The quickest way for an entrepreneur to scale up a business could be to enter into supplier contracts or vendor agreements with Fortune 500 companies. If you are successful at doing this, you could see rapid growth in sales volumes with a corresponding increase in profitability.
What is “Fortune 500” and what does it take to work for one of these companies?
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the largest United States corporations by total revenue for their respective fiscal years. Among these large companies, you’ll find Walmart, Apple, ExxonMobil, General Motors, or CVS Health, to name just a few.
Many Fortune 500 companies have Supplier Diversity Programs (SDP), geared towards giving subcontracting opportunities to small and minority-owned businesses.
But becoming a supplier to one or more of the largest companies in the U.S. isn’t easy. The process of signing the contract involves dedication and hard work.
It would also require you to learn how the company that you are targeting operates. What are the conditions for getting approved as a supplier? How can you navigate the bureaucracy that you will invariably face? You will also need to understand how vendor agreements work and the steps that you need to take to enter into one.
However, remember that while the process can be complicated, the goal of signing supplier contracts with big corporations isn’t impossible to achieve. Remember that most probably the corporation that you will be dealing with could have an SDP as mentioned before and, if you meet the eligibility criteria, this could help you get on to the approved list of vendors.
Here are some of the steps that you can take to speed up the process of getting approved as a supplier to the country’s top corporations:
Steps to Get a Supplier Contract with a 500 Fortune Company
Familiarize yourself with the target company’s operations – The first step that you need to take when you set out to enter into supplier contracts with one of the Fortune 500 is to find out if you have something to offer them. Do they require the product that you make or the service you provide? How can your small business fulfill one of their needs?
An excellent way to begin the process is to study the corporation’s website carefully. Get an idea of what they require and think of how your company fits in.
Get your house in order – Don’t be surprised if you are asked to furnish your financial statements as part of the approval process. When Fortune 500 companies are entering into supplier contracts, they want to be sure that they are dealing with businesses that have the resources to keep their commitments.
The procurement officer may even want to visit your place of business to understand the manner in which you operate. If this happens, make sure that you put your best foot forward. It’s an ideal opportunity to highlight your firm’s strengths.
Think about how you can convince the buyer to trust you – Get into the shoes of the Fortune 500 company’s procurement executive. What does he or she see? A well-managed and trustworthy company that can be relied upon to fulfill the contract? Or a business that may be risky to deal with?
Remember that large companies don’t want to take any chances. They hate missed deadlines, shoddy goods, and unpleasant surprises. If you can convince the person that you are dealing with that you are absolutely dependable, that’s half the battle.
Differentiate yourself from the competition – It’s a buyer’s market and the competition can be fierce. The corporation that you are trying to enter into a supplier contract with probably already has several small businesses on its shortlist. In fact, it is even possible that there’s already an entrenched supplier that has years of association under its belt.
How will you compete?
Draw up a list of your strong points. Which areas of your business are you most confident about? Now, think of a way to convince the buyer about this. Sometimes a strong testimonial can do wonders. Has your business ever received any press coverage? Show the clippings to the buyer. It will help to establish your credibility.
A certification can help – Do you operate a minority or a women-owned business? Is your small firm a veteran business enterprise? If the answer is yes to any of these questions, it could help to get the appropriate certification from an agency that the corporation recognizes.
For example, these are some of the agencies from which Walmart accepts certifications:
- National Minority Suppliers Development Council (NMSDC)
- Women’s Business Enterprise National Council (WBENC)
- S. Business Leadership Network (USBLN) (Disability Supplier Diversity Program)
- S. Pan Asian American Chamber of Commerce (USPAACC)
This is a partial list. You can access the entire list of certification agencies on Walmart’s Supplier Inclusion page.
A certification could help your business become eligible for preferential treatment to enter into supplier contracts.
Subcontracting could give you a foot in the door – Entering into supplier contracts with Fortune 500 companies can be a challenge. It may take months to overcome the bureaucratic hurdles that you will encounter during the application process.
However, subcontracting offers a way out. Try and get some subcontracting work from an existing supplier. This will give you an opportunity to demonstrate your competence. If your performance meets the buyer’s expectations, your application may be considered when the corporation plans to expand its list of approved suppliers.
You may need to buy enterprise contract management software – Many small business owners make the mistake of thinking that they don’t need to invest in a software package that would help them to monitor and fulfill their contractual obligations. After all, why can’t they use good old email and continue tracking developments on a spreadsheet?
Unfortunately, if you think like that, you’re setting yourself up to fail. Large corporations place a great deal of value on efficiency. They want a reply to every message that they send you. Above all, they want you to adhere to your commitments. A good enterprise contract management software package can help you to do this.
Don’t expect immediate success – When you are trying to enter into supplier contracts with Fortune 500 companies, be prepared for the long haul. The process is very different from selling to a small or medium-sized business.
Why is that? Why should negotiating with a big company be different? The first issue that you have to understand is that for every decision that a Fortune 500 company takes there are multiple stakeholders. So, if you think that a particular meeting went very well because you were successful in impressing the procurement executive, you could be surprised to receive a list of additional questions from the corporation.
Don’t worry if that happens. It’s probably another department that has raised the query. Remember patience pays. The small business owner with the highest degree of “stick-to-itiveness” is likely to have a better chance of winning the contract.
How to Get Supplier Contracts with These 3 Big Companies
This giant multinational retail corporation is the world’s largest company by revenue. Walmart has over 100,000 suppliers. Many of these are multi-billion dollar companies themselves, but Walmart also has numerous small businesses in its list of approved suppliers.
The first step that you need to take to enter into a supplier contract with Walmart is to study its supplier checklist. Do you have all the information that you will need? After you have gathered the required details, you can go to this page to begin the qualification process.
Minneapolis-headquartered Target is the eighth-largest retailer in the United States. The company is associated with over 150,000 independent retailers across the country. If you think you have a product that will attract sufficient buyer interest, you could submit your product information to Mr. Checkout, a network of distributors that services independent retailers.
You can also register on Target’s supplier diversity program if your business is at least 51% owned and controlled by women, ethnic minorities, or specific other categories.
Costco Wholesale Corporation runs a chain of immensely successful membership-only warehouse clubs.
The company’s supplier diversity program caters to African American, Asia-Pacific, and Hispanic American citizens among other categories.
You can also get your product into Costco by providing your product information and requesting the company to consider your application.
The Bottom Line
Supplier contracts with Fortune 500 companies can propel small firms to the next level. Of course, it isn’t easy to win a contract with a big company. The process requires you to learn how to highlight your skills in a manner that gives the buyer the confidence to deal with you.
However, if you do manage to get your firm on the approved list of suppliers of a giant corporation, it could be the beginning of a new phase of growth for your business. Give it your best effort, and remember to be patient. If you are successful in winning a contract from a Fortune 500 company, the rewards can be tremendous.
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