81% of Businesses See Revenue Boost From Corporate Contracts over Next 5 Years

Small Business Contracts With Big Companies on the Rise

A whopping 81% of businesses predict a boost in sales from large corporations over the next five years, according to a survey by American Express. The survey of small and midsize business suppliers found that 50% of respondents anticipate revenue increases by 50% or more from contracts with large corporations with over $1 billion in revenue.

Small Business Contracts With Big Companies on the Rise

The optimism stems from the fact that more and more corporations are contracting small businesses for substantial external purchases each year. These contracts are creating vast opportunities for small and medium businesses. And they are amounting to 30-50 % of their total revenues depending on the industry.

Nearly three-quarters expect their company’s revenue to increase over the next 12 months. And another 73% agree their companies have increased their financial commitment to working with companies with over $1 billion in revenue.

Donna Donato, vice president of strategic sourcing and business enablement for American Express, explains this trend in the press release.

Donato says, “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.”

How are they Doing It?

Businesses say networking and branding of their business are responsible for snagging the large contracts. Fifty-four percent of the respondents relied on both online and offline networking. Almost half or 47% say personal relationships with procurement officials for their success did the job. More than four in 10 of the 501 SMB companies are using their company websites and other marketing materials.

Online social networking through specific groups is the most effective method for 51% of respondents. Some of the other tools are personal selling at 44%, trade shows and events (42%) and networking in small groups (37%).

Another important tool in this process is certification. This is because it affects the reputation of a brand. According to the report, certifications for quality of service products rated highly at 48%. The past performance, as well as corporate social responsibility, also plays a factor at 15% and 10% respectively. 

Creating a Virtuous Cycle

The ripple effect from this trend shows businesses are also diversifying revenue streams and expanding their internal teams, thus creating a virtuous cycle. According to the survey, nearly two-thirds (64%) of respondents have seen their revenue increase. While four in ten have either diversified their revenue sources or have seen their businesses grow progressively because of the contracts.

Broader communities too are seeing the benefits. A stronger labor market is responsible fo more people are getting hired to feed the growing businesses from the contracts. More than half (54%) of the businesses say they are hiring new people. More importantly, is the fact 74% of businesses are keeping their hires because of the contracts from the large corporations.

As their businesses grow, owners are looking for additional financing to expand their business. In this survey 57% of the businesses state they are seeking additional funding for growth. And surprisingly, 66% say access to capital was easy and manageable.

Growing Pains

Despite the optimism from the booming business, challenges still remain. For 43% of the businesses, complex processes in fulfilling agreements is a major challenge.  This is followed closely by negotiating payment terms and data and security requirements.

To this end, 56% of the respondents say they are improving their company’s data security and privacy policies. Additional measures include implementing data security and privacy training. Businesses are also hiring new employees on their data and security teams to improve their chances.

Image: Depositphotos.com

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Michael Guta Michael Guta is the Assistant Editor at Small Business Trends and currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

One Reaction
  1. This is because the biggest deals are usually done B2B. They usually have more money to invest so it works.