What you need to know with Pivoting to the Private Sector for Procurement Opportunities through Supplier Diversity
The supplier diversity procurement opportunities in the private sector are far greater than in the government sector:
- The target market is the Fortune 5,000 corporations, far more than government agencies and without the bureaucracy and red tape
- In 2020, the Billion Dollar Roundtable (a non-profit group founded in 2001 by the largest corporations committed to diversity spend) documented that composite supply-chain diversity spend of its 28 (now 32) member companies reached $115 billion
- The private sector supplier diversity spend is estimated to be in the trillions of dollars annually with an average annual corporate spend of 10-35% (versus government of 3-5%)
- There is far more demand than supply– less than 2% of all DBEs (women, minority, veteran, LGBTQ+, & disabled owned businesses) and less than .2% of SD/VOBSs are private sector certified to work with corporations’ supplier diversity departments
- Corporations are seeking to significantly increase their spend (2-3x) on new SD/VOB-DBEs yet 75% report that it is difficult or very difficult to find new qualified diverse suppliers.
- A recent study conducted by The Hackett Group found that almost 30% of companies are setting formal diversity spend goals and setting up supplier diversity programs for the first time.
- Over the next four years, the top-quartile supplier diversity organizations plan to increase their spending with diverse businesses by 54%
- The Hackett Group study showed that long-term supplier diversity programs generated 133% more ROI than businesses that continue to use only the same suppliers they have always used.
- This same study showed a $3.6 million increase to an organization’s bottom line for every $1 million spent on procurement and operating costs.
New diverse suppliers entering the private sector space need to understand the following realities of Pivoting to the Private Sector:
- Unlike the government, there is no published posting of procurement opportunities (RFXs) in the private sector space. As such, suppliers interested in working in this space need to proactively pursue opportunities consistently and professionally
- There is no such thing as set asides or sole source opportunities like the government
- There are no quick wins and business must be pursued assertively and consistently
- If you are new to the private sector, you are unknown, unproven, and untested and thus a risk to corporations in providing you with procurement opportunities
- If you are new to business (less than 5 years), there are many things you don’t know about being a successful business. Even long-standing businesses have blind spots and have room to improve to be more competitive.
- You need to be ready, willing, and able to deliver your product and services and have the scope and scale required by the private sector.
- You need to be solid, profitable, sustainable, and scalable
- Research your target market to understand their needs and challenges
- Solve a problem, Add Value, and provide Innovative Solutions
- Be a subject matter expert, be flexible and responsive
- You are entering a mature space where minority, women, disabled & LGBTQ+ suppliers have been working in for 20-50 years.
- Corporations all have long standing relationships with incumbent diverse suppliers that you must unseat to win opportunities
- Without the right assistance and support, it could take you 2-4 years before being given any procurement opportunities
- To compete and win you need to do the following
- Find and develop relationships with the right people at the right corporations that buy what you sell
- Say and do all the right things
- Be professionally persistent and consistent to show that you want to do business with them more than they need to do business with you.
- Plan that at a minimum, it will take twice as long and cost twice as much to enter a new market in a new way.