Your Home Business Purchasing
In the previous five articles, I’ve mentioned some of the key elements of managing your online business when you are working at home. Working at home in your own business does not mean there are no management responsibilities, as you are now the manager of all the different “departments” in the business. It is your business now, so you get all the benefits of good management, and all the consequences of bad management. The buck stops with you, though if things go wrong, you may be tempted to blame others. But when you are the CEO, the responsibility for the well being of the business is yours. Apart from everything else, you are also the CEO.
There are three “departmental” elements of management that I have not covered yet: purchasing, and, if appropriate, research and development, and production. I will not delve into production or research and development, as I suspect few of you will have a need for these. However, working in any home based business will certainly have a purchasing input. Whatever you are doing, you will spend money. The better you manage that spending, the better your profit and loss results will be, and that is true whether you’re working in an office or at home. A large business will probably have a professional purchasing manager, watched closely by the finance director and CEO. If you are working alone at home, you are that purchasing manager. However, the finance director and CEO parts of you need to watch out for what’s going on. You need to give yourself a tough time in justifying your expenditure.
Why Do You Need to Manage Your Purchasing?
This is really a statement of the obvious. To be profitable, you need your revenue to be above your expenditure. Your expenditure is made up of purchases, whether for internet access, power, ebooks, advertising, or printer cartridges. The more efficiently you can manage that expenditure, the better for your bottom line.
Spending money is easy. It is one of the easiest things in the world to do. Spending it well and in a business like fashion is very different, and not anywhere near so easy.
Where and how can you go wrong with your purchasing if it is not managed properly? Here are just a few examples:
There will be numerous temptations every day to spend money, supposedly to improve your business. If you succumb to all those temptations quickly, you could very soon be cash poor. If you are an impulsive buyer, this could be a dangerous area for you and your business.
You may be paying too much for a product or service. That directly affects your profitability.
You may end up buying inadequate products or services, damaging the growth potential of the business and affecting profitability.
You may miss superior products or services that, although more expensive than their competitors, will improve your bottom line by being more productive.
How Do You Manage Your Purchasing?
Much of the management of your purchasing is about self control and common sense. The financial director part of you has to apply discipline, and the CEO part of you has to watch over conflicts between purchasing and financial control. You, as the purchasing manager, need to:
Be aware of your weaknesses, especially if you can be an impulsive spender. Be honest with yourself here. I am sure most of us have impulsive tendencies. They are not always a bad thing, but you do need to be aware of and manage them.
Stand back from the situation and take a detached view of your purchases. This way you can fulfil your roles as CEO and financial director, as well as purchasing manager.
Have a purchasing budget, and review it regularly. Stick to it unless it is really necessary to change it.
Have a decision making process that brings you to the best decisions over what you buy, who you buy it from, and what you are prepared to pay for it.
Challenge yourself for every purchase, whether it’s for software, new computer, joining an online program, buying an ebook, or many other things.
Research your market for whatever it is you are intending to buy, and keep a record of suppliers, prices and product specifications so that you can compare them now or later.
Delay any purchase after first consideration, then go back to it. For example, a few months back I had a long list of ebooks, software aids, and marketing aids I wanted to purchase. Thankfully, my budget did not allow me to buy all. I could have transferred money from elsewhere to buy everything on the list, but I stuck to the month’s budget. When I went back to the list a couple of months later, I found that I no longer wanted or needed to buy all but one of the remaining items.
Review once, review twice and maybe three times. Then buy if you really think such a decision is justified, and not a product of impulse or panic.
Keep cool when you are about to spend money. Purchasing is a cool discipline, as is much of running a business, whether your business is at home or elsewhere.
Have a review process for suppliers, services and products. Try to track the effectiveness of your purchases, so that you know whether to use the same supplier and/or product and/or service again.
The above are just a few ideas for improving your approach to purchasing. The underlying principles, though, are no different to how you should approach your domestic buying in the local shops. Business purchasing may have a scientific veneer, but at its most basic is the same as buying your weekly groceries.
Roy Thomsitt is the owner, webmaster and author of
, a new website in late 2004, about working online in a home based business. He has a background in offline advertising, with practical experience of working from home in marketing since 1995, plus 2 years of experience with online marketing. Professionally, he was trained as a management accountant and has substantial background in financial and project management, implementing new office, accounting, computer and management systems.
