Small Companies Don’t Stand A Chance

A worrying e-mail landing in my inbox today that compelled me to respond. Over half of private sector businesses believe that SME suppliers are less competitive than their larger counterparts, according to new research from BT Business and Cisco. The research, developed to explore the factors influencing large businesses in choosing suppliers, shows that the same proportion of large businesses are more demanding of suppliers than they were a year ago.

Although 87% said small businesses are more likely to have the personal chemistry (I daren’t ask!) conducive to a smooth supplier relationship, 57% said they do not believe SMEs are as able to provide around the clock support, and 52% said they are less able to offer competitive rates. This is not good for little guys trying to make a living. On a positive note, procurement managers are aware of the benefits of working with a smaller business. The vast majority (72%) believe small businesses are well placed to offer a more personalised service than their larger competitor, with customer service and responsiveness cited in the top five reasons to award contracts. Hooray!

The bias for larger, established businesses is illustrated by 40% who said they are less likely to choose a small business supplier when times are tough. And 42% would select a larger supplier over a smaller one, believing that big enterprises are a safer option in the long run. It also emerged that 41% think that small firms are less creative. In my experience, it’s that larger companies who are less creative and unwilling to change working practices to completely satisfy their customers - unlike smaller companies who bend over backwards to gain and retain customers.

Procurement managers allocate on average £28 million each year to suppliers, with a sizeable 23% (£6.6 million) spent with small businesses. While these figures point to a healthy market opportunity for SMEs in the UK, almost half (48%) have increased their payment periods or would consider doing so as a result of the credit crunch. This is despite nearly a quarter (24%) acknowledging that larger companies have a responsibility to consider the impact these terms would have on firms who may struggle to cover their initial costs.

These findings are extremely worrying for UK businesses and especially start ups. As such I would urge businesses to outsource anything that is secondary to their core business competence and invest their precious resources in what will help set them apart from the competition. Given the pressure to do more with less, small businesses are being squeezed by the demanding tendering process. Intelligent use of IT alongside wider organisational processes can help SMEs to address these challenges.

Good customer service is obviously essential for any business. Having fewer people can mean that it’s much more difficult to respond to customer queries and concerns. But there are ways to overcome this; unified IT and communication systems are now affordable for all, and can provide the tools to help enable SMEs to compete with even the biggest suppliers. A range of IP communication services including voice, video, data, security and wireless networking can be integrated to improve both business collaboration and customer responsiveness, as well as to help reduce operating costs.