From million-dollar insurance requirements to 90-day payment terms, Juliette Gust and Tricia Fratto of Ethics Suite share their firsthand struggles as diverse business owners navigating corporate procurement — and highlight what meaningful support for small suppliers looks like.
As self-funded women- and minority-owned business founders, we are often surprised by (and eternally grateful for) the encouragement and support received from organizations and individuals who seek us out to participate in events, open doors to opportunities and provide unwavering support for our efforts.
They change rules, not just for us but for everyone, so that we can be included, they waive requirements (only the ones that are unnecessary that no one flagged for them in the past), and most importantly, they listen. They listen to why a small business might not need to have a specific policy or a particular audit that is appropriate for larger organizations. They listen to why a small business might not have or need a $20 million cybersecurity policy. They listen to the reasons why our small business might be the best fit for them, regardless of what other, larger companies might be offering. And most importantly, they let us into the competitive arena so that we can have a fighting chance of winning the work.
However, we are also often surprised by the “paper only” efforts made by some organizations — including corporations, government and higher education institutions — when it comes to supporting women-owned and diverse suppliers. Most large corporations have a “supplier diversity” program, and it looks great but is often treated more like a promotional flier than an actual effort. Small vendors might get to participate in these supplier diversity programs, so long as they meet a long list of eligibility criteria, including be a multi-millionaire and already doing business with us.
In this article, we hope to demonstrate:
- How a small, diverse supplier might feel when trying to work with a massive corporation (like a chihuahua pulling a boulder uphill, really);
- The factors behind these Sisyphean efforts; and
- Potential ways to bridge this gap for healthier and more inclusive vendor relationships that truly benefit both organizations.
It’s not about doing charity work or accepting substandard services — it’s about giving small businesses a chance to shine!
Tell us you don’t care about diverse suppliers without telling us you don’t care about diverse suppliers.
A procurement process or ‘The Amazing Race?’
Want to do business with Giant Corporation X? You will need a Ph.D. in filling out forms, an IT team to navigate the RFP portal, a prayer circle for moral support, a Santa bag full of gifts and a blood oath, or you will be THROWN INTO THE PIT OF DESPAIR. Any failure to meet the requirements exactly as listed results in your proposal being deemed NONRESPONSIVE!
In other words: Our procurement team will never ever consider reviewing whether the mandatory requirements are actually necessary, and don’t you dare ask the end user what they think, or you will be vaporized and banished forever.
Here are some examples of the challenges small, diverse suppliers face when attempting to win business:
Example 1: Are you willing to buy us out of our current contracts?
That is a real thing.
How to make a small business owner cry.
Example 2: Do you have alliances with other companies that can benefit our organization?
Also, a real thing. Um, would you like our small business credit card cashback rewards or our business card printer coupons?
Example 3: Requiring audited financial statements or cybersecurity controls framework attestations from large, well-known firms, while allowing large companies to offer the same assurances from small providers.
“Well, we already know them.”
What can you do?
We urge you to take a long, hard look at your current vendor requirements and RFP language and processes and consider if they are truly important to your business, necessary for risk management and proportional to the product or service you are seeking. Do you really need to know “what incentives we offer our long-term clients to induce them to stay with our company” to determine whether our actual product is a good fit for your business?
We also urge you to consider realistic options that can be advantageous for both companies. Can’t afford a SOC 2 (even though requiring one from a small company is a bit sniffy)? How about alternatives like agreed-upon procedures, restricting to Type 1 and maybe just starting with a risk assessment? Or — wait for it — offering to pay for the small business’s SOC report.
Yes! This happens. Cheers to the visionaries! We are certain these organizations maintain positive, long relationships with grateful vendors who likely return the generosity in myriad ways, such as lower pricing, dedicated client service staff, opportunities to use new products or services before they are released to the general public and many more.
From FedRamp’s program roadmap: When we say “costs too much” we really mean it!
David & Goliath negotiation tactics
Imagine you’re a vendor with fewer than five employees — and one of them is also the CEO, the intern, the marketing and social media director, the customer service lead and occasionally the one who buys pizza. Now, imagine that CEO walking into a negotiation with a corporate team armed with a dozen lawyers and an espresso machine. Corporations often expect vendors to meet all their demands, cut prices, allow 90-day payment cycles and maybe throw in a free puppy. Bargaining power or just an unnecessary flex? You decide.
What can you do?
Strive for balanced contracts that do not impose overly restrictive terms on small businesses, ensuring mutually beneficial partnerships. Support timely payments by implementing shorter payment cycles or offering early-payment options for small vendors to help mitigate the cash-flow challenges many small businesses face. This is especially helpful when the products and services you seek include significant investments of vendor time in developing customized products and services.
An effective supplier diversity program requires more than a policy; it calls for active efforts not only to add a small business to your RFP invitation but to reduce procedural burdens and create accessible opportunities for partnership. When corporations fail to invest in these measures, the result is an exclusionary system where only a select few vendors can succeed.
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Read moreDetailsMore ways large organizations can support small businesses
Addressing the barriers we’ve described requires commitment and systemic change within large organizations. Here are a few recommendations:
- Simplify procurement processes: Streamlining vendor requirements and offering more accessible onboarding procedures led by caring teams can ease the burden on small, diverse businesses, allowing them to participate in corporate supply chains.
- Invest in supplier diversity programs: Robust supplier diversity initiatives, combined with hands-on support for small vendors, can make these programs more effective and inclusive.
- Foster a culture of collaboration: Emphasizing collaboration and valuing the unique insights and capabilities that diverse businesses bring can lead to more innovative and flexible solutions.
Small, diverse business vendors bring innovation, resilience and agility to the economic ecosystem, yet they often lack the support they need from large corporations and institutions. As businesses become increasingly aware of their social responsibility, supporting small vendors should be prioritized not only for ethical reasons but also as a pathway toward mutual growth and innovation. With the right policies and a shift in perspective, large companies can help create a more sustainable and diverse economic landscape that benefits everyone.
