then don’t get sucked into an engagement to establish a relationship
with a big company. You’ve got limited resource
and the process will be costly and inevitably a huge distraction. Eventually this commitment
is gonna be captured in a contract, and
contracts have consequences which I’ll be coming onto. Number four – consequences. I’ve had businesses that have
won very complex competitive tenders to provide services
to very big companies such as telcos and we threw everything at the tender process to win it. We were assured that the
opportunity was substantial and that the significant
time, money and human resource we put into responding
and winning the tender was basically an investment
in an opportunity to generate substantial future
revenues as you’d expect. But, there were no consequences
for the big company, the partner for not delivering
on its side of the bargain. In that case, after over
three years of work, they failed to even get
the product to market which caused a huge
problem as you can imagine. You need to have consequences for both parties in a relationship. A big company will no doubt
ensure there are consequences for your business if you don’t deliver. You need to make sure that
there are some consequences for the big company if
they don’t deliver too. Otherwise you’ve got a
collaboration that doesn’t really lack balance and it won’t
work in the longterm. A simple example would
be a contractual revenue commitment by certain dates. This means that somebody
in that big company will own a profit and loss
with this cost running through it and that needs to be covered at some point by revenue. So even if they leave, the
person taking over their role is likely to assume ownership of the cost and that revenue target
to so it survives on. You need to have some corporate memory. This goes back to commitment,
if a large company, a big company wants to
work with a small company, a small business, or
startup, it should recognize that they have to deliver as well and not just use their negotiating
power and their lawyers and their standard contracts
to transfer all risk to the small business, to their partner, just because they usually can. Now this can be really hard to do and I often ask myself
what would I have done now with the benefit of hindsight,
but it is really important. If the large enterprise
is not willing to accept any financial consequences
for a failure to deliver, then you’ve got to ask yourself whether they’re really committed. Number five – communication. Effective channels of
communication are fundamental to the success of almost
any business relationship, but this is especially the case when you are dealing with big companies. You will find that a lot of people need to be kept in the loop
and poor communications can lead to costly
misunderstandings and delay. Relationships needs to be managed, from senior champions all the way down to those that are actually doing the work and if the big company partner
does not have a clear method of communicating with a small
business partner or supplier, you need to design one basically and you need to make sure
that that is captured in the contract and that it’s realistic. Let’s face it, the CEO of
a multi-national company isn’t going to sit down with you for a catch-up over a
smoothie every month. You gotta make this communication to the framework realistic. And it’s important to
understand the inner-workings of a big company and
who communicates to who, what to whom and how,
how issues are escalated. Find out where the buck really stops, and it’s important to setup and diarize these meeting or calls with
each layer of seniority and again make sure there’s
a communications process embedded in the contract. Then hold people to these meetings and make sure you use that
time to the maximum effect because it’s precious
to these big companies. This is actually something
that a small company can learn from a big company,
they have typically spent millions of pounds or dollars on creating effective communication channels. So to some extent you’ll
learn but you’re gonna find you’ve gotta fit into their framework because trying to change
these things will be hard and it’s a battle you
probably don’t wanna fight. Number six – contract. Big companies have big lawyers, big companies have big
contracts and big standard form contracts and it can be
difficult to change these things or at least that’s what they’ll tell you. You need to be very careful
that you sign a contract that captures the essence
of the relationship and my six Cs and which is fair. Don’t just sign whatever’s
put in front of you because you can’t believe
that you’ve got your foot in the door of a potentially significant revenue opportunity. When it comes down to it,
big companies can be ruthless and it will not be due to
any kind of personal malice. They also have shareholders
and stakeholders to protect and they employ
professionals whose bonuses and jobs are based on doing exactly that. They have tried and tested contracts and the financial resources
to follow through and go legal which is something small
companies typically can’t afford, financially or in terms of
the time it just soaks up. A common example is
negotiating around liability. Don’t just accept unlimited
liability for mistakes and make sure that liability
flows in both directions. Another example is payment terms. If you’ve got suppliers
expecting to be paid in advance or in 30 days and a big
company is forcing you to accept 120 day payment terms, then you need to have a
frank conversation with them about how you bridge
that working capital gap. Some have their own schemes
to help small business or you may be able to
factor your debtor book, but that comes at a cost as well, and it can be hard to
get out of factoring. If the big company is really committed and it really wants to
collaborate with you and you’ve got a great
communications and champions and this corporate memory built in, you should be able to
avoid a one-sided agreement that may come back to haunt you. Use the best lawyers
you can possibly afford, goes without saying, and
go through the small print very carefully to make
sure you understand it, you haven’t just delegated it to a lawyer. At the end of the day, the
whole deal will boil down to what’s in the contract. A few years down the line
when you need to refer to the contract to clear
up some kind of confusion, you may be dealing with
completely different people to anyone you’ve ever
met when you started out and an internal lawyer with
several other issues to resolve that week with whom you’ve
got no history whatsoever. So that can be quite difficult. I’ve been on the wrong side
of a big company’s advisers and lawyers and due to their scale and their on tap resource,
any small business partner is at an immediate disadvantage. You get one chance to ensure
your position is as good as you can get it to be and that is during the negotiation before
you sign the contract. It can be tough to negotiate
with big companies, but if the contract is
unfair and does not reflect the relationship you envisaged then you may need to walk away. So, they were the six Cs,
the six things that you need to consider when you’re
working with a big companies. But I did say that I would give
you a bonus C so here it is. Number seven – compensation. Now in a small business
your team will probably multi-task and your goal
can be medium, long-term and simply to grow your business and perhaps in dividends or
create equity value and sell it. In big companies, people
have specific roles and jobs and responsibilities
and they are rewarded usually using complicated and
quite detailed compensation or bonus schemes, and they
can make a real difference to their annual income. So what that means is that
these compensation schemes have a direct impact on behaviors. For example, if you sell red widgets and the plan is for the
partner to sell them for you this year and your key sales
contact in a big company has for some reason been
tasked with selling fewer red widgets this quarter and more
green ones, then guess what! It doesn’t matter what you
do or how much you plead, they’re gonna be focused
on selling green widgets that quarter to get recognition, or perhaps a bonus or even a promotion. So, the point of my seventh C
is that you need to understand the compensation plans
of those that can impact the performance of your collaboration. And, the best way to find
out is simply just to ask. Explain that you want to
help them be successful and therefore you need to know what success looks like for them so you can both work on it together. So that is it, they’re
six Cs plus a bonus, you’ve got seven in total. Follow them to maximize
your chances of success when working with big companies. Thanks for watching and please
don’t forget to subscribe to the channel for more
videos like this one and please hit the like button.

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4 thoughts on “THE SIX THINGS EVERY SMALL BUSINESS OR STARTUP NEEDS TO KNOW ABOUT WORKING WITH BIG BUSINESS

  1. Hey piers. You’re one of the very few people I look up to. You’re incredibly successful, yet you come across as extremely pleasant to be around, which seems to be rare when it comes to many entrepreneurs. It’s also cool that you have a YouTube channel, have been watching for month and been taking pages of notes along the way. Stay healthy 👍🏼

  2. Really insightful, thank you! I'd be really interested to hear your principles on creating a commercial strategy/monetization framework. For instance, should you always be looking to turn a profit straight away, or is better to build a customer base and make a loss? There's loads in there and would appreciate your opinion!

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