Orthodontist group a good model for small business

Economies of scale give big box stores and warehouse clubs a financial advantage over mom-and-pop merchants.

But small businesses can still compete with the big guys if they band together, as independent hardware stores and supermarkets have been doing for years. And organized buying groups can be equally beneficial to a variety of other businesses.

The hardware model is well-known, with many long-established Main Street stores organizing under the Ace, TrueValue, and Do It Best brands. By doing so, they get enough bulk buying power to compete with Home Depot and Lowe's while retaining their independence and family ownership.

The supermarket model is similar. Unlike their major rivals, including Pathmark, A&P and Stop & Shop, which are parts of large corporations, ShopRite and Foodtown are actually buying cooperatives organized by private owners of the individual stores

Less well known, but perhaps a better business model for many small business owners, is the United Orthodontic Buying Group LLC. As the name states, this is a buying service for orthodontists, organized nationally to give single practitioners the kind of deals they could never negotiate on their own.
How to do it

Here are the steps followed by the United Orthodontic Buying Group in acquiring business vendors who would provide the best quality products at the best prices. To ensure the integrity of the process, neither UOBG nor its administrator own any stock in any of its vendors, nor do they have any inside relationships with any of its vendors.

• Survey membership to identify professional or personal needs members wish to have fulfilled.

• Contact all appropriate companies in that market niche to request a pricing proposal.

• Negotiate pricing and compare the proposals on a detailed vendor evaluation form.

• Ask companies, after final proposals are submitted, if they wish to voluntarily submit any unique items, such as any expense reimbursement the buying group incurs while doing business with the chosen company.

• Award business to the company with the highest evaluation score.

• When some of the better proposals are very close in the competitive evaluation, ask the entire membership to vote on which company to select.

• Notify the entire membership so the selected vendor should be their focal point for purchasing the product or service.

Source: UOBG.org

Typical discounts can run as high as 40 percent to 60 percent.

"It is only through orthodontists uniting together that our profession has significant power and subsequent control within the business community," Dr. Jon Fischer, the UOBG administrator, said on the group's Web site, uobg.org.

The idea for a buying group grew out of an orthodontic study group in western Kentucky about 20 years ago, Fischer said.

"Particularly in the specialties -- orthodontics as a prime example -- the pricing of products and services were exceedingly high," he said. "Spreading our individual purchasing around to multiple companies, or 'shopping the market,' derived only a small and limited benefit, no matter how large the individual practice."

So the orthodontists asked suppliers, "What kind of better pricing arrangement could you give ... if the entire study club membership purchased our supplies, solely from your company?"

Based on proposals collected from the major orthodontic suppliers, the group chose to align with a single company. The larger the group, the better the deal, they decided in expanding beyond their home turf.

Now the buying group represents about 20 percent of the orthodontists in the United States and Canada, including many from North Jersey.

"This concept is no more elaborate than what the farmer's co-ops taught us in the 18th century; volume purchasing brings better pricing!" Fischer said.

"It is a financially better deal for the clinician because of better pricing and also for the company, for they achieve far greater business than they ever could without this arrangement."

Orthodontics is well-suited to this type of service because bands and brackets are a major expense, but it would work for any type of business, said Dr. Bernard Gorkowitz of Orthodontic Associates of Hasbrouck Heights, who participates in the buying group.

"Any group of businesspeople could get together to buy supplies together," he said.

With the buying group, participants get discounts on the bands and brackets they purchase through GAC International Inc., one of three major orthodontic suppliers.

In addition, they receive coupons that can also be used to purchase other dental products, including uniforms and chairs, said Dr. Gwen Cohen of Mahwah, another participant.

"I pay for all my bands and brackets and get an equivalent amount in coupon money to buy all my peripherals, for free," she said.

source;www.northjersey.com