Although I now run a business with $2 billion in revenue, my first company wasn’t anywhere near that size. In fact, when I launched EMJ Data Systems in 1979, I did so from the trunk of my car. I also founded a few other firms along the way to growing EMJ to $350 million in sales, then sold it in 2004 to the company that I now run, SYNNEX Canada.
My first-hand experience of startups, small businesses and large businesses has convinced me that the way large companies will react to the current economic upheaval will offer several exciting possibilities for your entrepreneurial firm. Here are six of them:
FILL THE VACUUM
Large companies’ first move is to cut costs, often by exiting a line of business that they’ve concluded can’t make money due to its high cost structure. Yet, the same niche could be perfect for your low-overhead operation.
To identify a niche that has been abandoned by a big company, talk to the staff it has laid off. Approach its former customers, who are probably anxious to find a new supplier. And approach the company itself: it might be so relieved to get out of this business that it will agree to sell you assets for pennies on the dollar — and maybe even finance the sale for you.
SELL OUTSOURCED SERVICES
Even as large companies downsize, they still need someone to handle essential tasks. Head office might mandate substantial staff cuts, so the manager will cut the janitor. But the place still needs cleaning, so, after a few weeks of garbage piling up, she’ll hire an outside company.
Corporate managers are adept at getting around such mandates from the top. Often, they’ll find the money they need for outsourcing like this by clamping down in one budget area while quietly spending money in another. A stupid business practice, true, but that’s what big companies do. Capitalize on it.
JUMP ON TOP TALENT
Until a couple of months ago, it was very tough to hire good people. Now, suddenly, it’s becoming easy.
Large companies often judge who to lay off based on a single dimension, so they wind up cutting valuable employees. These people will be willing to work for you for far less than their old pay — or to work part-time, as advisers or for future consideration. Use this time to get a few great minds on your side.
BEAT THEM ON PRICE
In good times, most companies pay less attention to cost efficiencies. But that changes fast in a slump.
A firm that before the recession was content to use a high-end supplier such as a big law or accounting firm will now become keen to find a more affordable alternative. If you’re a lower-cost supplier of business services, you might find doors opening at prospects who used to shun you.
GO WHERE THEY FEAR TO TREAD
There are fast-growing markets even in a recesion. Everyone knows that environmental businesses are hot, so, if we were in good times, many large companies would be entering this market. But not now, when they won’t take any risks. Here’s your chance to enter new markets at a time when large companies are unwilling to invest in anything new and creative.
BE FIRST IN LINE FOR BARGAINS
Because this crisis is credit-related, you might be running short of cash. But you don’t really need cash — you need what cash can buy.
In tough times, many firms will have surplus capacity. You can move far faster than the big guys to take advantage of opportunities to negotiate cash-conserving deals. For instance, a landlord who has office space that he can’t rent might let you move in for “free” if you’ll cover the taxes and utilities.
The same goes with almost anything you want to buy. You’re more likely now to find someone willing to supply it cheap, barter for it or offer creative payment terms. Your best sources of cash these days are the many suppliers who need your business now more than ever.
Jim Estill is CEO of SYNNEX Canada Ltd., a computer-equipment wholesaler based in Guelph, Ont. His popular CEO Blog: Time Leadership is at www.jimestill.com.