In speaking with small business members at a recent association event, I discovered they were purchasing linens and procuring paper goods through discount retail outlets. I thought to myself, “Is this how they should be purchasing to better their businesses?” Perhaps it is, given certain variables, but this made me think that more than likely, not all factors have been considered prior to choosing to purchase their goods in this manner.
After more than 25 years in procurement, I have discovered that many small businesses do not purchase effectively or appropriately. Often, purchasing for a business is the one of the most neglected areas. A majority of small businesses buys goods and services every day but do not evaluate and streamline purchasing. As a result, they may spend more money than they need to, buy goods that aren’t of the proper quality for their needs, or choose suppliers that don’t offer the customer service they deserve or are a match for their business. So, they resort to purchasing at discount and retail stores, which are often not cost effective as they appear. They do not have long-term agreements for their commodity or service needs.
The most effective way for small business to leverage their purchasing power is to plan their organizational purchasing in a similar manner as their counterparts in large corporations. The expenditures of the business should be evaluated over a recommend period of a year, from toilet tissue to temporary services. Once you have the total expenditures, for each item and service, you are in a better position to leverage your aggravate volume, whether that is through individual negotiation to set up long term agreements or participation in a buying program to attain best value and lower your overall operating cost.
By getting a handle on your business purchasing, even the purchasing of toilet paper, you can more effectively manage your operating budget, resulting in an increase in profits and the ability to soar past your competition.