Group Buying for Small Businesses to Beat Costs

Forum of Private Business and Buying Support Agency advise recession-hit firms to save money via clever purchasing

The Forum of Private Business has joined forces with the Buying Support Agency (BSA) to help recession-hit small businesses save money, following research showing spiralling business costs are a major barrier to growth.

According to research carried out by the Forum 82% of business owners saw the cost of raw materials increase over the past year, with the same number saying the rising price of overheads had adversely impacted on their businesses. Further, 74% reported that cost increases have inhibited their growth ambitions and 45% that their profitability has suffered.

To ease costs and free their businesses to grow Forum members can save up to 35% on their overheads by signing up to the Forum’s buying support service, which includes free access to a buying group and a free purchasing audit.

“At a time of recession and spiralling costs it is important that small businesses are given all the support they need to control their overheads and cash flow worries. Group buying is a real solution to the problem,”

said the Forum’s Chief Executive, Phil Orford.

“In partnership with the Buying Support Agency the Forum is helping business owners gain considerable time and cost savings – and peace of mind through advice, support and guidance.”

Matt Roper, Founder and Managing Director of the BSA, said:

“We often hear small business owners say that they’ve got great purchasing deals and yet they’ve not had the opportunity to benchmark these prices against other comparable businesses to validate whether this view is accurate.”

“Not only that, small businesses can’t expect to enjoy the level of competitive prices charged to the largest companies due to their lack of buying power. The BSA is about enabling smaller companies to punch way above their weight and save significant sums of money. And Forum members gain access to our buying group without charge and without obligation.”

Mr Roper offered firms some ‘top tips’ to help them cut costs and run their businesses more efficiently:

  • Make sure you know where your costs are, and attack the biggest first. Apply the "80/20 rule" – typically 80% of costs come from 20% of your supply items or services.
  • Check to see if your business has recently tendered out the products and services purchased. If not, how do you know you are enjoying the best prices? Challenge existing suppliers to review their prices. If you’re aware that prices are falling in a certain area, there should be room to re-negotiate prices with your suppliers.
  • Join a buying group for the most routine costs such as stationery, telecoms, utilities and cleaning supplies. This can free up valuable time to concentrate on the more critical, higher value cost areas such as salaries. The economies of scale achieved by such groups also deliver an opportunity for small companies to secure prices normally enjoyed by their largest competitors.
  • Communicate early with your suppliers if your company is struggling. They will appreciate your honesty and should do all they can to help you in the short term, perhaps by extending payment terms.
  • Work with your key suppliers to jointly review the supply chain and challenge how things are currently done. Could steps be taken to reduce total costs in the supply chain, which would be of benefit to both you and your supplier? Examples might be to consolidate orders to reduce delivery costs, consignment stocking and reduced transit packaging.
  • Consolidate the number of suppliers if possible – this will not only enable you to strengthen your bargaining position with suppliers, but it will also reduce the cost of administering each supplier’s invoices, orders, etc.
  • Be sure that everything you buy is actually needed. Consider postponing buying decisions or possibly buy the product second hand.
  • Finally, introduce an incentive scheme that encourages all of your staff, not just those involved in purchasing, to come up with ideas for saving the company money. The reward might be an extra day’s holiday for the member of staff who comes up with the biggest cost saving idea. The great thing about this idea is that it not only saves the company money, but also encourages a team spirit within the company and reminds people that wasting money can have a detrimental impact not just on the shareholders and senior management but on their own prospects.

Forum member Roy Smith, of Frank Marshall Auctioneers and Estate Agency Group, in Knutsford, Cheshire, has benefitted from the buying support service.

“It has given us a 24% saving on our existing stationery and office supplies spend. This is something we would never have achieved on our own, as our buying power was limited,” said Mr Smith.

“We have been very happy with the responsiveness and service quality of the stationery supplier since the switch, and would recommend the service to others. We also like the fact that it is keeping watch over the service levels to make sure that the supplier doesn’t get complacent.”

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