Growing your business (Part 7)
The seventh strategy in this business growth series is about “margin”.
In the previous articles of this series we have covered:
- Increasing Customers and Clients
- Increasing Transaction Frequency
- Increasing the Transaction Value
- Effectiveness of the Sales Process
- Making things Flow (Run Smoothly)
- How the Selling Price affects Margin
In this article we are looking at increasing your margin though the way that you buy. I would like to firstly point out that this is NOT about:
- “Beating up suppliers” to get the best price! In any business you need to have a good relationship with your suppliers as there are often times when you will need to call on them for some priority service.
- Finding the cheapest product! If your business prides itself on providing a quality service the last thing that you will want to do is substitute the quality products you use for something inferior.
Margin IS about:
Working with your suppliers
- Often suppliers receive items in pack sizes or boxes. If you are purchasing items regularly than working with your supplier by purchasing a pack or box reduces the amount of work (ie counting) that they are required to do. You are therefor in a bargaining position for better pricing by buying in bulk. Also remember that you have to store the product so you need to consider not buying excessive amounts.
- Negotiating quantity discounts! If you usually use or sell 5 items per month, ask the price for 10 items. You will have to factor in the costs of having to finance the items for an extra month.
- Suppliers also have clean outs of excess or old stock. Ask your supplier if they have any products they may like to have moved on. If you are unsure about the saleability of the stock consider taking it on a consignment basis. Therefor if it doesn’t sell you don’t have the financial responsibility for it. Often once the product is removed from the supplier’s site they prefer to not have it returned so they may offer further discounts just to clear it.
- Listening to the sale’s person. All sale’s staff have budgets they aim to achieve. If they are close to their goal at the end of the month they may pass on a few incentives to buy.
- Most sale’s organisations have advertising budgets, discuss running a promotion with your supplier for their product and have them provide the advertising money.
Reviewing your Suppliers
We should regularly review our suppliers to determine if we are getting:
- The best pricing
- The best service
- The best range of products
Your final consideration is to review the number of suppliers that you utilize … buying power can create bargaining power.
If you would like to explore changes to enable your business to flow more effectively or any other business growth strategies, please feel free to contact us.