Achieving Wholesale Success: 10 Tips to Get Started
Whether you are just thinking or have decided to start running a wholesale business, there are several elements you need to spend a lot of time planning and researching before moving on. Proper planning and fact-finding ahead of time can not only save you a lot of headaches in the beginning, but it can make the difference between a successful wholesale business and a monetary disaster waiting to happen. In this article, we'll provide ten tips to help guide you along the way as you start planning your business.
They are presented in chronological order so you can use them as a way to plan the right steps along the way. Remember, success depends on many factors and the most important factor is your determination and the energy you put into making your business a success!
Step 1: ask yourself why? Why do you want to enter the wholesale business? Is it because you would like to work with other companies and producers being the main point of contact between the two? Or is it because you think it's an easy way to make money fast? Wholesaling is a demanding business and can require a lot of start-up capital, warehousing, logistics planning, and customer service skills. As the primary channel between the manufacturer and resellers, you may have to manage hundreds of thousands of units of merchandise that need to be shipped across the country at any one time. Large retailers often pay under a Net-10 or Net-30 program, which means payment is made after the products are delivered. What would you do if a retailer defaulted or went bankrupt before receiving payment?
Step 2: Study your competition There is no need to enter a market where there are already established and credible wholesalers for a particular product. Retailers want to know they have a reliable source of supply that meets their conditions, and they will often not switch wholesalers for an established product. Just because you build the warehouse doesn't mean they'll come. Use your local chamber of commerce, the internet, and even visit retailers to find out which wholesalers exist in your area. If you want to specialize in a specific product, contact the manufacturer directly to find out who manages the wholesale trade in your region. There may be none in your state, or there may be three in the same street.
Step 3: Assess your financial situation Wholesaling can require a lot of capital and start-up expenses before you even see a penny of income. Do you have the resources to spend establishing a relationship with a manufacturer who will likely require you to buy from them in bulk? Can you afford to wait up to 30 days for payment? Do you have the money to invest in shipping goods or setting up your delivery service? Be sure to look beyond the start-up costs. Employees, taxes, property rentals, and insurance are just some of the things you will need to consider as ongoing costs.
Step 4: the business plan A solid business plan is the foundation of any business. You need to make sure you have explained what you intend to do and how you intend to do it. Not only will banks request it for financing, but often other companies you deal with will want to see it as well. They must be the guidelines that you follow day by day in your business to achieve the goals you have set for yourself. For this part, it is often advisable to work with a business lawyer or seek professional advice from business consulting services. A good resource to help you find people in your area with the necessary skills and background is the Small Business Administration, which can be found on the web at http://www.sba.gov.
Step 5: Apply for licenses, tax certificates, and other necessary documents Nothing is as certain as death and taxes. It is no different in business, with one exception. As a wholesaler, you will have to pay taxes and other fees to your state and the federal government. The only exception is that you will be granted tax-exempt status for the actual goods you are moving between the manufacturer and other retailers. This can be a complicated process and is handled at the state level. Again, for this part, you'll want to make extensive use of your state's tax authority as well as local chambers of commerce. One wrong mistake here can end up costing you not only money but possibly your entire business.
Step 6: Configure your facilities Location, location, location. Businesses have to exist somewhere, and like most things in life, there are rules and regulations as to where they can be. Will you have trailers arriving at your location at all hours of the day and night? Will you have a store that suppliers and customers can call? What about the need for electricity, water, and sewage? Zoning laws exist to ensure that the right structures end up in the right places. Nobody wants a warehouse next to them in a residential neighborhood. Work with commercial real estate agencies to find a suitable location for your business.
Step 7: Establish your relationships Do you have the facilities, do you have the finances now, do you have someone providing you with products or customers for that product? Work with manufacturers and retailers to build a relationship. This can be one of the hardest parts of the experience, and this is where the rubber hits the road. Plus, relationships go beyond your customers and suppliers. It is good practice to establish relationships with the local chamber of commerce, retail associations, and trade union organizations in your area.
Step 8: marketing Wholesalers traditionally don't advertise. That doesn't mean you shouldn't promote your business to others, after all, how can you build relationships or expand existing ones? Wholesale guides are published and distributed to many retailers and this is where most of your marketing efforts will be directed. The other half should go directly to the retailers, meet the buyers, and describe your services. Just because you have a client today doesn't mean you can rest on your laurels. Marketing works hand in hand with building a relationship and maintaining it.
Step 9: The moving machine: the service of your customer's product is on its way, and retailers are placing orders. Was everything done correctly? Not really. Providing products to customers, answering questions about delivery times, and collaborating with suppliers to source new product lines is a complex and challenging part of the business. In today's just-in-time marketing model, a delay in shipping could mean the end of a business relationship. Customers should be informed of any status changes, pricing issues, and product movements from the facility to the loading dock. This is where back-end systems come into play by keeping logs and records of all activity with that client. Don't underestimate the value of a good customer relationship management (CRM) system.
Step 10: Employees, Credits, and Other Financial Matters Once everything is up and running, your next focus will be on your business finances. Employees must be hired and fired. The payroll must be respected. The money has to go in and the money has to go out. Here you should invest in talent and financial services if you don't already have them. An oversight can mean the loss of hundreds of thousands of dollars; a missed payroll deadline could mean the entire business goes to a halt. It is essential to constantly monitor the books and expenses. Know when to tighten your belt and when to expand.
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