When running an independent business, it’s so easy to become isolated and feel that life is just a series of battles to be fought, one after the other. Whether it’s dealing with the impact of a new competitor, rising bills or coronavirus, it can be a struggle to prioritise and make ends meet.

However, a single step exists that, as a practice, you can take – if put in motion properly – to lower costs relating to supplies and services without making too many other changes. Very simply, by joining a buying group, where the power of many filters down to the individual, practices can take advantage of the pricing that large corporates can achieve.

What is a buying group?

A buying group is a very easy concept to explain: all it means is the joining together of a (large) number of independents, with no real individual commercial clout, into a single organisation that has more buying power and leverage with suppliers than they’d each have ordinarily.

And it works because the buying group can use the total value of purchases that its members make to negotiate better terms with the suppliers – predominantly manufacturers where your highest costs relate to drugs. The collaboration of buying resource enables the member to access a net net price that they cannot achieve on their own (even if bulk deals were considered).

Buying groups aren’t new and work successfully across many sectors; pharmacies have been served by Cambrian Alliance, AF Group has helped the farming sector since 2005 and vets have access to them as well. While names and ownership have changed, the benefits remain the same. VetShare has been saving members money for more than 10 years and MWI, in one form or another, the same since 1990.

In an age of rising competition – both on and offline – and a desire for a healthy P&L, attention should be paid to costs as well as increased revenue . After all, profit is the subtraction of cost from revenue – and the larger the gap, the larger the profit.

Benefits to consider

[1] Negotiation

The very essence of a buying group is its ability to negotiate. Its experienced professionals have access to the marketplace prices so know when they can squeeze for more. A manufacturer will want to protect its margin, but it will also want to gain access to a captured audience – especially if they are willing to switch products for a competitive price. A good buying group will be looking for solutions that are Win:Win:Win as they need to keep the member happy, the supplier happy and generate a return themselves.

Furthermore, the buying group is providing you with a service, expertly reading contracts, cross-checking purchases against rebate due and often returning funds to you quicker than you would get them outside of the group. Many also have account managers that theoretically work for you to keep you up to date with changes that could bring further reductions as they establish your preferences and flexibility.

[2] Lower costs

The raison d’être of a buying group is to give the independent something that it cannot achieve on its own – negotiating and buying power. An independent calling a supplier for stock is a lone lost voice in a sea of many. A buying group has gravitas, and has a greater chance of calling the shots through its ability to negotiate using economies of scale and at a faster rate. The result is that it makes less margin proportionately from each buying group member and will be less generous with non-buying group members – don’t let that be your practice.

In a little more detail, volume and commitment to buy is the key reason why buying groups get better pricing. Some buying groups will also “buy” the product on your behalf and invoice you directly, and others can also sell you a white label of the exact same product at a lower price as they commit to buy by the pallet and distribute to you directly. Both result in less work for the supplier and a better price.

While some arrangements are exclusive, you will still enjoy the benefits of non-rebate offers and can opt out of some of the arrangement if you believe you can negotiate stronger in a particular area, but you would still need to monitor this yourself – do you have that commitment?

Another win for practice is the time you or your staff will gain from administration – negotiation meetings, comparative and purchase data analysis, monthly documentation and banking checks – leaving you or them time to earn money or focus on other areas of the business. It isn’t costly to join a buying group and easy to leave, with most not charging a joining fee, exit fee or lengthy contract.

As for changing the competitive landscape, a good buying group won’t get into bed with just one supplier, but instead will seek to get different suppliers to bid. This is pure economics in action – if one supplier will not or cannot offer the best pricing, another should; a single supplier that feels invulnerable is less likely to offer decent, or even fair, contract terms.

Other benefits

Being a member of a buying group can offer more than simple cost savings; it can allow a practice to remain independent while reaping the rewards that come through size; the practice and staff can concentrate on what they do best – serve clients.

And depending on the buying group, other benefits may exist that can be tapped into, such as debt recovery and enforcement, help with buying capital equipment, equipment servicing, pet insurance and health plans, financial and insurance services, and card services and payment processing.

Again, these benefits should be proportionately less expensive than if the independent went on to the open market to source them for itself.

To finish

Ultimately, being a member of a buying group should be a positive experience that increases profit with the added security of banding together with others. Practices can struggle in today’s market to increase revenue by selling more to more clients. But that makes it imperative, as profit margins come under greater pressure, to take a leaf out of Tesco’s book where “every little helps”.

Remember, every increment in cost removed is effectively the same as an increase in revenue.

MWI Buying Group

Megan Chiplen, marketing executive for MWI Animal Health, believes that vets who join MWI Buying Group will “save time and money on the products and services most needed to run a practice” and will simplify their purchasing administration and business processes.

The group, she said, offers enhanced discounts and rebates on a wide range of products – from pharmaceuticals and consumables, to laboratory and pet cremation services. She added: “We give easy access to the true net net cost price of all the products in a veterinary wholesaler’s product range. Practices will be able to make quick and accurate purchasing and pricing decisions. And we have financial reports and management tools specially designed to reduce administrative load while giving a completely transparent view of purchases.”

The group also offers a number of added value services “at competitive rates”. These, Megan said, include CPD training, pet health plans, equipment servicing, human resource support, safety services, practice insurance and financial services.

And there’s MWI Distinct Advantage, an extension of the buying group offer. On this Megan claimed that “Distinct Advantage members typically save more than the standard buying group and wholesale offering combined”. It also gives member access to a clinical advisory board (CAB).

The CAB is made up of independent vets and pharmacists that peer review products and services, making transparent recommendations to members. In addition, Megan said that “the programme provides market-leading, value-added services designed to improve client retention and create efficiencies throughout your business, while maximising growth and profit potential”.

VetShare

Anita Bates, Commercial director of VetShare and MiVetClub, said that the “whole point of a buying group should be that it brings the best prices and keeps vets informed of any changes”.

Anita noted that “the cost of goods with Brexit, coronavirus, and supply and demand, plus annual price increases and changes to rebates” means that practices “might not be getting as good a deal as they originally thought”. Her recommendation is to “use a buying group with account managers or regular communications to ensure that vets do not miss out on notices of changes to net net.”

Practices cannot have missed, as Anita pointed out, that in the past 12 months there has been “a rise in pet ownership and a rise in new start-up practices, as well as the profession’s continued corporatisation; we all face competition, so we need to be ahead of our game when it comes to wise buying”.

VetShare and MiVetClub’s product procurement is undertaken by CVS and endeavours to “ensure that members gain the best possible price”. In so doing, the company seeks to “utilise the buying power of CVS to capitalise on the frameworks that the manufacturers calculate their rebates from, so that members can benefit”. She pointed out that even better rebates exist in MiVetClub, based on a dedicated product list.

Other related offers exist – MiPet and EqueVet have a range of products. Anita explained: “These products are already known to the market, and are produced and managed by leading manufacturers with the MiPet and EqueVet livery. As they can forecast the volume used by CVS and members, they can access the lowest market price, bringing members the same quality goods at an affordable price. The two brands are not available on the internet – even if they have a prescription supplied – driving repeat sales in practice.”

The company also has a number of service partners that can further enhance the rebates on wholesaler purchases.