Selling to Fortune 1000 Companies

Date: January 03, 2014

Two small business owners share the promises—and potential pitfalls—of landing lucrative contracts with Fortune 500 and Fortune 1000 companies.

April Morse’s family-owned cabinet company, Weber Cabinets, was faltering in 2010. The Lodi, Calif.-based company that she and her father owned was generating revenues of $200,000, a 90 percent drop from a record $2.2 million in 2005. Nearly all of their revenue came from new-home construction, which had steeply declined in the surrounding area. And the 40-year-old NFIB-member company had gone from 25 employees to just three: Morse, her father, Mark, and an office manager.

Morse knew the fledgling company needed to make a big play to survive. Little did she know that the solution lay right under her nose. In March 2010, Morse came up with an idea for a new product: a custom chopping block shaped like a wine bottle. It was unlike anything the company had produced. To make it, she used wood scraps from the cabinet-making process. She began to sell the chopping blocks out of the shop, and the product was a hit with her customers.

Landing a Fortune 1000 Company

After seeing success in her own shop, Morse pitched her product to the upscale gourmet retailer Williams-Sonoma. With more than 200 stores nationwide and a direct-mail catalog business that reaches millions of consumers, landing the company’s business would be a moon-shot deal for Morse. A week after submitting her idea, Morse hadn’t heard back from the company, so she followed up with a phone call to a customer service representative at the company. The response on the other end wasn’t encouraging.

“The girl laughed at me,” Morse says. She told Morse to call back after 60 to 90 days. Morse blogged about her poor customer service experience on her “Custom Cabinet Girl” blog.

Almost a week later, a vice president at Williams-Sonoma saw her post via a Google Alert in his inbox and asked a staff member in his department to contact Morse. Williams-Sonoma was interested in selling the product, the staff member told her, and wanted to do a test run at 38 of their stores. They priced the chopping block at $129.99.

After the trial order of 120 units sold out, Williams-Sonoma ordered 2,000 units, paying Morse $60 for each one and infusing her company with $120,000 in cash. As a result, Morse’s business started to rebound. She even had to hire seven contractors to help with the extra work resulting from additional orders.

Challenges of Working with Big Customers

Working with Williams-Sonoma has given way to the harder work of maintaining the results of Morse’s big break. Williams-Sonoma followed up its initial huge order with a much smaller one—just a few dozen units, which didn’t sell as fast as anticipated. Morse also hasn’t been able to get Williams-Sonoma to sell her chopping blocks in its direct-mail catalog. Additionally, she’s only making $12 profit per unit—meaning that the deal with Williams-Sonoma, while high-profile, doesn’t constitute a huge financial windfall for her business, now named Weber Company.

“Even now, three years later, [there are] challenges with setting up a wholesale price,” Morse says. “You’re a small business doing it for a large business, and they call the shots.”

Now, Morse is searching for a more sustainable strategy to get big retailers to sell her product. Recently, she spent $10,000 for a six-day trip to an international trade show in New York (she spent $5,500 alone for booth space), where she displayed her chopping blocks and lobbied buyers at Midwest chains to carry her product. She sold about $3,800 worth of product and connected with some promising leads, making the trip worthwhile.

 Overall, Morse says, the biggest benefit of the Williams-Sonoma deal wasn’t the deal itself, but the buzz that came with working such a well-known brand. “They helped with the notoriety of my business,” she says.

How to Spot Selling Opportunities

For decades, Weber’s had thrived on making products for consumers, but Morse and her father had never dreamed about selling to a Fortune 1000 company. And according to Cynthia Kay, small business owner and author of Small Business for Big Thinkers, many small business owners feel the same way. But owners should keep an eye out for such opportunities.

“Big companies look for small suppliers that offer fresh ideas and are not stuck doing things the way they have always been done,” says Kay, who owns a media-production and communications company in Grand Rapids, Mich. “They want a noncorporate America, entrepreneurial perspective to jump-start their creativity. They think smaller firms can do that.”

Indeed, since Morse’s first foray with Williams-Sonoma, retail heavy-hitters such as HomeGoods, T.J. Maxx, HomeSense and Winners now carry her chopping blocks—thanks to a direct selling relationship with parent company TJX Companies, Inc. All told, Morse estimates that the chopping blocks have added $200,000 to her business since 2010, revenues that are beginning to turn her business around.

When reviewing a contract with a big company, owners should first look at whether the deal will be profitable, says Doug Berman, a Dallas-based attorney who counsels startups and mid-size companies. Caught up in the excitement of landing a deal with a large organization, many small businesses fail to ask: “Is the pricing so low that the volumes or the credibility gained from associating with the large company are not worth it?” says Berman. (Morse recommends that small business owners look for at least 15 to 20 percent profit margin.)

Get a Piece of Fortune 500 Companies

Another strategy for landing big clients: Don’t try to compete with big companies for huge projects; instead, go after smaller portions of big projects.

That’s the tactic Randy Gunter used. In 1997, Gunter quit his job at an ad agency and launched his own marketing agency, the Gunter Agency, based in New Glarus, Wis. A week later, Gunter landed freelance work with Rayovac, an esteemed corporate account at the time. Rayovac’s graphics department needed a freelancer to shoulder some of the burden of its overworked staff.

By highlighting his Rayovac experience in conversations with prospective clients over the phone, as well as positioning his company as nimble yet as good or better than its bigger competitors, Gunter’s small team went on to land marketing projects with Fortune 500 companies such as OshKosh B’Gosh, Firestone, Oscar Mayer and John Deere.

The rest, Gunter says, is history. “My company grew from there,” he says.

Lessons from Working with a Big Client

Gunter’s strategy to focus on smaller portions of big projects earned the business of Kimberly-Clark in 2003, when he secured projects to do design work for the Huggies and Pull-Ups brands. Over the next year, Kimberly-Clark grew to be the company’s largest individual piece of business, and annual revenues rose to more than $2 million in 2004.

And then, the waves began to come. Kimberly-Clark hired new creative directors. Then, it hired one of Gunter’s team members (despite a noncompete clause). Finally, Gunter’s main contact at Kimberly-Clark left, and the company stopped sending business Gunter’s way. Although he tried to get the business back, Gunter says he could never secure a meeting.

After taking that million-dollar hit, Gunter’s work has skewed to smaller brands. “It isn’t that we won’t be pursuing larger customers again,” he says, but for now, the demand is coming from smaller businesses. If the opportunity to work with blockbuster brands comes around, Gunter says he won’t be opposed to taking them on as clients. “These larger customers are simply more lucrative than the smaller ones.”

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