Procurement is a business function that determines what to buy and from whom. It may not be a big deal for a business at startup stage, but as it grows, the need of dedicated procurement staff rises. For instance, a freelance software engineer can buy his own laptop from a local depot or online, but a software development firm that employees 15 people does require a dedicated person to find the best equipment at best price. The company can hire a full time employee, but ideally, handing over the task to a good procurement company can save their time and money.
We are living in a faster than ever before age, and everyone is looking to save time and money. Businesses of all sizes often prefer hiring the services of an outside company to handle procurement, simply because they do not want to spend their employees’ time on market research and negotiating with vendors.
So, if you are planning to start a procurement business, it certainly has a great potential, however, to start and run a profitable procurement business you need to make strategic moves. This article will discuss six most important steps when starting a procurement business within limited budget, and how to take it to the next level successfully.
1- The Market Research:
You may already have in mind the category that you will focus on, but it is very important to know the real market statistics and understand the industry dynamics before you finalize a particular line of products. For instance, sourcing for IT services is very different that sourcing for construction; gather the stats and see where you can offer more value.
Another question that you need explore at this stage is “who are your target companies that can possibly buy your service”. Identifying the potential clients will also reveal your competitors and examining their offers you can always come up with a more valuable offer.
Remember that this step is neither easy, nor quick; you have to do your own research and it requires parallel time. Having a mentor at this stage can be a big plus and networking with entrepreneurs in the procurement industry can open more doors for you.
2- Identifying the Profitable Niche:
Your initial market research ends with a list of products/services, potential buyers and competitors. You may already have tens of items in your list, however, experts suggest focusing on smallest possible niche in the beginning. It is easy to build a successful business with a few items and you can always add more categories on later stages as it seems profitable.
While you are working on finalizing the product line, look for passionate advocates of your offering in parallel.
4- Meeting the Legal Requirements:
The legal requisites may vary depending on your location; you must check with your local authorities for complete details about setting up a procurement business. Remember, legalizing and registering your business is a first practical step towards success, because no organization would want to do business with a non-registered/un-authorized business.
5- Having a Team of Leaders Onboard:
Even if you start a procurement business with the smallest possible niche, you do need a team to take it to the next level. A successful procurement firm cannot happen with one man army and you must get well experienced team members with prior purchasing experience. Ideally you should hire one expert who is well-versed in the sourcing process rather than hiring three entry level executives.
Success of a procurement business is all about active industry connections and for that very purpose, you should work on building a team of leaders not just workers. This is important because, the more autonomous your team is the faster your business will grow.
Moreover, as your business grows and you add more categories, with a team of leaders you can segregate your procurement/sourcing team into groups, i.e. each group handling a different purchasing category.
6- Paying Close Attention to the Technology:
In present day business world, no company can survive without using technology. So, it’s crucial to back your business with a good purchasing & procurement management software. Besides that, look for the tools and resources that can optimize the business process and bring efficiency; here are some ways technology can make a big impact on your business.
- Incorporating automation tools can greatly lower the costs and increase the profitability of the business.
- Using better communication tools can lower the risk of mismanagement and increase efficiency.
- Taking advantage of free applications can considerably increase overall productivity of the company.
- Using technology to enhance customer experience can multiply your sales.
The Bottom Line:
Procurement is a vast field with unlimited opportunities for enthusiast entrepreneurs, but without a specific scope of business, chances of success are very rare. Whether you want to establish a procurement agency to work with government or private sector, start small and grow it big!