As a small business owner, you probably have money at the front of your mind at all times. Because, you’ll understand that trying to reduce expenses with smart management of finances is key if you want to succeed.
Of course there are multiple ways you can shrink your costs, but one option could be to join a buying group.
To put it simply, a buying group or buyer’s group, is a term used for when small businesses work together in regards to purchasing and other business functions.
Essentially, these organisations handles things such as payments, sourcing, contract and supplier management for you, whilst leveraging the purchasing power of the group to get a better price than if you were to negotiate alone.
For small businesses, this gives them a chance to be in competition with larger organisations who have a more efficient supply chain – bigger organisations can offer similar products to small businesses but for lower prices.
Let’s take a look in more detail at what a buying group is and the benefits of joining.
What is a Buying Group?
Buying groups are made up of small businesses who are looking to strengthen their relationship with their suppliers and leverage group purchasing power.
Typically, suppliers are more inclined to give better pricing to those businesses who have a higher order quantity over the year.
And so, if small businesses come together, they can negotiate better discounts and build relationships for you.
In addition to better prices, buying groups can often secure other benefits like promotions and rebate deals.
The Benefits of Joining a Buying Group
Joining a buying group comes with many benefits, from lower costs of goods and shipping costs to extra support from the group itself.
Let’s discuss 5 benefits in more detail.
Reduced Costs for Purchasing Goods/Services
One purpose of a buying group is to bring small businesses from a certain industry together; so they can place a single large order with suppliers – known as group purchasing.
And it works because suppliers tend to give better discounts for buying in bulk – the group then passes these savings back to you.
Simply, suppliers will have large purchasing order minimums before they can offer discounts and a buying group can help you meet those.
Therefore, small businesses enjoy the discounts that are normally offered to larger organisations by collaborating together.
Higher Purchasing Power
As businesses join forces, buying groups combine their purchasing power for better negotiations.
As a result, securing prices that would not be attainable if a small business was to work alone.
The fact of the matter is, the more you buy, the better the discount.
Save Shipping Costs
Whilst suppliers give better discounts for larger orders, they tend to waive shipping costs in this instance too.
A great benefit as your buying group can negotiate discounted rates or sometimes even free shipping on purchasing large orders.
Keep in mind though, the order will probably be delivered to one destination but your buying group is usually responsible for ensuring you get your part of the order.
Reduced Transaction Costs
Joining a buying group can be highly effective at simplifying your procurement processes.
As such, it reduces not only the cost per unit on goods, but also the per transaction costs, due to having a smaller number of contracts that need to be prepared and managed.
Lower Purchasing Risk
Ultimately, buying groups are in it for the long run when it comes to keeping their members – increasing the pressure to support them.
Only opting for suppliers because they are the “cheapest” option can harm the buying group’s reputation, so this is generally avoided. Members want the best quality suppliers and so buying groups seek out those that are credible; decreasing the purchasing risk for the member.
Regardless of which industry you’re in, joining a buying group can offer significant benefits – with cost savings being the most obvious.
So why not explore your options, find recommendations and see if joining one is right for you.
For more information please contact us today.
