If you look at current trends, it would seem as though giant companies, especially retailers, do in fact have their smaller vendors by the short hairs.
A case in point is the recent ABC News story about Dan Brown & his “Bionic Wrench,” made in Cabot, Pennsylvania and their horrendous experience with Sears. Brown’s company manufactures, and holds the patent, on the Bionic Wrench, a product made entirely in Pennsylvania.
Last year Sears was the Company’s biggest customer, ordering some 200,000 items for the Holiday shopping season. As a matter of fact, Sears was so enamored with the product that they asked Brown to refrain from selling to their competition and offered the sizable order to compensate.
This, in my opinion, was their first mistake.
Companies like Sears have been doing this to small businesses for decades. I was warned, back in 1975, about doing business with them, so, while it was no big surprise when I saw this story, it angered me none-the-less.
Several years ago an author I was coaching read me a contract she had received from Sam’s club. While the order was substantial and the discount they asked for reasonable for the quantity, their terms called for everything being fully returnable, in any condition, within five years.
She, of course, had already figured out this was a bad deal and I simply confirmed it for her. That’s one of the benefits of having someone to act as a sounding board and help with decisions.
What’s a small business owner to do when faced with an order from a giant company? Are there ways you can still benefit from the huge buying power of a large company without putting yourself at risk?
The answer is, of course, most certainly yes.
For example, Dan Brown and bis Bionic Wrench company could simply have declined Sears request for exclusivity. Making your company vulnerable by having only one big customer is never a good idea. I must say, like Mr. brown, I learned this lesson the hard way years ago.
A small manufacturer or service business needs to buffer themselves from things like this taking place. We need to “spread the risk” among a number of clients even if it means losing out on what seems, at first, to be a great opportunity.
Something else a smaller business can do when dealing with a much larger buyer is to carefully negotiate the terms of the sale. My coaching client, for example, could have renegotiated the contract to, perhaps, offer more of a discount for a non-returnable arrangement or even suggest a smaller order. Even a small publisher can risk a small quantity and, if successful, can always come back with better terms.
While the attraction of a big order from a giant company is always attractive, it’s important to protect yourself and your company from what can go wrong.
Of course, in the case of Dan Brown versus Sears, this is simply a lack of ethics on the part of Sears, not to mention their total disregard for supporting American businesses.
I doubt Richard Sears (1863-1914), the founder of Sears, Roebuck and Company would approve of the way the present management is running the organization he started.
You can read an interview with Dan Brown, that appeared on the New York Times Small Business Blog here.
If you want to grow your business with less risk, make sure you have someone who can act as your trusted advisor, coach or mentor. If you do not presently have a business coach, consider my small business coaching service to help you and your business. Please keep in mind I do not work with more than five (5) clients at any time. Go here.