Business cost-cutting - idea for a new business

[waveuponwave]

As everyone's mind is on cutting costs, I've been testing out a new service to make sure businesses aren't paying more than they need to for essential supplies and services.

The idea is that if a business is about to re-order something (e.g. stationery), they provide me with the specs and a previous invoice or a quote from their current supplier, and I get quotes from other companies to see if anyone can do it cheaper. If they decide to use one of the companies I've got quotes from, we split the money they're saving 50/50. If I can't save them money or they decide not to go with one of the quotes...no charge.

I've already done this casually for a couple of friends' businesses and saved them hundreds on stationery, office cleaning, courier servies and equipment hire among other things. Ongoing, I could imagine doing it either as an 'audit' where they provide me with invoices for everything they spend money on, or just on an ad-hoc basis.

Obviously anyone could just do it themselves, but in my experience small businesses get so busy they often keep using the same supplier for years even if it ceased to be the best option a long time ago.

So really I'm just looking for feedback - can anyone see there being a demand for this, and are there any obvious pitfalls? Or if anyone fancies being a guinea pig get in touch too

 

[YD1]

good idea........

 

[MyAccountantOnline]

I think their is a franchise which did/does offer this service?

I had a client who tried it and just couldnt make enough money to support a full time business.

 

[Pole84]

I like the idea... I have seen this in place in big companies (read FTSE-listed) where if employees can source something cheaper, they get to keep half the saving... So even the big-dogs are doing it...

Are you looking to do this for a particular niche e.g. stationary?

Maybe you could even consider combining a couple of individual business orders together to get further mileage out of the purchase, and get some bulk discounts?

 

[office man]

this is what ERA (Expense Reduction Analysts) do - they are a franchise. a very large one in fact - i have worked with them several times over the years - a good idea in practice but rest assured its a market that is already in existence and has stiff competition from the likes of ERA - from what i recall they charge a percentage of savings made too.

Might be worth a post in the franchise section as i am sure i have seen a couple of franchisee's as members on here.

 

[waveuponwave]

Great replies so far, thanks everyone. I'd not heard of ERA, but that sounds like a very high-end version of exactly what I was talking about. I wonder if there's still room in the market to offer the same service to small businesses? I'm talking about a 2-man operation run alongside a couple of other businesses - I certainly wouldn't want to be renegotiating million-pound contracts for the Hilton group!

Are you looking to do this for a particular niche e.g. stationary?

Probably a very good idea, but the fun of it so far has been learning all about totally new areas of business, in order to understand what the customer needs.

 

[office man]

It's also worth baring in mind that many stationery companies (mine included) offer this service free of charge to win new business. It's noting new really 'show us some of your invoices and we'll save you 20%' - i have done this for years to a degree of success, i have even managed to fend off consultants offering customers this service by offering to work with them on the saving s for free.

It's a very competitive market and the thing you really have to look out for is that if a supplier bids low on a selection of lines to 'get their foot in the door' then they will naturally look for the hidden extras to make up the additional margin - it's only business at the end of the day.

Sometimes it's not what a company is telling you that you have to look for, it's what they are not telling you.

good look anyway.

 

[chrisinit]

Try it with 10 local businesses, get some business cards printed and test the water.

If you get a good response try another 10 business but specialize in a specific sector.

That way if you keep doing this you can cover a range of sectors and find out what's profitable.

Worth a try and there is little start-up expense in my eyes.

 

[Pap_sak]

As everyone's mind is on cutting costs, I've been testing out a new service to make sure businesses aren't paying more than they need to for essential supplies and services.

The idea is that if a business is about to re-order something (e.g. stationery), they provide me with the specs and a previous invoice or a quote from their current supplier, and I get quotes from other companies to see if anyone can do it cheaper. If they decide to use one of the companies I've got quotes from, we split the money they're saving 50/50. If I can't save them money or they decide not to go with one of the quotes...no charge.

I've already done this casually for a couple of friends' businesses and saved them hundreds on stationery, office cleaning, courier servies and equipment hire among other things. Ongoing, I could imagine doing it either as an 'audit' where they provide me with invoices for everything they spend money on, or just on an ad-hoc basis.

Obviously anyone could just do it themselves, but in my experience small businesses get so busy they often keep using the same supplier for years even if it ceased to be the best option a long time ago.

So really I'm just looking for feedback - can anyone see there being a demand for this, and are there any obvious pitfalls? Or if anyone fancies being a guinea pig get in touch too

Thats a pretty good idea and I am sure it could be good for you and the customer as long as service was prompt.

 

[Hogrill]

One of the biggest pitfalls for me would be the fact when choosing a supplier its not all about cost.

You may be able to offer a saving for instance on a courier but if they dont deliver when they should thats no good to me.

Another thing to consider is how you keep track of on going business as I assume you dont want to be paid just for the savings on the first order which may be minimal.

 

[waveuponwave]

One of the biggest pitfalls for me would be the fact when choosing a supplier its not all about cost.

You may be able to offer a saving for instance on a courier but if they dont deliver when they should thats no good to me.

Another thing to consider is how you keep track of on going business as I assume you dont want to be paid just for the savings on the first order which may be minimal.

Very good points. I suppose you're always making a leap of faith when you change supplier, but I'd have to concentrate on finding the cheapest reputable companies. They'd also have to be able to work at that price consistently, rather than just giving a teaser rate to secure new business. I suppose I wouldn't get paid until my client was happy with the new company I'd found for them.

I assumed I'd only get paid on the first job, because even if I tried insisting on future payments they could easily cut me out of the loop and deal direct. Unless anyone can think of a way of structuring it?

 

[office man]

I assumed I'd only get paid on the first job, because even if I tried insisting on future payments they could easily cut me out of the loop and deal direct. Unless anyone can think of a way of structuring it?

PM me your email address, i can certainly give you some pointers, i will also be able to tell you who are going to be the cheapest (whilst being able to sustain an acceptable level of service) in your area. I am aware of how the other consultants work their contracts so that A - you will be able to secure a longer term arrangement and B - they will not be able to deal direct.

Let me know.

 

[Shaun_Pearce]

I operate in a similar fashion waveuponwave. The service I offer to businesses is a cost saving on their utilities ie - Gas, Electric, Water, Waste & Telecommunications. The 50/50 cut you speak of is also know as shared savings. There are many ways to do this but my business offers only to take 50% of the savings for the first year thereafter its all for the client.

It's a good idea UES has been trading now since 2003 and is handling clients such as Wales & West, National Grid. So there is a market for what you are doing and I think you are on to a winner.

I hope you dont mind me using this oportunity to offer a free audit to anyone who feels that they could use with saving on average of 20%-50% on all utilities.

All the best with the business venture!