Business and Personal Finance: Know What You Want Before You Buy

Controlling Purchase Costs – Know What You Want Before You Buy

Planning your purchases may not sound like as much fun as coming up with a splashy new ad campaign, but it can do an awful lot for your bottom line in the long run. In fact, cutting costs has a bigger impact on profitability than does increasing sales. Consider this: Lower product costs mean higher gross profits on every single sale, with no extra work on your part. The trick is to purchase wisely, but to do that you need to know exactly what you want.

ALERT!

When you’re just starting out, you may not have a handy roster of vendors to choose from. Rather than simply pulling names out of the phone book, try to get recommendations from other business owners who make similar purchases. You can also check with your local chamber of commerce to gauge the reputation of a local supplier.

No matter what you purchase for your business, whether it’s ongoing inventory or a one-time equipment buy, consider the product specifications that will best suit your company before you even start talking to vendors. Specifications don’t have to include specific brands or model numbers (though if you know those details, write them in); you can start with things such as price range, size, and functionality. Once you know what you’re looking for, start calling around to vendors to get price, availability, and service information.

One-time purchases, such as fax machines or computers, are easier to deal with because you have to consider only what you want; you’re the end customer here. Trying to buy inventory can be trickier, especially before you open the doors to customers, because you have to figure out what other people will want to buy. There’s no hard and fast rule here to getting it right the first time, but planning your purchases will get you closer. Stick with what you’ve chosen to stock according to your business plan; you can adapt from there.

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