The less a business pays for goods and services the more profit that business generates. How does a small business with limited purchasing power get access to lower cost goods and services? The answer is simple. Pool the purchasing power of many small businesses to increase the purchasing power of each individual business. The implementation of forming a buying group can take lots of time, money and resources. Most small business owners have little of these buying group ingredients.
The concept of many small to mid-size businesses joining together to form buying groups has been around for a very long time. The implementation of the concept has only been available for a few years. Just about all of the national buying groups that have started operations in the past five years are no longer in business. I will tell you why many of these buying groups were not successful later in the article. Some of the few surviving buying groups have formed an alliance that offers their members access to greatly discounted pricing with a total of 37 national vendors. The Hospitality Buying Group was the first national buying group to offer a FREE lifetime membership to any business in any industry. This group recently started the Hospitality Buying Group Alliance which offers free lifetime memberships to all the national buying groups in the alliance. The only investment the business members make is the time to compare the prices of the alliance vendors against what they are currently paying.
By now you are thinking that all of this sounds too good to be true. If the Hospitality Buying Group Alliance gives away lifetime memberships then how do they make any money? If the members are not a revenue stream then the only other revenue source must be the vendors. The vendors pay the buying groups commissions on all purchases made by their members. There is no risk for the vendors because they only pay the commission after they have been paid by the buying group members. The commissions are very low so the maximum discounts can be offered to the business members.
Some credit card companies, like American Express, offers a small savings or a percent cash back reward to their customers for using vendors in their network. While saving 2 – 5 percent with credit cards is good, a 10 – 50 percent savings with buying groups is much better. Buying group members will only be contacted by the alliance vendors they select. As the buying groups get more established more vendors are interested in offering their services to group members.
If the concept of the buying group is so good then why do most buying groups fail? Most of the failed buying groups spent a few hundred thousand to over a million dollars just to get the buying group started. To make matters worse they have large operational expenses. This is going on at the beginning of the buying group’s existence while the group has few vendors to offer potential members. To keep the group functioning they need to charge members $500.00 - $10,000.00 annually to join the group. With few vendors the members can only expect to save a few thousand dollars annually. Many small business owners are not willing to take the risk of purchasing a membership in a buying group that may not generate significant savings. This results in few buying group memberships sold. The buying group can’t pay their operational expenses resulting in reducing the sales force. This results in decreased revenues and finally the buying group ceases to exist.
The successful national buying groups that make up the Hospitality Buying Group Alliance were all started with an initial investment of just a few thousand dollars and thousands of labor hours by just one or two individuals. Their operational expenses in the beginning were just a few hundred dollars a month plus lots of labor hours by the owners. As the buying groups grew the revenues were reinvested back into the buying group. The use of technology reduces the operational cost of the buying group. This approach results in a successful buying group with a positive cash flow. This information should put potential members at ease because they know the buying group will be around for a long time.
This is a very special time in the history of buying groups because this is the first time an alliance of buying groups has ever been formed. With the free lifetime membership, total freedom to select one or many alliance vendors and a growing alliance of buying groups makes this the best time to participate in the buying group alliance. You can which national vendors the Hospitality Buying Group Alliance offers by going to: http://www.hospitality-buying-group.com/.
Paul Buisson has been involved with buying groups for over 12 years. He has consulted with several buying groups to make them successful. He can be reached at 985-727-2992 for free advice.
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