Hit the Bull's-Eye.

Take steady aim to secure corporate contracts

CHERYL WATKINS SNEAD, PRESIDENT AND CEO of Banneker Industries in Lincoln, Rhode Island, provides supply chain management services (assembly, packaging, distribution) to companies such as Raytheon and Texas Instruments. Prior to starting her $1 million company, Watkins Snead, Who has a degree in mechanical engineering, worked for General Electric in management and later ran a small machine shop, Peerless Precision in Lincoln.

Despite her background in manufacturing and technology, Watkins Snead says she is often approached with skepticism because she is a woman in a male-dominated industry. Nevertheless, she has parlayed her skills and experience into a lucrative enterprise: the Raytheon contract is worth $200,000 per year, while she'll net $50,000 annually from the Texas Instruments' deal.

Watkins is one of several thousand African American business owners who has found success in corporate procurement. The National Minority Supplier Development Council (NMSDC), a New York-based organization that matches certified minority suppliers with more than 250 corporations, reports that Fortune 500 companies purchased more than $35 billion from minority suppliers in 1998, compared with $86 million when the organization was founded in 1972. Still, minorities represent only a small fraction--about 3%-4%--of the amount corporations spend overall on procurement.

"There are more opportunities for African Americans because more corporations have programs to diversify their supplier base," says Harriet Michel, president of NMSDC. "However, corporations are downsizing their supplier base, so the smallest companies have been cut out. In addition, corporations have drafted longer-term and bundled contracts." Many firms are putting pressure on their prime suppliers to inaugurate diversity supplier programs and making an effort to see that minority firms remain in the supplier base by enhancing subcontracting opportunities through second tier programs, says Michel.

Defense, retail, telecommunications, information technology, environmental and construction will be growth industries for the future, says Harry C. Alford, president and CEO of the National Black Chamber of Commerce in Washington, D.C. And while there's more than enough business to go around, small companies have to realize that it doesn't happen overnight.

"There are many good companies that have strong diversity supplier programs, but African Americans are underutilized because these companies don't have the marketing apparatus," says Alford. "The major obstacle is trying to find a good flow of communication between small businesses and perspective customers in getting these entrepreneurs in the door and growing them so they can do more."

NMSDC has identified corporate members with "world class" programs in minority supplier development, including AT&T, Ford Motor Co., IBM, J.C. Penney, Lucent Technologies and others. These companies rated exceptional in program measurement and tracking, strategic planning, supplier sourcing and development, education and training among other criteria.

Ford (NMSDC's 1998 Corporation of the Year) has 300 prime minority suppliers and purchased $2.4 billion from minority suppliers last year, says Renaldo M. Jensen, Ford's director of minority supplier development in Dearborn, Michigan.

"We provide technical assistance by pairing retired auto experts with minority suppliers to solve specific problems," says Jensen. "We have assisted over 50 minority suppliers to date. We also provide financial assistance to help minority suppliers overcome capital needs. We now have a portfolio of $6.5 million going to 16 minority suppliers. We have to develop and support our suppliers. If their product isn't up to par, the cars can't be made."

In the second and final part of our series, BLACK ENTERPRISE will examine where these opportunities are in the private sector and give entrepreneurs the skinny on how to play the game: how to get started, where to go for help and how the process works.

GETTING STARTED

While you're approaching corporations, you'll need to adopt a strategy that requires skill, persistence, an alternative income stream while you wait for contracts and, to a certain degree, luck. It doesn't hurt to know someone on the inside, but if you don't, write or call the director of minority supplier development, who usually works in the purchasing department.

Private companies aren't bound by the same legislative rules and regulations that government agencies are. It's up to individual companies to set their own goals and initiatives for diversifying their supplier base. Many, such as Ameritech and Kraft Foods, now tie salaries and bonuses to how closely managers meet supplier diversity goals.

"Most employees buy into this because it comes from the top down," says Sharon Patterson, manager of supplier diversity at Kraft Foods in Northfield, Illinois, and chairman of the Philip Morris Supplier Diversity Task Force. Kraft bought $323 million, or 3.8% of total purchasing dollars, from more than 240 African American suppliers in 1997.

Majority firms recognize the market value of the black community, and realize that it makes good business sense to have African Americans as suppliers as well as consumers, says Jensen. Therefore, competition is even more fierce, not to mention other factors aimed at cutting costs, such as downsizing, consolidation, outsourcing and streamlining.

Watkins Snead says most companies have a handbook or guide on how to do business with them. You should become knowledgeable about their commodities, quality standards and other pertinent details about the company. "You must also develop a relationship with the decision makers in the company who will assess your business, whether they be engineers, human resource personnel or work in the purchasing department," says Watkins Snead. "Once you've done that, you must find out what their needs are, areas where they need assistance, their issues with past suppliers and where they see their company going."

Watkins suggests making on-site visits to meet with decision makers or sending them articles about their company to show them you're knowledgeable about their firm's activities. Outside networking through chambers of commerce and other business organizations is also key.

One method of gaining access to those in-the-know is by joining one of NMSDC's regional purchasing councils, which has more than 3,500 members including most Fortune 500 companies. More than 15,000 minority-owned businesses have been matched with member corporations as suppliers. African American firms gain insight into procurement from their peers and corporate executives by participating in local councils that provide training on topics such as how to approach a corporation, and by attending NMSDC's annual conference in October, which features industry group and committee meetings, power breakfasts, luncheons, a business opportunity fair, plenary sessions, workshops, an awards banquet, receptions and other social outings.

You can also meet decision makers by serving on boards and handling community projects. Paul Smith, COO of A-1 Professional Property Services Inc., a $7.5 million exterior maintenance service firm in San Mateo, California, won a $1.5 million annual contract with Kaiser Permanente through his membership in the Northern California Supplier Development Council.

"We had built a very strong reputation in the development council as a result of being named Supplier of the Year on the local and national levels several times over the past six years. When a minority contractor that was providing services to Kaiser Permanente filed for bankruptcy, they gave us a call at 3:30 on a Friday afternoon to take over the contract at 5 o'clock," recalls Smith. "It took 11 months of performing janitorial services to satisfy Kaiser Permanente. We bid with 20 other companies--some that were very large prime contractors--and won based on our quality performance."

Trade shows, conferences and expositions are also excellent bets for meeting corporate supplier honchos and getting the inside scoop, says Smith. Before you go, research what companies will attend,. determine who your perspective customers are, create a short list of potential contacts and plan to meet them at the event, advises Michel. Schedule in as many workshops and information sessions as you can and make the rounds at trade fairs. Don't forget to party hardy, too--this is an opportunity to rub elbows and socialize with your peers, Michel adds.

It's also critical to research the company you're interested in on the Internet, and read trade magazines and newsletters such as NMSDC's Minority Supplier News, Washington Technology and Purchasing Magazine, which identify key players and provide information on procurement opportunities.

If you think a company is a good fit with your firm's goals and mission, you should send in the company's qualifying application to see if you meet their needs and standards. You'll then be invited to submit a Request for Proposal (RFP) if the company feels you're qualified to bid on a contract. At this point, all of your research and contacts will come into play.

To prepare the RFP, you need to ask yourself the following questions, says Armentha "Mike" Cruise, president and CEO of Aspen Personnel Services, a $12.5 million human resource recruitment firm in Takoma Park, Maryland: Do I understand what the company's needs are? Can I fulfill the contract? How many people will I need? What are the insurance requirements? How will I finance the project? Do I need a line of credit or can I finance it myself?

"Be very careful to read the RFP thoroughly, understand it, ask questions and get geared up to meet the deadlines," says Cruise, whose clients include MCI and Unisys, NationsBank and AT&T. "Your pricing has to be right--you must be aware of what your competitors bid and the conditions of the market relative to your capabilities."

THE SELL

Now that you've done your homework and have the company's ear, it's show time. You'll need to put together a proposal for the manager of supplier diversity and other buyers to show why you are the best person for the job (more reliable, less costly, more experienced).

According to Robert S. Frey, author of Successful Proposal Strategies for Small Businesses (Artech House, $59.95), a proposal is an offer or response to an RFP to provide a service or product. Generally, it includes a cover letter, executive summary and sections detailing your technical approach, business management, cost/price and quality assurance and health and safety plans.

Ultimately, this legal document is what determines whether you win or lose a contract. Therefore, it's critical that your meticulously written proposal convey that you can complete the contract safely, on time and cost-effectively; according to company's requirements and quality standards; and offer tangible benefits to the client and an innovative, solutions-oriented approach.

"Some people feel it's their right to do business with us," says Joset Wright, vice president of procurement and property services for Ameritech in Chicago. "Don't try to attack or shame a company into doing business with you. Understand what your product is and know about my business to know what to offer and what we need."

Wright, who oversees $5 billion in procurement ($131.3 million with minority firms), uses the example of how one woman would send information once a week about her company as well as articles she thought would interest Wright as a "soft sell" approach that works. "She showed a willingness to be persistent and persevere," says Wright.

If you feel in need of expert advice on how to best approach a corporation, you might want to hire a consultant like B.J. Holland. As president of BJ Concepts in Fairfax Station, Virginia, Holland provides business strategy and management sources.

"Before coming to us, many companies would go in with their capability statements and ask,`Do you have work for me?'" says Holland. "Most would take their capability statement and say they'd get back to them, but [their information] would go right in the trash."

Most companies want to see how your company can augment their services or products and how a business agreement would be beneficial to both parties, says Holland. "Smaller companies need to be able to talk about market trends as well as the company's buying patterns, laws, rules, and regulations governing procurement--this is a selling point."

Herb Stokes, CEO of Alliance Relocation Services L.L.P., a relocation firm for corporate transferees in Chicago, has grown into a $10 million company in the past four years due in large part to having a client roster that includes the likes of Federal Express, McDonald's Corp., United Parcel Service and Coca-Cola.

As the prime relocation service provider for Fed Ex for nearly a year, Stokes moves about 1,600 of their employees each year, totaling $5 million in revenues. To get its business, Stokes, who was formerly executive director of quality management at Allied Van Lines and has 26 years of experience in the moving business, devised a program for Fed Ex to evaluate his services during their busiest moving season--May to September.

After several meetings to shore up the deal, Stokes came armed with a proposal for a solution to the problem he had identified--inferior service provided by the previous relocation firm.

"Fed Ex employees weren't getting good service," says Stokes. "I did a needs analysis and put together a solution based on the homework I had done. I started to benchmark companies in the service industry of similar size to Fed Ex to see how they were doing compared to their competitors."

Stokes used performance-based pricing, whereby each employee was asked to complete a telephone survey to assess Alliance's services. The company was then paid based on a grade assigned by each respondent. "Fed Ex was impressed so," says Stokes, "they offered to use our services exclusively."

Stokes, Smith and others say they often face skepticism on the part of corporate representatives who feel that as small, minority businesses, they aren't up to the job. They find it challenging to be perceived for what they are: qualified, experienced businesses that can bring value-added services or products--which happen to be minority-owned. To overcome this, they strive to provide superior quality products and services with complete customer satisfaction.

"Minority firms must meet quality standards, learn and understand the industry beforehand, have good business acumen and be profitable and growing," says Jensen. "We look for a quality product that won't be overtaken by technology and concentrate heavily on the management team. We believe this shows the potential of what the company can be."

To combat the perception of being small, industry experts say small firms need to grow their businesses through strategic partnerships, public offerings and acquisitions of other companies.

"Minority firms are now more financially able to purchase or grow certain types of businesses," says Phyllis McCarley, manager of global supplier diversity at IBM in Somers, New York. "In the past, they were more dependent on corporations; now more corporations are willing to provide investments in minority businesses to help them grow."

Many corporations provide supplier financing such as AT&T and Ford, which has a minority enterprise small business investment corporation, resulting from a joint venture with the Small Business Administration. NMSDC's Business Consortium Fund makes available $100 million in working capital loans to certified companies eligible for financial assistance.

Anthony Jenkins, president of Stratford Safety Products Inc., a personal protective equipment firm in Chicago, is backed by several venture capital funds that invested $3.15 million in his company because they recognize his potential for growth, he says.

Jenkins has acquired several companies since staring his firm a decade ago. Last year, he made three acquisitions, resulting in $5 million in sales. This included a fourth Duracell plant (Duracell is a major client) in Lexington, North Carolina, which was strategically located across the street from one of the battery company's warehouses.

"We acquire companies every few months," says Jenkins of his $15 million firm whose clients also include Southern Co. and Lucent Technologies. "We buy underperforming companies that aren't able to compete to expand our network of facilities around the country. By acquiring them we are able to offer expanded and diverse capabilities to our clients and demonstrate we can take on more of their business."

Indeed, acquisitions, joint ventures and mergers--trends affecting large, majority companies--are trickling down to small firms, says Michel. African American entrepreneurs have the opportunity to expand their expertise and market base by using these strategies to acquire corporate contracts.

TAKING THE BACON

Entrepreneurs should be aware that securing a contract doesn't happen overnight--it could take one month or three years, unless you're asked to perform ASAP in an emergency situation like Smith of A-1 Professional Property Services. However, you must stay in contact with the diversity supplier manager throughout the process and have a plan in place to stick with it to the end, which includes building a client base and having' the financial means to pursue contracts and maintain existing ones.

According to Holland, most companies put out an RFP 30-45 days before they ask for a response. An evaluation may take up to six months if the company has an existing contract and the bidding process may take several months as well. It's also key to maintain a consistent, measurable level of service, so you can always foster continuous growth, says Stokes.

If you make the right contacts, do your homework, thoroughly understand what you have to offer and what potential clients need and stay persistent, scoring corporate contracts will be within your reach.

RELATED ARTICLE: KEEPING A COMPETITIVE ADVANTAGE

To stay in the game of private or federal procurement, follow this advice from procurement officials and the players.

* Develop your core competency or niche and aggressively market your products or services by establishing relationships with procurement officers.

* Become familiar with corporations' or agencies' needs for products and services and their specifications, deliverables and quality of work to be completed before bidding on a contract.

* Bidding as a sole source contractor gives you the experience to bid on other contracts, but to expand your market share, consider partnering, merging, acquiring or forming joint ventures with other small and large firms as a prime or as a subcontractor.

* Seek out a small business development center, which can show you how to contact agencies, get your company's name on a bidder list, help you understand solicitations, get bonded or construct a business plan to obtain a bank Joan or become 8(a) certified.

* Submit your offer with examples of commercial prices you have charged and references from satisfied customers.

* For subcontracting opportunities, check out lists of past contract awards and firms that have responded to announcements of pending procurements. This can provide you with valuable leads.

* Ask a successful federal or corporate supplier to help you navigate the corporate maze, mentor you or provide legal, accounting or human resource management if you lack this expertise.

* Become technically savvy. Create a Web page to market your products/services and ensure that you can do business electronically.

* Take advantage of conferences, workshops, training and counseling programs that assist minority businesses in the procurement process.