Do you really want a big corporate customer?

I was talking to a colleague the other day who owns a small business that has a number of small customers and one very large corporate customer. By far and away the worst payer, most demanding and least sensible customer is the huge corporate, which in reality is contributing nothing to the business except cost and hassle.

This is an area that I have been pulled into many times in the past and in every case bar one, when analyzed properly and in detail the only sensible conclusion is to ‘fire’ the big corporate customer.

In theory having a huge global customer sounds like a great idea. Big orders, little or no risk and so on – the fast track to that Ferrari you’ve always dreamed of.

Sadly it is very often the opposite.

Let me share an experience I had a number of years ago in 2010. A company I was working with ran a seminar with a well known global bank. The bank had agreed to allow its procurement team to tell us the truth about supplying the bank. I am not allowed to name the bank publicly and you’ll see why in a minute.

To a room full of excited and enthusiastic potential suppliers, the procurement team laid out how the bank buys and its tactics for getting the best deal:

• Payment terms were 180 days – non negotiable.
• Contracts could be stopped instantly by the bank, but only on the agreed notice by the supplier – usually 90 days or more.
• Procurement would never stop screwing the price paid down or improving on the terms of service required of the supplier until it was convinced it had just about got the supplier to back out.
• Buying cycles were measured in months if not years on average.
• If a supplier could not supply globally it would not be eligible to supply locally.
• As a business, the bank considered that if suppliers barely broke even on supplying the bank that was okay, because just having the bank as a customer would win them other customers.

It doesn’t take much imagination to picture the reaction in the room from all those enthusiastic and eager potential suppliers. Most of them were shocked and many of them angry that a big player would consider treating smaller companies so badly.

However, think on this. That particular bank had a procurement budget of more than $10 billion annually so its buyers were probably quite rightly focused on big solutions from big companies that would ensure that they had fewer contracts and were able to lever economy of scale in ways that buying from smaller companies just would not permit.

The harsh and unforgiving reality is that it is usually a costly hassle for big corporate business to deal with smaller suppliers and often that is why they shy away from it.

It doesn’t mean you should ignore them, but does mean you need to be very clear in your mind what it is that you want from dealing with them. You need to have a plan and the sense to walk away if the deal isn’t right, because make no mistake, if you don’t then you could finish up with a great business being held back by its biggest customer.

Author – Tim Sandford