Whether you are just thinking about, or you have decided that
you would like to start running a wholesale business, there
are a number of items that you should spend considerable time
planning and researching before going full steam ahead. Proper
planning and fact-finding up-front can not only save you from
a lot of headaches in the beginning, but can also mean the
difference between a successful wholesale business versus
a monetary disaster waiting to happen.
In this article we will provide you with ten tips to help
guide you along the way as you begin planning for your business.
They are presented in chronological order so that you can
use them as a way to plan out the proper steps along the way.
Remember, success depends on many factors - and the most important
factor is your determination and energy you put into making
your business a success!
Step: Ask Yourself Why?
Why do you want to get into the wholesaling business? It
is because you would enjoy working with other businesses
and manufacturers being the main point of contact between
the two? Or is it because you think it is an easy way to
make money quick?
Wholesaling is a demanding business, and can require lots
of up-front capital, warehousing, logistics planning and
customer service skills. As the main channel between the
manufacturer and retailers you may find yourself dealing
with hundreds of thousands of units of merchandise needing
to be shipped across the country on a moments notice. Large
retailers often pay on a Net-10 or Net-30 schedule, meaning
payment is made after the goods are delivered. What would
you do if a retailer did not pay or went bankrupt before
you received payment?
Step: Study Your Competition
It does no good to enter a market where there already exist
established, credible wholesalers for a given product. Retailers
want to know they have a dependable supply source that meets
their terms and often will not change wholesalers for an
established product. Just because you build the warehouse
does not mean they will come.
Use your local Chamber of Commerce, the Internet and even
visit with retailers to find out what wholesalers exist
in your area. If you want to specialize in a specific product,
contact the manufacturer directly to find out who handles
wholesaling for them already in your region. There may be
none in your state, or there could be three down the street.
Step: Assess your Financial Situation
Wholesaling can require a lot of up-front capital and expenditures
before you even see one cent of income. Do you have the
resources to spend on setting up a relationship with a manufacturer
who will most likely require you to buy in huge quantities from them? Can you afford to wait up to 30 days
for payment? Do you have the money to invest in shipping
freight or setting up your own delivery service?
Be sure to look past the startup costs as well. Employees,
taxes, property rental and insurance are just a few of the
things you will need to factor in as ongoing costs.
Step: The Business Plan
A solid business plan is the foundation of any business.
You need to make sure that you have spelled out what you
intend to do and how you intend to get it done. Not only
will banks require this for financing, but often other businesses
you deal with will want to see it as well. It should be
the guidelines that you follow every day in your business
to achieve the goals you have set forth.
For this part, it is often wise 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, located on the web at http://www.sba.gov
Step: Apply for Licenses, Taxing Certificates and Other
Necessary Paperwork
Nothing is as certain as death and taxes. It is no different
in business, with one exception. As a wholesaler you will
be required to pay taxes and other fees to your state and
to the federal government.
The one 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 tricky process and is
handled at the state level.
Again, for this part you will want to make extensive use
of your state taxing authority as well as local Chambers
of Commerce. One wrong mistake here can end up costing you
not only money, but possible your entire business.
Step: Establish Your Facilities
Location, location, location. Businesses must exist somewhere
and like most things in life there are rules and regulations
on where they can be. Will you be having semi-trailers coming
to your location at all hours of the day and night? Will
you have a storefront for vendors and clients to come calling
at? What about electrical, water and sewage needs?
Zoning laws exist to make sure that the right structures
end up in the right places. Nobody wants a warehouse next
door to them in a residential neighborhood. Work with commercial
real-estate agencies to find a suitable place for your business.
Step: Establish Your Relationships
You have the facilities, you have the financials - now do
you have anyone supplying you product or customers for that
product? Work with manufacturers and retailers to build
a relationship. This can be one of the most difficult parts
of the experience, and is where the rubber hits the road.
In addition, relationships extend beyond your customers
and suppliers. It is good practice to establish relations
with your local Chamber of Commerce, retail associations
and labor organizations in your area.
Step: Marketing
Wholesalers traditionally don't advertise. That doesn't
mean you shouldn't market your business to others, after
all how can you build relationships or expand on existing
ones? Wholesaling guides are published and distributed to
many retailers and this is where the bulk of your marketing
efforts will be directed.
The other half should be in going to retailers directly,
meeting with buyers and outlining your services. Just because
you have a customer today does not mean you can rest on
your laurels.
Marketing works hand in hand with building a relationship
and maintaining it.
Step: The Machine in Motion: Servicing Your Customers
Product is coming in, retailers are placing orders - we're
all done right? Not exactly. Getting the product to your
customers, answering questions about delivery timelines,
working with vendors to obtain new product lines, it is
a complex and demanding part of the business.
In today's "just in time" marketing model a delay
in shipment could mean the end to a business relationship.
You must keep your customers informed of any status changes,
pricing concerns and product movements from your facility
to their loading dock. This is where backend systems come
into play by maintaining records and logs of all activity
with that customer. Do not underestimate the value of a
good Customer Relationship Management system (CRM).
Step: Employees, Accounts Receivable and Other Financial
Matters
Once everything is up and running your next focus is your
business financials. Employees need to be hired and fired.
Payroll needs to be met. Money must come in, and money must
go out. Here you should invest in financial talent and services
if you do not possess them already.
One oversight can mean the loss of hundreds of thousands
of dollars; a missed payroll deadline could mean your entire
business comes to a halt. It is critical that you constantly
keep an eye on the books and on your expenditures. Know when
to tighten the belt, and know when to expand.
Joaquin Reveron is the President of Video Games Mystery
Corp. Trainer and wholesale marketing consultant for online
and offline purchases. A Wholesale Distributor is one of the
topics discussed at http://www.videogamesmystery.com
