Answering Top 5 questions about working with a GPO
People who cook for themselves know that it’s cheaper to buy food in bulk than to buy small amounts. As a business owner, you’ve probably looked at your budget and wondered why grocery store rules don’t apply for business expenses. While you can’t always barter with individual vendors for better prices, you do have the option of joining a group purchasing organization. Here are the answers to your top questions about picking the right GPO and how these groups help your business.
1. What Is a GPO?
A GPO is an organization that combines each member’s buying power to receive the best deals on group purchases from vendors. Although working with a GPO is not the same as joining a union, the two entities are similar. Both involve people joining together to ensure that they receive the best treatment. However, with GPOs, your entire company enters into an agreement with other companies, rather than your employees organizing with each other.
2. How Do You Choose the Right GPO?
When you’re deciding which GPO to join, make sure to check each entity’s terms and conditions. Find out which companies each GPO works with; does it contract with national suppliers, or does it restrict transactions to local vendors? What kinds of products does the GPO usually purchase? Are these products that you use all the time, or will you only receive a few discounts each year through your membership? Does the GPO provide specialized services for each member, or does every company receive the same treatment? Finally, does it offer any other services, such as networking and training opportunities? After asking each of your options these questions, you have a good idea of which GPO you should join.
3. What Are the Benefits?
Once you’ve joined a GPO, you receive many benefits, the most important one being discounts on your supplies. As a small business owner, you don’t have access to major investments, loan programs, or savings accounts the way corporations do. Saving money is difficult because your cash flow is varied. Therefore, receiving regular discounts on supplies makes a huge difference in your bottom line, especially if you continue to charge the same prices.
Another benefit of GPOs is that they connect you with potential business partners. Some GPOs host conferences at which you can network with other members, and most of them provide you with members’ contact information. Perhaps your next biggest investor or client is waiting at your next GPO meeting.
GPOs also save lots of time that you would otherwise waste looking for vendors. Every business owner knows the hassle of looking for a new supplier when your current one goes out of business or relocates. With a GPO, you don’t have to worry about finding a supplier; all you have to do is submit your latest order. You also don’t need to spend several meetings negotiating your pricing and shipment details, since the GPO does that for you.
4. What Are the Pitfalls?
It’s important to ensure that you choose the correct GPO for your business. Just because one of your professional contacts recommends a GPO doesn’t mean that this organization is perfect for you. Making a hasty decision about which GPO to join leads to not receiving enough benefits to make membership worthwhile.
Other problems that business owners encounter are fees. As you search for the right GPO, check each organization’s terms carefully. Some GPOs charge membership fees, and if this is the case, make sure that you’re going to receive enough savings to cover these expenses. Other GPOs don’t collect dues but do require you to purchase a certain amount from each vendor every month. If so, ensure that your demand keeps pace with purchasing requirements before signing up. Still more GPOs do not have any fees or purchasing requirements, and these groups are probably your best options unless your company is growing rapidly.
5. How Do You Get the Most out of a GPO?
You’ve found a GPO that works for your business model, so you want to make sure that you use your membership to its fullest extent. Attend all meetings about vendors and expansion opportunities, even if you’re not sure they apply to your business. You never know what information you’ll hear. Go to any fellowship events in your area and meet as many members as possible. Look out for emails about online training or certification programs and consider learning a new skill whenever possible. By checking your email regularly and maintaining professional relationships with fellow members, you maximize your GPO benefits.
Business owners are often leery of joining professional organizations because they’re worried about prohibitive costs and low rewards. However, if you do your research before joining a GPO, you’re sure to find a group that helps you expand your business.