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