The current situation

The majority of smaller businesses do not employ a specialist to negotiate the best deals on all their purchases. As Matthew Roper from the Buying Support Agency says: "Buying decisions tend to be made by owner-managers who took on the role in the early years of their business. As the company grows, they don't have the time to get the best deals, yet are still too small to justify employing a specialist."

Many businesses also do not place the same emphasis on buying as they do on selling, so all energies are put into one part of the business at the expense of another. The Daily Telegraph recently ran an article that said 90% of owner-managers feel they could make savings, while a quarter of businesses have no specific targets in place for cutting costs.

In short, many businesses are wasting money, yet are doing nothing to address the situation.

The solution

Perhaps the most obvious solution is to negotiate new contracts individually. However, this approach would be debilitating time-consuming and the individual savings may not be enough to justify the time spent negotiating the deals.

According to Matthew Roper, the answer is to treat buying in the same way as any other non-core element of the business and that can mean outsourcing. And, for smaller businesses, that can mean joining a buying consortium which can negotiate on far more than just price. "A buying consortium can negotiate better payment terms, delivery frequencies and discounts."

By joining a consortium, smaller companies effectively join up to create a body large enough to take advantage of some serious discounts. And the hard work is also done for them, the consortium negotiates the deals, all the members have to do is take advantage of the reduced rates.

"Any business over a certain size has to budget for services and consumables. It all adds up." David Molian of Cranfield Credo, who have carried out extensive research into the buying habits of smaller businesses.

"Smaller businesses are inherently disadvantaged in terms of their buying power, and if they don't challenge the status quo, they are condemned to live with it."

A special offer

Given that buying consortiums save smaller businesses money, it is only fair to expect to pay a membership fee. However, members of the FPB can join our partner organisation the Buying Support Agency completely free of charge – an instant saving of £495. Members are also free to leave at any time, so this is a deal where there really is nothing to lose. If the BSA cannot save you money (and we are sure that they can), simply leave.

What to do next