Reducing costs has become a fact of life for Irish businesses and business owner/managers need to be more efficient than ever. As always, it is the little things that count – a 10% increase in profit is more likely to come from 20 things that contribute 0.5% each than from one thing that gives you the full 10%. It is also easier to reduce your businesss costs by 10% these days than to increase your revenue by a similar percentage.
One simple practice to reduce costs is to get at least three quotes on everything you purchase. If you spend more than €200 on anything during the year, it can pay to “shop around”. Be specific with your requirements, exact product/service usage and put it out to tender. Large businesses, the Government and purchasing managers have been benefiting from tendering/eTendering for years – so you should too.
Here are 5 reasons to “shop around” and get three quotes for your business;
1. Massive savings can be achieved by identifying suppliers with low margins and low overheads. A huge range in prices can exist for the exact same products so it pays to identify these suppliers, especially for commodity products/services where all other buying criteria is irrelevant.
2. If you (or the buyers in your business) are not product/service experts or you are sourcing something for the first time; the value of three quotes allows you to make an informed decision while quickly ascertaining what is the market value for this product/service.
3. Suppliers have various considerations to take when pricing. Your timing to get three quotes can have a major impact on the price. What if the supplier has excess stock? What if the supplier has had a similar order cancelled? What if the supplier has a delivery in your area? What if the supplier is keen to keep production running? All these elements can reduce your costs so it pays to get three quotes, frequently.
4. Prices are constantly changing these days. Raw material, manufacturing and distribution costs can vary month by month, if not week by week. Some businesses absorb such increases while others do not – make sure you are dealing with competitive suppliers by tendering frequently. This cannot be understated; getting three quotes is not a one-time exercise. The most competitive businesses get three quotes frequently to ensure they are paying market prices.
5. Essentially, shopping around is the simplest most effective way to reduce your business costs. Cutting costs only means one thing: more profit for you and your business. By looking at these areas, you’ll be able to increase your profits – even in the current economic climate.
Mike McGrath
www.supply.ie
