Managing
Your Home Based Online Business: Part 6 of 7
by: Roy Thomsitt
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.
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About The Author:
Roy Thomsitt is
the owner, webmaster and author of http://www.change-direction.com,
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.
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