If you are a startup in 2018, my tip is: focus and take care of the small clients.
Look after the small clients.
The temptation for startups is to always chase that big account, that big tender, that big fish.
Often big companies will bully you.
They set the terms of relationship and as a startup you have to abide by them.
You need them more than they need you.
Big companies will often give you a big contract that requires that you place big stock orders or make sizeable initial investment to kicstart the project, and they will not pay you an initial deposit.
This puts pressure on the startup to raise the initial finance for the project.
Raising finance as a startup is a challenge, even if you have a signed contract from the client.
And when you do manage to raise finance and execute the initial phase of the project, big companies and government often takes longer to pay you, they often say they pay within 30 days but in reality their payment cycles are between 30 and 60 days.
A startup cannot afford to wait 30 to 60 days for a payment.
Cash flow is the lifeblood of a small business. You are one month away from technical bankruptcy.
The attitude and approach of big companies is that you need them more than they need you.
“If you can’t deliver, why did you accept the project, you said you have capacity?” is their response when you sensitize them of the impact their long payment cycles has on your business.
If you can’t deliver, they have thousands of other suppliers who are willing to supply them and they can easily choose them.
Often big companies and government are the reason why small businesses go bankrupt.
On the other hand, smaller clients, are a lot of hassle to manage but they pay you on time, you can negotiate initial project deposits and you can even negotiate manageable payment terms.
Small clients will not make you a millioneer, but they will keep you in business.
With enough small clients, you will pay for your rent, salaries, stock of the business.
Revenue from small clients will not pay for your exotic lifestyle, but will keep you in business.
Small clients will make your business to break-even on a monthly basis.
Look after the small clients, they keep you in business.
It’s easier to build relationship with small clients, because the owner is accessible. You may never meet the owner of the big company. Yes sure you can have a relationship [working relationship] with the project manager of a big company, but when they leave the company, this may mean the end of the relationship with that company.
How do I grow my startup with small clients?
Isn’t that for my startup to grow I need big clients?
You grow with your small clients. As they grow, you grow with them.
Small clients need you as much as you need them. Their survival is your survival, their growth is your growth. When they order more, you get more revenue.
Over time, I’m convinced that in South Africa, big companies and government are not structured to do business with smaller companies.
Their procurement processes, their payment cycles, their in-flexibility to assist with initial investment and their relationship approach is not geared for transacting with small businesses.
And maybe that’s what works very well for them when they deal with other big companies.
By all means seek those big contracts from big clients, but in the process don’t neglect your small clients.
Small is the new big. In order to go big, go small.
Look after the small clients, they will look after you.