Prudence needed when dealing with these megacompanies
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by Dave Gallagher
At some point nearly every small business owner with big dreams is tempted to partner up with a large company.
Working with a big company could mean large work orders, leading to plenty of profit. If a small business has a great idea, a big company can help them realize the full potential of the product by drawing on its vast resources to bring it to the market. Partnering with a big company could also lead to other big clients, and suddenly the small company isn’t so small anymore.
Most of the time it can be difficult for a small business to partner with the big, global companies on a project. For Puget Safety Equipment’s Becky Eastwood, knowing the right person at the right time played a crucial role in becoming a vendor for global giant Halliburton.
The 10-employee Bellingham company has been a vendor for Halliburton for about a decade, and it all started when a Halliburton employee living in Whatcom County happened to discover Puget Safety Equipment.
“I don’t know how he did it, but he got us on as a vendor for Halliburton and it’s been a good partnership ever since,” said Eastwood, who owns Puget Safety with her husband, Jim. “I think he left the company eight years ago, but we still provide safety product orders for Halliburton. It’s one of those things where I don’t think we would have ever had the chance to work with them if that employee hadn’t given us the opportunity.”
Of course, opportunities to partner with a large company usually don’t just fall into a business owner’s lap. Diane Kamionka co-founded a high-tech company in 1987 called Cintech Solutions, which developed new software technology for phone systems. As phone companies began moving toward this technology, Kamionka began contacting them about her product. It took six months to even get a first meeting with Northern Telcom (Nortel), which eventually agreed to a partnership with Cintech.
“Once they saw our product, we ended up talking and eight hours later we came away with an agreement,” said Kamionka, who is now a consultant in Bellingham. “It wouldn’t happen that quickly today because back then we were in the early stages of this voice and data technology. Today big companies have a long process to make sure a product or partnership fits their overall strategy. It can be very draining for a small company.”
Aside from the stroke of luck of landing a company like Halliburton, Eastwood agrees winning a contract with a big firm requires a lot of patience. Puget Safety Equipment has also worked with other large firms, such as Heath Techna.
“It is a long process with just about every big company you work with. Most of the time you have to grow into it by starting with small orders to prove you can handle it,” Eastwood said. “You have to know before you even approach a large company what you can and cannot do.”
Partnering with a large company doesn’t always mean fame and fortune, either. Large companies are always looking to make a profit, too, and they aren’t always keen on sharing the recognition.
“Once you partner with a large company, you are just another car on the train, and you have to accept that fact,” Kamionka said. “The big company tolerates you and usually grabs the spotlight for itself.”
Stepping up to the plate
When a small company decides they want to partner with a large company, whether it is to bring a great idea to the market or become a vendor, the first thing the small-business owner has to be prepared for is waiting in line. Companies such as Microsoft and Boeing are constantly being approached by smaller companies, if for no other reason than they want to be bought out.
“There are only a small percentage of small companies who actually get bought by large companies,” Kamionka said. “If a small company gets purchased by a larger one, it is probably so the big company can acquire the technology.”
Many big companies today have screeners to determine if they are interested in proposals from a smaller firm. In order to be efficient in the process, smaller companies should research the big companies first to see if they might fit. Since many of the large firms are publicly traded, there is usually a wealth of information available, including directions the company might be headed when it comes to new technology.
By the time a small-business owner approaches a larger firm, they should have properly screened the big firm as well, Kamionka said. Not only should you have already determined whether this big firm might be a good fit, but also have a clear idea of what you want to get out of it and whether the big firm can deliver.
“The small-business owner needs to have a clear exit strategy in mind so you don’t just get swallowed up by the large firm,” Kamionka said.
It is also important not to have the small business entirely dependent on the big company, Eastwood said. Puget Safety Equipment has contracts with big companies, but about 80 percent of their contracts are with small firms.
“We feel comfortable with that kind of split, because we never want to get in a situation where we are putting all our eggs in one basket,” Eastwood said.
Kamionka agreed, saying branching out provides more stability for the small business.
“Looking back, establishing more relationships with other companies would have been the one thing we would have done differently,” Kamionka said. “Overall, though, working with a larger company was a very good experience.”
Eastwood has found getting contracts with big companies to be an interesting experience. Some offer an oral agreement, while others offer complicated written contracts that try to cover all the bases.
“I get a leery feeling with the long, legal contracts and I feel compelled to look closely to make sure there isn’t a trap,” Eastwood said. “I would have no problem hiring an attorney if there wasn’t any part of the contract I didn’t understand.”
It’s also important to make sure your small business can handle the contract, Eastwood said. They were tested at one point when Halliburton placed a $50,000 order, which hurt Puget Safety Equipment’s cash flow until they paid.
“It’s always hard to say no when you’re hungry for new business, but you have to make sure you only take on what you can handle, because word-of-mouth travels fast even among big companies if you develop a bad reputation,” Eastwood said.
To Eastwood, the most important thing about working with a big company is to have fun.
“It’s interesting learning about these big companies that you’re working with,” Eastwood said. “You also get a chance to work with a lot of different personalities, and it can be a fun experience.
