Does the big fish always get the lion’s share?  (Or have you planned your exit well?!)

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Selling your business to a multinational is many an entrepreneurs dream, but it pays to know what you are getting yourself into! Our blog today delves into the world of big fish/little fish and what business owners need to be aware of when working with, or looking to be acquired by, large multinationals. In his last seminar Peter Birkett, CEO of Southampton Science Park, shared his experience of setting up and running cueSim, a leading helicopter training simulator business for QinteiQ.

Small companies see larger ones as stifled by bureaucracy, slow to act, and besieged by procedure and protocol. Large companies see smaller ones as financially precarious fly-by-nights, who lack organisation and take risks that would cause the CFO of a global business palpitations!

Multinationals are riddled with decision making processes, hierarchies, policies and procedures so any small business looking to work with them will need to be aware of these. Not doing your research into these hurdles can stop a small business as quick as it started! However, in today’s economic climate, there are great opportunities for both parties. Many large organisations are taking advantage of the myriad new technologies that budding entrepreneurs are creating. They understand that start-ups can be flexible, fearless, agile and innovative – all benefits that can save a large organisation from taking risks in the short term, with the option of still acquiring the knowledge and the business in the longer term.

When you’re in the early stages of a start-up you probably have a clear vision of where you want to go. Many start in business thinking: ‘this is going to be huge, I’ll be living the life in no time,’ but the early days are usually the toughest and it’s no mean feat to stick at it! If your vision is to be working with, or acquired by, a multinational then you need to bear this in mind from the outset to create a business that makes you a good target. Once you’ve done this, you need to stand out by drawing attention to your business, integrating with the company’s product or gaining competitive wins in their market. Although it can be difficult to focus on such a strategy when you’re a start-up, especially since day-to-day thoughts are focussed on simply getting the job done, success is dependent on getting your vision and value proposition right.

Here are Peter Birkett’s five pearls of wisdom:

  1. “Relationships are incredibly important. People buy from people they trust, even if there are cheaper alternatives on the table, so interaction and harmonious teamwork is the key to creating mutual benefit further down the line. There are different types of interaction: creating understanding (sizing each other up!), competing, and working together. Make sure you understand the basis of your relationship with the larger organisation and communicate accordingly but at all times, work on inserting your business into their value chain and solving their problems.”

  2. “Look at the end goal and work back from there. Fast growing and innovative companies are the types of businesses that go on to be acquired or grow into a multinational themselves so every entrepreneur should be geared to making their company sustainable and profitable from day one. When I was running cueSim, my love of the product is what gave me the drive and focus to keep on track. I referred to my business plan several times a month, constantly changing it to reflect the new challenges and direction the Company needed to take.”

  3. “Work with, not against, the multinational’s processes which will impact most areas of your business. They will have preferred suppliers lists which can be difficult to navigate your way onto, but once you’re working with them, don’t forget your usual modus operandi, put your commercial head on and work to protect your business.    So, when signing T&Cs, make sure your IP is protected. When planning cashflow, make sure that you’ve factored in longer payment processes. Of course you may have to compromise to reach agreement but don’t give everything up instantly!”
  4. “Deliver what you say you will. When it comes to this, consider all three factors that you need to get right: time, cost and quality. And react fast when you are asked to. Try not to over-hype your product as this will raise potentially unserviceable expectations. Remember that small businesses are seen as a risk by the multinational – prove them wrong all of the time by demonstrating your ability to be agile and innovative.”

  5. “See the bigger picture by understanding what both the multinational and the competition are doing and plan accordingly. Remember that there’s a reason they chose to work with you – you have something they want! For example, if you’re working in a space that the larger organisation wishes to enter, they will be interested in acquiring you to harvest your customer base. Demonstrate that you know how to engage customers effectively and that they will benefit from this.”

So, does the big fish always get the lion’s share? Not if you plan well and position your business right!