Great Ideas for your Small Business:
Do a Deal with a Big Company
For a small business owner, doing a deal with a giant corporation is thrilling, intimidating, and scary. But the opportunities are out there. Big companies of all kinds are hungry for the nimble thinking and new products created by entrepreneurs.
The first challenge is making contact with someone at the big company who is interested in what you have to offer. Sometimes this takes weeks, but once in a while the big company finds you.
That’s what happened to Santa Monica–based Round- house Products, which designs patented CD storage systems for itself and others. Six years ago, Roundhouse signed a lucrative licensing and design agreement with office products giant Avery Dennison. (In 2000, they sold the company to Targus.)
Jon Williamson, senior product manager for new products at Avery, said he was in the process of designing a CD storage system when he found Roundhouse’s products and said, “this is it.”
“They bring a freshness that I can’t always get in a larger company,” said Williamson. “I’m constantly intrigued by their intelligence and how quickly they can get something to market.”
The relationship, which ended in 1997, benefited both companies. When it was growing, Roundhouse benefited from Avery’s tremendous retail distribution clout, while Avery took advantage of Roundhouse’s design talents and speed in executing new ideas. Neither company would dis- close the exact financial details of the agreement, but both said it was positive for everyone involved.
“When Avery came to us, we had a good, strong patent position and something exciting to offer,” said Howard Sher- man, Roundhouse’s chief executive officer. Roundhouse’s sales have been so strong, they no longer need Avery’s help. Sherman joined Roundhouse to bring some management expertise to the founders, who have a strong background in design but little financial expertise.
Roundhouse was founded in 1989 as a design consultancy. “Two guys from Art Center in Pasadena basically invented and patented a system for storing CDs,” said Sherman. The company’s patented “Roladisc” system eliminates the need for the bulky plastic jewel cases by storing CDs in plastic sleeves. In fact, customers are encouraged to send back the plastic cases to Roundhouse for recycling.
Roundhouse also had a significant business relationship with a division of Sony to develop another line of customized CD storage products. “We didn’t care about their size,” said Carl Walter, senior vice president of operations for Sony Sig-natures in San Francisco. “What was important to us was that we felt they were very creative. They had a very innovative product that we liked.” That joint venture agreement covered a line of CD storage cases featuring famous artists including Neil Diamond, Santana, Kiss, Janis Joplin, and Bob Dylan.
Roundhouse’s Sherman said one challenge in dealing with a big company is not to appear too anxious or naive, even when you are so eager to do the deal. “It was very exciting for us when we first met with Avery,” he said. “But we all had to wear our poker faces.”
He said another big challenge is timing. People who work for big companies often can’t believe how quickly a small company can turn something around. Although they had a letter of intent drafted in a few days, it took ten months to sign a formal contract with Avery. Being patient and persistent are both important, Sherman said.
“You also need to persevere and be flexible as the players change within a corporation,” Sherman advised. He and the other founders remained with Targus after the acquisition.
Tips for dealing with large companies
- Find the right person to contact and be persistent until you reach them.
- Present the gist of your idea in a clear, concise manner.
- Be well prepared for your first meeting so you make a positive impression.
- Surround yourself with experienced advisers, including your attorney and accountant.
- Be patient. Things take longer to be decided at big companies.