Small businesses urged to consider alternative buying methods to reduce costs

Small recession-hit businesses faced with increased business costs may be able to save money through group buying, research carried out by the Forum of Private Business (FPB) has claimed.

According to the FPB, spiralling business costs in the wake of the recession and rising inflation have become a 'major barrier to growth', with 82 per cent of business owners seeing the cost of raw materials increase over the past year. The same number said that rising overheads had adversely impacted their business.

Of the businesses surveyed, 74 per cent said that price increases had hindered their growth ambitions while 45 per cent said their profitability had suffered as a result.

The FPB is now urging small businesses to consider alternative buying methods to reduce overheads and cash flow problems.

Phil Orford, the FPB's chief executive, said: "At a time of recession and spiralling costs it is important that small businesses are given all the support they need to control their overheads and cash flow worries. Group buying is a real solution to the problem."

In collaboration with the Buying support Agency (BSA), the FPB and the BSA have offered some tips to help cut business costs:

• Know exactly what your highest costs are and reduce the cost of these supply items or services first. Use the 80/20 rule; 80 per cent of costs typically come from 20 per cent of your supply items.
• Research the market of your products and services to make sure you are receiving competitive prices.
• Challenge suppliers and don't be afraid to switch if you find the same products and services cheaper.
• Negotiate with suppliers, especially if prices are falling.
• Routine costs, such as stationary, telecoms, utilities and cleaning supplies, may be reduced by joining a buying group. In some cases small companies may be able to secure prices normally reserved for larger competitors.
• Communicate with suppliers; suppliers may be sympathetic to businesses struggling in the short term, potentially offering extend payment terms.
• Regularly review and challenge your suppliers by reviewing the supply chain; could steps be taken to reduce delivery costs?
• Consolidating the number of suppliers you use will strengthen your bargaining position and potentially reduce costs.
• Ensure you are only buying what is essential.