5 Issues Entrepreneurs Need to Be Aware of When Working With Big Customers

For a small business, landing a big name client can be a dream come true. Big companies can often afford to pay well for services. Plus, they are a boon for marketing, lending cachet and credibility to a small business. It makes it much easier to get hired when you have a Fortune 500 brand on your client roster.

However, this dream can turn into a nightmare for entrepreneurs who aren’t prepared for the unique work styles that accompany many large corporations. As failing to prepare often prepares you to fail, here are some of the issues that you should be prepared to encounter as you land big-name clients.

1. Extended vetting process

Big companies are particularly careful about their reputations, so many have an extended vetting process of each vendor that they work with to ensure that they are not associated with any business that could become a PR problem for them down the road.

Be prepared for a vetting that seems like a cross between the Spanish Inquisition and a TSA pat-down. This may include giving up sensitive information about your revenue, your clients, how much your top clients account for in terms of revenue and even background on the executives.

Furthermore, many big businesses outsource this vetting to a third-party provider, who may ask you things that may seem irrelevant to your business or the scope of your proposed work with the company, but are just part of the process.

2. Extra insurance

Many big businesses require that your business carries all kinds of supplemental insurance at certain levels. Some of the types of insurance you may be required to carry include general liability, commercial auto, employer’s liability, worker’s compensation and professional liability/errors and omissions insurance.

This can become frustrating for multiple reasons. First, the type of insurance required may not be relevant to your business or the engagement, so you have to spend money for no reason other than it’s a policy and a cost of obtaining the business.

The other issue is that many insurance companies that service small business don’t carry all of the types of insurance that you are required by your client to carry or they may not carry the coverage at the levels required by the client. You can work with a broker to piece together the coverage you need, or you can seek to get an exemption.

3. Slow pay

Big companies are really good at managing cash flow, which means that you need to be really good at managing yours as well, because they often take anywhere from 30 to 90 days to pay bills.

Think about asking for a retainer up front and/or payment staged at milestones as a way to ensure that your cash flow doesn’t suffer along the way.

Additionally, some large companies will take a discount, usually a couple of percentage points, if they pay sooner than their own dictated terms, often at their own discretion. Take this into account when you give your price quote to the client, especially as it relates to any expense reimbursements.

4. Non-negotiable standards

Another “my way or the highway” aspect of working with big companies is that they have many standards, from required non-disclosure agreements, to travel and ethics policies and more. While with small- and mid-size businesses you may be able to negotiate certain aspects of these agreements or get workarounds for key terms, it is very difficult to do so with larger entities.

I have seen contracts that give access to full name and likeness rights and even those that prohibit entrepreneurs from making political donations. Read these contracts carefully -- preferably with a lawyer -- and make sure that you understand what you are agreeing to.

You will have to weigh the cost-benefit of agreeing to terms that you may be uncomfortable with. If the rewards don’t greatly outweigh the risks, walk away.

5. Internal politics and red tape

The final issue to be prepared for is long sales cycles, especially initially, but sometimes, even when you are entrenched and continuing to work with the big company. This can be exacerbated by frequent turnover in key departments or having to work with different departments who may have ownership of different facets of the goods and services that you are providing.

The best advice here is to be patient but persistent and never become complacent.

Big companies can really help a small business enter the big leagues, but they can also be a big pain in the rear. Your expectations and preparation can help soothe that pain, so that you see more benefit for your efforts.