The 2019 Survey of Small and Midsize Business Suppliers, Developed and Conducted by American Express, Found That Businesses With Corporate Contracts Expect Revenues to Increase by 50% Over the Next Five Years
US small and midsize businesses are often referenced as the backbone of the country’s economy thanks to their drive and ambition to grow and scale but finding new opportunities to expand a business is often challenging. To explore the perspectives of small and midsize businesses on ways to grow, American Express conducted the first ever Survey of Small and Midsize Business Suppliers in 2019. The survey results, which includes responses from 501 small and midsize companies with revenues between $250,000 to $1 billion annually, suggest a bright future ahead for businesses who tap into this new avenue for growth.
According to the survey, eighty-one percent (81%) of respondents predict an increase in their sales to corporations with over $1 billion in revenue over the next five years, among which fifty percent (50%) of respondents anticipate a revenue increase of fifty percent (50%) or more.
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“Contracting with corporations offers tremendous growth opportunities for businesses across every industry and can help drive supply chain competitiveness, unlock innovation, provide access to new markets, and deliver positive socioeconomic impact in local markets,” said Donna Donato, Vice President of Strategic Sourcing and Business Enablement for American Express. “As our survey results found, business owners who already contract with companies that generate over $1 billion in revenue are diversifying their revenue streams and expanding their internal teams which ultimately benefits our economy.”
THE OPPORTUNITY FOR SMALL & MIDSIZED COMPANIES
Large corporations make substantial external purchases each year — as much as thirty to fifty percent of total revenue depending on the industry, creating vast opportunities for small and midsize businesses. The benefits of selling to corporate clients are clear, with survey results showing that many small and midsize businesses experience significant business growth when partnering with such corporate clients:
- Nearly two-thirds (64%) of respondents have increased their revenues
- Four in ten (40%) of respondents have diversified their revenue streams
- Four in ten (40%) of respondents have grown organically through corporate contracts
Not only are small and midsize businesses experiencing the positive effects of winning corporate contracts, but their broader communities benefit from these relationships as well. For example, despite the limited labor market for small and midsize businesses, contracting with large corporations has proven to be a successful growth strategy, allowing such businesses to expand hiring efforts. More than half (54%) of respondents hired new employees as a result of winning new business with large corporations, and nearly three-fourths (74%) of respondents noted that conducting business with large companies has helped to hire and retain talent.
FINDING, WINNING AND FUNDING CORPORATE CONTRACTS
According to the survey, networking and introducing their brand to procurement officials in target industries were found to be instrumental for small and midsize business owners to grow their businesses. The survey identified certain key personal and digital networking channels as a means to obtain knowledge about potential new business targets:
- Over half (54%) of respondents rely on both online/offline networking
- Nearly half (47%) of respondents rely on personal relationships
- More than 4 in 10 (41%) respondents rely on company websites and marketing materials
Notwithstanding the variety of information channels, online networking was shown to be more effective than offline networking in securing new business leads. Fifty-one percent (51%) of respondents indicated that online social networking via specific groups was most effective in securing new business leads with corporate clients, followed by forty-seven percent (47%) of respondents indicating social media platforms as being the second most effective method of securing new business leads. Offline, respondents indicated that they saw the most value in networking one-on-one (44%), at trade shows and events (42%) and networking in small groups (37%).
The survey also found that certain business certifications and credentials can further differentiate small and midsize businesses from the competition. Respondents indicated that the credentials set forth below were the most useful certifications in helping to winning corporate contracts:
- Quality of service or products (48%)
- Past performance (15%)
- Socio-economic credentials (10%)
Coming up with the capital to finance contracts with corporations can be challenging, with many small and midsize businesses seeking additional financing to do so. More than half (57%) of respondents sought financing to fund their growth to service corporate contracts, among which two-thirds (66%) of such respondents found the process for securing financing to be manageable. Working with large corporations can open new doors, especially when it comes to financing. Nearly three-quarters (74%) of respondents agreed that working on corporate contracts led to more flexible financing options for their companies.
CHALLENGES OF CORPORATE PROCUREMENT
While winning a large corporate contract is exciting for small and midsize businesses because of the potential to increase revenue, there are also challenges that come along with fulfilling these agreements. Survey data indicated that the biggest challenges facing small and midsize businesses while working with corporate clients include:
- Complex processes (43%)
- Negotiating payment terms (38%) with 22% of respondents reporting payment terms of 60 days or more
- Complying with data and security requirements (37%).