- Small businesses may be able to access the bulk discounts larger companies have by teaming up to place orders together.
- Office supplies, computer hardware, software licenses, and industry-specific goods are a few areas where group purchasing may be possible. Some trade associations and chambers of commerce even negotiate group health insurance plans that let small business owners and their employees benefit from lower rates.
- You may be able to maximize your group purchasing savings by using cash flow forecasts to time bulk orders and by consolidating vendors.
Small businesses may pay more for the supplies, inventory, and services they need simply because they don’t have access to the same volume discounts as large corporations. But what if there was a way for you to get bulk discounts without overbuying?
Group purchasing power may make this possible. Below, we explore what this is and how it works to help you optimize your business purchases.
What Is Group Purchasing Power?
Group purchasing power is when small businesses team up to buy goods and
services in bulk, typically to have access to better prices. Types of businesses that may participate include:
For example, professional firms may partner with other service professionals to
negotiate bulk discounts on software licenses or specialized industry platforms,
office supplies and equipment, and professional training.
3 Key Benefits for Small Businesses
Small companies benefit from group purchases because they may allow you to:
- Negotiate stronger, more flexible terms: Businesses may be able to
get smaller order minimums, waived service fees, or longer repayment
terms. - Build partnerships beyond purchasing: You might form connections
that lead to referrals, shared marketing, or other ways to grow your
business together. - Lower costs through collective buying: You may gain access to
discounted prices reserved for higher-volume buyers.
You may even receive discounted group health insurance rates for you and your
employees through trade associations or chambers of commerce. These
organizations negotiate with insurers to offer group rates to eligible member
businesses.
How To Join or Create a Group Purchasing Network
If you’re interested in joining a group purchasing network, here is one way to do
so.
Step 1: Pinpoint Shared Spending Opportunities
Make a list of the goods and services you’re buying that other similar businesses might be purchasing as well.
Step 2: Connect With the Right Buying Partners
Look for local businesses, trade associations, chambers of commerce, industry networks, and other groups that may already have a group purchasing network. If there aren’t any, consider rallying businesses in your area or industry to form one.
Step 3: Set Clear Terms That Work For Everyone
Create a member agreement that clearly defines items like payment schedules, funding methods, delivery timelines, and dispute-resolution procedures.
Step 4: Simplify Payments and Cash Management
Businesses in group purchase organizations may pay vendors directly or reimburse a group organizer for their share of the purchase. Your bank’s treasury management services may automate these payments and help you maintain organized records. Good recordkeeping when placing group orders may make it easier to reconcile expenses later and reduce errors.
Best Practices for Maximizing Group Purchasing Savings
Consider these strategies that may help you maximize your group purchasing
savings:
- Consolidate vendors for better long-term pricing and simpler billing.
- Use cash flow insights to guide group spending, such as making bulk
purchases during peak seasons when your business may have healthy cash
flow. - Nurture long-term supplier partnerships by making timely payments
and sharing demand forecasts. Communicating about upcoming orders may
help vendors prepare or possibly provide extended payment terms.
You may also track your savings and ROI to see whether group purchasing
savings are making a real difference in your finances and if it's worth the effort.
Positioning Your Business for Better Purchasing Power
Group purchasing power may help you reduce business costs. Partnering with
vendors and other businesses may also better position your business for longterm
growth. When you’re ready to move forward with group purchasing, talk to
a PNC small business banker about how PNC’s cash flow and treasury
management tools may support you in managing and simplifying bulk purchases.
