The document outlines 5 steps that purchasing professionals can implement to help save startups money and strengthen margins. The steps include: 1) obtaining a total spend profile, 2) sorting spend by category, 3) visualizing the spend data, 4) setting a sourcing strategy based on the data, and 5) capturing 3 rounds of savings through negotiations and process optimizations. Implementing these steps allows startups to efficiently manage purchasing, reduce costs, and position themselves for scalable growth as they move towards an IPO.

1. 5 Steps that Purchasing Professionals can put in
place to save a start up by reducing total costs to
create strong and sustainable margins.
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2. Purchasing Role in A Startup
 Purchasing certainly does not create the start up
 Start Ups certainly do not need an optimized
purchasing process
 Companies with quickly accepted products and
massive revenue growth should not worry about
Purchasing except when ready for IPO and need for
SOX compliance
 Only real concern is function of purchasing things
should be efficient
So why bother …………………………..
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3. Purchasing Role in A Startup
So why bother …………………………..
 Generally most startups do not go from product creation to massive revenue growth
instantly
 Cash becomes king at some point in most startups journeys
 At the same time start ups need to plan for scalable growth when success comes
 In early development phases focus on efficiency of purchase process and development
cycle combined with infusion of investor capital can lead to higher cost purchase choices.
 Also in early development founders relationships are key to getting resources which is
vital in beginning. However, as growth comes different set of criteria can be used for
sourcing choices.
At the mid point of the cycle from beginning to IPO is when the contribution of
a professional purchasing employee or consultant can have an immediate
impact as well as aligning spend decisions to obtain optimum total purchase
cost and improved margins with growth.
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4. The Steps: Proven and Repeatable with High ROI
Obtain total spend profile using actual payables data.
2. Sort data by category and add # suppliers and
transactions.
3. Visualize data
1.
4. Set Strategy based on proven sourcing approaches.
5. Execute Strategy and collect 3 rounds of savings.
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5. Step 1: Obtain Total Spend Profile using actual Payables
Supplier/Payee
Product/Category
Total Spend
Total
Transactions
Method of Payment
Pay Terms
Corporate Landlord Inc.
Building Space
5,000,000
10
Invoice Contract
15 days
Computer Hardware
Corp
Servers
3,200,000
200
PO
30 Days
Business Process LLC
Labor and Call
Center
3,000,000
12
Contract
10
Raw material Corp
Production
components
2,500,000
500
PO
15 to 30
Facility Management
Service
Building
Maintenance
1,200,000
1
Contract with PO
Quarterly in
advance
Consolidated
Professional Service Inc.
Legal and
Marketing
700,000
8
50% contract invoice
Travel Agent Inc.
Travel
450,000
900
Enterprise Software
Giant
ERP and CRM
300,000
1
Indirect material
Warehouse
Office Items
125,000
1000
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Expense 30% Corp
Credit Card 70%
Personal card
Mixed
PO
Prepaid for
Year
40% PO, 35% Invoice
no contract, 25
Expense
Mixed

6. Step 2: Sort Data By Category and Add # Suppliers
Product/Category
Total
Spend
Total
Transactions
Total
Suppliers
Method of Payment
Pay Terms
Building Space
5,000,000
10
3
Invoice Contract
15 days
Production
components
4,500,000
500
35
PO
15 to 30
Servers
3,200,000
200
1
PO
30 Days
Labor and Call Center
3,000,000
12
1
Contract
10
Building Maintenance
1,200,000
1
1
Contract with PO
Quarterly in
advance
Legal and Marketing
900,000
8
3
50% contract invoice
Travel
550,000
900
4
Expense 30% Corp
Credit Card 70%
Personal card
Mixed
ERP and CRM
500,000
4
4
PO
30 Prepaid for
Year
Office Items
225,000
1000
5
40% PO, 35% Invoice
no contract, 25
Expense
Mixed
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7. Step 3: Visualize Data
Top Supplier Spend
5,000,000
3,200,000
3,000,000
2,500,000
1,200,000
700,000
Corporate
Computer
Landlord Inc. Hardware
Corp
450,000
300,000
Business Raw material
Facility Consolidated Travel Agent Enterprise
Process LLC
Corp
Management Professional
Inc.
Software
Service
Service Inc.
Giant
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125,000
Indirect
material
Warehouse

8. Step 3: Visualize Data
Spend By Category
5,300,000
4,500,000
3,200,000
3,000,000
1,200,000
900,000
550,000
Building
Space
Production
components
Servers
Labor and
Building
Legal and
Call Center Maintenance Marketing
Spend
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500,000
Travel
ERP and
CRM
225,000
Office Items

9. Step 3: Visualize Data
Category and Transaction Level
5,000,000
1200
4,500,000
1000
4,000,000
3,500,000
800
3,000,000
2,500,000
600
2,000,000
400
1,500,000
1,000,000
200
500,000
0
0
Office Items
Travel
Production
components
Servers
Total Spend
Labor and Call
Center
Legal and
Marketing
Total Transactions
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ERP and CRM
Building
Maintenance
T
r
a
n
s
a
c
t
i
o
n
s

10. Step 3: Visualize Data
Category and Total Suppliers
5,000,000
40
4,500,000
35
4,000,000
30
#
3,500,000
25
3,000,000
2,500,000
20
2,000,000
15
1,500,000
10
1,000,000
5
500,000
0
0
Office Items
Travel
Production
components
Servers
Total Spend
Labor and Call
Center
Legal and
Marketing
Total Suppliers
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ERP and CRM
Building
Maintenance
S
u
p
p
l
i
e
r
s

11. Step 4: Set Strategy
Category Spend
Supplier
Transactions
Strategies
High
Few
Few
Strategic Level
Review.
Alternatives
Longer time to
Build
Direct
Negotiations
High
Many
Many
Consolidate to
Leverage Spend
Standardization
Automate Process
Low
Many
Many
Automate
Samples Strategies but other approaches available.
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12. Step 5:Capture 3 Rounds of Savings
 Generally First Round Savings Comes Simply From greater visibility,
aligning pay terms and simple process improvements
 Second Round Savings from optimization demand and introduction of
alternatives and more detailed business process optimization
 Third Round Savings with fully realizing consolidated leverage,
alternatives with demand and process optimization
Savings By Round
30%
18%
7%
1
2
Round
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3

13. Summary
 Immediate cash conservation
 Quickly start to capture 3 rounds of savings
 Align process for scale
 Direct impact on margin growth
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