For those startups looking to sell to a major buyer, you could be forgiven for feeling a little frustrated at the process – it often takes a long time to get anywhere, which isn’t what you want when you’re starting out and keen to get going.
However the reason it takes so long is that there’s a lot at stake, for both the supplier and the procurer. Big contracts require checking, approvals, and what can feel like a million stages to get through. While there’s no silver bullet that gives you the key into a business, here’s a simple overview of the steps that your proposition will go through on your journey from pitching to supplying.
What is procurement?
A quick note on what procurement is. Procurement isn’t just the act of buying – it’s the act of buying goods and services, and what is wrapped around that is significant. You have to factor in elements such as cost and quality.
Procurement takes into account questions such as: what is the driver for the business? Is it a cost-driven decision? Or is it one based on quality, cost, the method of delivery and who is delivering it? Every organisation makes trade-offs – procurement is not a decision that happens in a vacuum. That’s why it takes so long, as mentioned above.
Step 1: Know what you’re offering
When you approach a business, you need to know exactly what you’re about. What need are you fulfilling for the buying business? What opportunity do you see? Why should they spend money on this? At the end of the day the company is buying your things to drive their business forwards, so be very clear.
Step 2: Request for more info / commercial proposal
If your proposal has been of interest, the buyer will initiate a commercial proposal (aka a pitch). However more information may be required, for example if the market is a new one, and in this case the procurer is likely to request more information, which is more speculative than a proposal.
Step 3: Go to tender
Here the true magic starts. When the procurer knows the business has what they want, you go to tender. This is generally a structured document that lays exactly what the customer wants and what their expectations are. You’ll also start thinking about logistics here – the timetable for the process and decision-making criteria, for example. Everything needs to be on the table – 100% honestyl no ambiguity. The last thing you want are nasty surprises or unexpected costs throwing a spanner into the works later on. Ask questions if you’re in doubt; this is the time for it.
Step 4: Evaluation
Evaluation is exactly what it sounds like – your big proposal analysed from several different angles, from quality checks to people structure, right down to whether the buyer feels they can work with you and ‘clicks’ with your company. A tender is comparing your offering to your competitors, and while the price is always evaluated, it’s rare for the decision to be made solely on this basis.
If you make it to the evaluation stage but you’re deselected, you can ask for feedback. Companies should be able to tell you why you weren’t successful, which can be a huge help for your next proposal.
Step 5: Due diligence
Part of the evaluation stage is due diligence. It’s really important that everything checks out, and that everything works financially and legally. For example, will information about the buying business be safe? Are there confidentiality processes in place, and do you have systems for handling sensitive data? The buying business needs to have transparency that their relationship with you will be a positive one that won’t harm them.
Step 6: Negotiation
Negotiation is when you pass the evaluation and due diligence, and start to establish the terms of pricing and how you’ll work together. There are multiple levers for you to think about here – price, but other things. Can you offer a discount? Can you offer exclusivity? If you get through to this stage, be sure to have a plan, and to have thought about what you want to get out of it. Think about the legal things, such as the contract terms, and ensure that everybody your side is happy with these.
Step 7: Internal approval
Internal approval can be hard to get in a big company. It can feel very painful and slow, as there are usually a lot of levels to go through, and a lot of internal negotiation goes on. Don’t lose heart – accept that this is just part of the process.
Step 8: Implementation
This is where you bid farewell to the procurement team, who don’t hold ongoing relationships in order to maintain impartiality – but they’re there to ensure the integrity of the deal that’s put together. Procurement doesn’t disappear completely, but takes a back seat. Now the focus is on making your relationship with your business work!
Want to take your business to the next level and win a contract with a big business? We're hosting the event for you.
Doing Business With Big Business is the flagship Virgin StartUp event. This is a full day workshop that will teach participants how procurement works in large organisations allow them to gain an insight into their decision making processes, learn what organisations are looking for from small suppliers, practice negotiations and network with buyers from a host of different companies! Places are limited and always over-subscribed - so book now to secure your place!