Being a part of a buying group, or group purchasing organization (GPO), is a great way to increase your purchasing power while decreasing your cost per item. But many buying groups provide a lot of other benefits to their members. This includes discounts on the services you need to run your business, less risk, and a host of other perks. So let’s take a look at the pros and cons of joining a buying group so you can make a solid decision on whether you want to jump in or stay out.
LOOKING DEEPER AT THE FINANCIAL BENEFITS
The number one reason anyone joins a buying group is to improve their financial situation. So let’s start by taking a look at what the monetary benefits are to joining.
- Because you are leveraging the buying power of a group, you are able to buy your products and services for lower prices. But you’ll generally enjoy lower invoice pricing as well as regular rebates.
- As a higher level client, you can also get better payment terms with most vendors as well. This can include extended invoice terms.
- You also can enjoy more access to unique items that you wouldn’t have access too without the improved buying power of the co-op.
- The group also centralizes billing through them, which means less receipts and invoices for you to have to deal with. You generally just make a single payment to the group and reserve your manpower for more productive endeavours.
- You will gain access to co-op advertising programs. Your collective buying power extends beyond products. You can leverage the group to save money on regular business services like marketing and advertising as well.
THE BENEFITS GO BEYOND THE MONEY
Buying Groups offer many additional benefits beyond the monetary ones.
- If the individual members succeed, the group succeeds. This means each member helping the others. Which gives you a network of peers that can help you through tough decisions by lending their expertise and opinions.
- If your exit strategy is to sell your business, you will have a waiting pool of potential purchasers that already know how your business operates.
- You leverage your increased status with suppliers to gain access to senior executives at your preferred suppliers. They wouldn’t normally make the time to meet with you as a small business, but they will take time to attend an event with the group as a collective.
- Negotiating with vendors happens at the group level. Which frees you up from having to deal with those hassles and allows you more time to focus on your business.
WHY YOU SHOULDN’T JOIN
The biggest reason not to join is if you feel that the group won’t benefit your business, or if you don’t “get along” with other key players in the group. Buying Groups work best when the members are like-minded entrepreneurs with similar goals in similar industries. You have to focus on combining your strengths with others like you so you can enjoy running a small business while still being able to price your items on a level that lets you compete with big-box companies. Instead of looking at your competitors as challengers to your footprint, you have to look at them like members of the same team and lean on eachother. If that level of cooperation doesn’t suit you, then a buying group might not be a good fit for you.
TALK TO A PROFESSIONAL
Joining a buying group can be a huge decision for your business. So make sure you get the professional advice you need from an experienced attorney to find out if it’s a good move for you or not. We’ve been helping buying groups and their members since 1985 and we’re happy to talk with you and answer any questions you have.