It’s a tough environment out there for startups. It’s common knowledge that 90% of startups fail, but do you know the main reason why?
Premature scaling has consistently been identified as the number one startup killer. While scaling up too fast usually involves making a significant investment without having enough customers, it can also involve a failure in scaling up business processes – including procurement.
Take, for example, a fast-growing tech company that was experiencing rapid growth. In the first year, all purchasing was handled by an admin assistant (let's call him Amir). At first, Amir could manage purchasing with ease, simply by shopping online and placing orders with a small group of suppliers. The organization’s needs were fairly simple – office supplies, laptops for staff, and so on.
But by year three, Amir was feeling overwhelmed. The organization’s purchasing needs had grown in volume and complexity. The number of suppliers to keep track of had ballooned into the hundreds, and he was having trouble simply keeping up with all the purchase requests. He had no time to practice good processes such as seeking more than one quote before making a purchase.
The startup’s CFO was becoming increasingly aware that costs were higher than they should be. The CFO determined to establish a procurement function within the next 12 months, but in the meantime, put increased pressure on Amir.
The CFO sent a list of questions:
Amir knew that he needed to learn how to manage rapid business growth, find cost savings and get procurement under control, fast.
Scaling headaches aren’t limited to startups. Medium-sized and large companies can go through unexpected growth at any time, such as that experienced with the eCommerce boom during the pandemic.
In terms of procurement, this can lead to challenges including:
At Una, we’ve had several conversations with companies that are small but growing quickly. Typically, they have limited staff, and no time to set up a procurement function although they recognize they need one. Crucially, they have little time to vet suppliers (adding risk) or negotiate (adding costs). They need help controlling spend and finding cost savings to avoid it becoming a major problem as they scale.
GPOs lend growing businesses their buying power to provide discounts on products they use daily, from office supplies to shipping and logistics. These cost savings can then be used to fund the things that really matter in a fast-growing business such as hiring more people, investing in tech, or ramping up marketing strategies.
Fast-growing companies are time-poor, and simply don’t have the resources for lengthy contract negotiations or supplier relationship management. Outsourcing these activities to a GPO saves money, time, and effort that can be better spent elsewhere.
Finally, working with a GPO is about speed. Group purchasing can simplify and streamline sourcing so that rapid growth can be accommodated easily.
We know you’re busy, so we’ll work hard to help you find cost savings as quickly and smoothly as possible. Get in touch today for an introductory conversation with one of our procurement experts to discuss how we can help facilitate your organizations’ rapid growth.
