owners are looking at the corporate opportunity, they often ask me “do
corporations buy what I sell”? I want you to think about this in this context: have
you ever heard the phrase “starstruck”? You remember when you looked at
rock stars or movie stars or famous people, you saw the glamour of their lives.
You saw all the attention they received and in your head you started thinking
through the amount of money they made and how much easier their lives must be.
How they were always being driven around in a limousine or having maids and
butlers and just a whole host of people that provided them all the concierge
That’s the image that is exported to us on a regular basis where, you know, when a person has achieved that level of success they're immune to many things, and so everybody just generally believes that's their everyday lives. I mentioned that particular example because you would be amazed - you really and truly would be amazed how often I get the question, “well, what do corporations buy?” I could go through a list and I could say, “Oh gosh, everything in the world”, but I want you to think about celebrities, important persons, the people that we think have it so easy that surely there are things they don't do.
I was in
Houston, Texas in an electronics store called Circuit City when former President
George H W Bush walked in. He had two secret service guys trailing behind him,
but he was shopping at Circuit city. He was walking around looking for CDs. I
don't know if he was buying presents for a grandchild or what, but he was
actually shopping. I thought surely this man had someone who could do something
like that for him. But no, no, he shopped, he did it himself. And then I've
heard of stories of people saying, “guess who I ran into at the grocery
store?” “Guess who I ran into at the
lumber store”? “Guess who I ran into at the department store; in the stadium
while their kids were at a soccer match or in a football game”? We have put the
rich and famous on pedestals, and yet they have everyday lives and everyday
needs just like us.
My answer to the person that asked me “what do corporations buy?” is, “they buy pretty much the exact same thing that you buy for your business”. Yes, I say they just buy a lot more of it, but they really and truly buy a lot of the exact same things you buy for your business. Now I want to break this down and we're going to break it down into two buckets: two primary buckets and two sub buckets.
The primary bucket is direct materials versus indirect materials, and the sub bucket is services versus materials. Let's start with direct versus indirect because I think this is where a lot of people get tripped up. Think about a large automobile company - Volkswagen, General Motors, Toyota. You might say you don't sell anything that goes in their product -- which is a vehicle. What you're saying in that particular statement is that a vehicle is considered an actual direct product for GM, Volkswagen, Toyota. And yes, you're right. If you don't sell anything that goes in the vehicle, you don't sell a direct product. That is a true statement. So you might conclude, well, gosh, there's nothing that I could sell to GM. That's not true because GM has a requirement of indirect products that they buy (think of indirect products as everything that does not go on the assembly line - that's not actually in the vehicle).
than that, but that gives you a pretty good idea. Did they buy a plant in which
to build the vehicles? Yes, they bought a plant. Did they buy equipment to
assemble the vehicle? Yes, they did. Do they buy supplies to maintain that
equipment? Yes they do. Do they buy office furniture and equipment and parts
for those buildings? Yes they do. Do they have electricity in that plant? Yes
they do. Do they have lights and lighting and all the various things that you
have in your house when you flip the switch? Do they have to maintain that
building? Yes they do. Do they buy brooms and mops and all that kind of stuff?
You can just keep going with that. Everything that anybody would need in an office building, large corporations need. For instance, anything that auto makers need to make sure that the cars get built, they buy. That gets you into both direct and indirect materials, and that's pretty much the same in any industry. You can conclude the exact same thing, for hospitals; the hospitality industry; computer industry; oil and gas, etc. Pick any industry and there are direct materials and indirect materials.
Direct materials are what actually go into their finished products offered for sell into the market. You will most commonly see them listed on balance sheets as “cost of goods sold”. Everything else they purchase is considered indirect. So, while your product may not be a direct product for what the corporation sells into the market, it could very well be an indirect product.
Let’s go to the sub-category that I mentioned earlier: products versus certain materials versus services. Materials are some type of “hard” or physical goods. They are tangible, something you can touch, and they can be both direct and indirect.
Services on the other hand require labor – utilizing human capitol to perform a task. For instance, there are legal services; accounting services; staffing services; plumbing services; and mechanical services just to name a few. The list of services in the current market has gotten even more expansive, especially once you start throwing in things like coaching services. If your business doesn’t sell materials, parts, or technology, but provides a service, now you can envision how corporations can use what your company offers.
It isn’t so much that they buy A,B,C or X,Y,Z services, it is more about your ability to show how your service can actually drive the value solutions they seek: total cost reduction; savings reduction, etc., in which case they are open to whatever kind of services they think can drive value. Services is a huge opportunity, but you must show corporations the value of why they should purchase the service from you and how best to use it in order to receive or achieve that value.
Here is another nuance with services: they are not an “or” situation and can be an “and” situation. The “and” situation is what happens when you wrap a service around the use of a material, whether it’s a direct material or an indirect material. If you have a service that allows for better utilization of a direct material, then they will be singing your praises, writing songs about you and shouting to the heavens. If you provide a service that gives them greater utilization or more value utilization or lower costs for an indirect service, they are going to find a way to keep you around and doing things.
It becomes a huge opportunity when you can provide a service that affects the way that they do a whole host of things, including how they use materials, and you can bring that level of innovation that shows them a way to take greater advantage of that material purchase, whether it’s direct or indirect.
Another thing to consider is that what might be an indirect material or service applied to one industry may very well be a direct material or service for another industry. For instance, if you are selling computer servers to a Home Depot, that might just be something they need to put their accounting system on and call it a day. But if you are selling computer servers to an artificial intelligence company, that is a strategic and direct material necessary to deliver their product. What was an indirect material then becomes a direct material. It becomes really, really important for the company with regard to how much attention they’re going to give it and the amount of money they’re willing to spend on it. In the case of a direct material, they look at things in term of “if I make this kind of investment, what are the multiples of them that I can get back in revenue?” If they look at it on the indirect side, the goal is how do they reduce the costs, extend the life, and bring in cheaper. So, it becomes not so much whether they buy what you sell, it’s more do you have a good idea of how to position it. Examples of knowing how to position your product are: offering massage services to corporations under the employee wellness umbrella; and a chef offering to plan menus for employees when the corporation is focused on having a healthier workforce.
At this point, under the category of “what do major corporations buy?”, you can see that they purchase basically everything. Now that you understand there is a high probability that they purchase what you sell, you can see that the possibilities are virtually endless – whether direct or indirect materials, or services.
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