We can see the rise of massive businesses in our lives, such as Amazon, Google, etc. But is it possible for smaller companies to survive without relying on the big multinationals as part of their supply chain? The data shows a trend towards more of the market being dominated by the larger companies. But does this dominance mean we have to deal with the large operators? What choice does a small business have, and can they thrive while cutting out the big man?
What is Big Anyway?
What constitutes a big business is a subjective question; however, certain conventions are broadly accepted. Firstly, company size is most often measured by the number of employees. SMBs (Small to Medium Businesses) are generally looked at as under 100 workers, SMEs (Small to Medium Enterprises) would come in at 100-500, and large enterprises at over 1000. There are more extreme examples such as micro-businesses where it’s a sole owner-operator or a few people and huge multinationals employing tens of thousands.
Look at Your Supply Chain
Research and analysis are everything in business. We need to know, in detail, what we need to run our business to be able to say with any confidence which are essential trading partners? If we are running a restaurant, we will need to deal with food suppliers mainly. It is very possible to source food locally; you may be limited to seasonal produce, though. Buying locally and in season can be a selling point to customers as it shows a commitment to the local economy and can indicate a concern for environmental sustainability.
Check out Local Suppliers
How successful we can be with a local purchasing strategy will depend on the strength of our local economy. Have a look around for local suppliers in your local area. Typically, business-to-business operators do not advertise as much as those selling directly to the public, so we may have to do a little research to find them. Ask around by talking to similar business owners in the area, checking out trade publications, and conducting online research. You will find it easier to start up a genuine conversation with local business owners, walk-in, or call them, and you will often be able to speak with a director or owner. The significant advantage of this is you will be dealing with someone with a genuine interest in the business, rather than a waged customer service operator or sales agent.
Cost Out the Pricing Differences
There is a more than reasonable chance that buying from smaller, more local suppliers could carry a higher price. In some markets, we cannot get past the power of bulk purchasing; a large multinational will be able to negotiate a better price by ordering 100,000 of something than a mid-level operator who only needs 25,000. Take the cost of buying from your preferred local supplier and check out your levels of profitability. It may be possible to justify a slightly higher sale price to your customers if locally sourced produce is something that matters to your customers? Don’t assume this is the case, rather test customer opinion by asking or surveying your customers.
Is Price Everything?
Price is generally not everything. As we have just touched upon at the end of the previous section, we can see that some consumers will happily pay a premium for extra value. You should also consider the value of the cost you are paying and make a planned assessment of the added value you will get. Take the example of a landscaping company; you could buy paving slabs manufactured in concrete in China and imported. But consider the alternative of buying natural stone paving sourced from a local quarry and hand-cut? The locally sourced stone paving will certainly be more expensive, but maybe nicer and more durable, not to mention the fewer transport miles.
Market Yourself to Other Independent Businesses
It’s not just sourcing your products and supplies that are part of a local business scene; you should also look to sell to other local businesses. In some industries, this is almost unavoidable, such as accountants. But consider if you mainly market yourself to the general public; you operate a car hire firm, for example. You should reach out to other businesses who may need a regular service, put together professional-quality promotional materials, hire an expert such as this Miami video production agency, and you will see the benefits. You are not only finding new customers but increasing your professional network, which can only mean more recognition and profile for your business.
What About Expansion?
You must consider the capacity that smaller suppliers can fulfil as your orders become bigger. It’s not enough to simply ask them, as many businesses will say they can handle larger orders, as they won’t want to lose a customer, who would? We must closely monitor our supplier’s performance as we expand, and if they are struggling to cope, we must have a conversation with them on how we might proceed? Is it a temporary glitch as they become accustomed to the new volumes, or something more systemic?
Big Ticket Items
There are some items that although we can source their sale locally, we cannot get around the fact that they will be manufactured by large organizations. Take the most common business tool, a computer, everyone has one, even if it is just the one that’s known as your smartphone. You can easily find a local IT retailer, but the products will have been manufactured by Sony, Apple, Microsoft etc. Even a local supplier who builds PCs will have to buy the parts.
Is There Room for a Mix?
In reality, we will have a mix of local and national suppliers. Some organizations, such as schools, must open up a bidding process to allow all to compete for contracts. But even small private businesses will find it hard to eliminate large companies from their supply chains.