Your Solution Expert
How To Start
a
Wholesale Business
Among the many benefits of starting a wholesale business is the ability to improve the brand value of the business by improving the customer life-time value. When you offer your retailers good customer service and are transparent with pricing and other information, they will continue to come back and even buy more. You don’t need a marketing budget if you are a wholesaler. Just offer kick-ass customer service.
What’s more, you’re able to incur low operational costs through bulk-buying, avoid excess inventory, and tap into new markets.
While all this is music to your ears, how do you get into the wholesale game? How do you start a wholesale business?
What Is a Wholesale Business?
Wholesaling refers to a business model where you buy goods or merchandise in bulk for reselling. The wholesalers purchase goods at a discounted price directly from manufacturers or distributors. Later on, they package them in small quantities and resell them at higher but discounted prices to retailers.
One thing you need to note is that most wholesalers don't manufacture goods. Instead, they concentrate on purchasing from the source and delivering to the retailers. In short, they act as the intermediary between the manufacturer and retailers.
The wholesaling process can be overwhelming if you don't plan well. Activities like drafting the business proposal, looking for rental space and the merchandise, and sourcing finances, among other issues, need careful planning. Here are helpful steps that you can use to help you stay organized and start a new wholesale business.
Choose
a Wholesaler Type and a
Product
First, choosing the product you want to sell begins with doing research. While at it, you'll discover that there are so many directions in the wholesale business. The different wholesalers you'll encounter are general merchants, brokers, etc.
All wholesalers have different approaches. The most critical question you need to ask yourself is whether you want to be a general merchandise merchant or a specialized wholesaler. Otherwise, wholesaling involves selling everything from building materials, electronics, spare parts, jewelry, food, etc.
So, do your research and whatever you decide, pick a reliable product with consistent demand and a reasonable profit.
Pick
a
Business Name and Legal Structure
The government requires that you register your wholesale business like any other business. So, the next step is to pick a unique brand name and entity and register your business.
Before you settle on a name, visit your state’s secretary of state search pages to see if another company has taken that name. Once you have established its uniqueness, move on to the next thing; entity.
Each business entity
comes with its benefits. If the business faces legal action, the entity you pick will determine whether your personal assets will be affected. You have the option to operate as a Limited Liability Company to protect yourself from legal action that could face your business.
If you settle for LLC, the government will not double tax you, unlike in corporations. On the other hand, it’s easy to create a sole proprietorship and your business dealings as a sole proprietor remain private. Choose one that fits your needs and preferences.
Whatever you settle for, research how to get the licenses and the legal documents. You can also hire a business attorney if any legal issues arise or when you need help deciding the entity that best suits you.
Create
a
Business Plan
Your wholesale business needs a strategy to stand out in the competitive market. That's why it's crucial to have a business plan.
There are two ways of writing a business plan
: write it using a business plan software program or from scratch. Whatever the case, the plan must have an executive summary, company’s background, business opportunity, marketing strategy, financial plan, competitive analysis, and operating plan.
Get Licenses and Permits
Getting a license
or permit varies from one state to the other. The most important thing is researching and completing this process to get the authority to conduct your business.
To start, you can always check with your secretary of state office, state tax office for or other business permits for your wholesale business license.
Apply For
a
n Employer Identification Number
Like all businesses, you will need to file taxes and other things. This is where the employer identification number will come in handy. However, not all entities will need to have an employer identification number. For instance, a sole proprietorship with no employees can file its taxes using the owner’s social security number.
It's essential to have an EIN
to ease your business operation, particularly when you want to conduct business with an open business credit card. The good thing is that you can complete the application process online, via fax or mail, within minutes.
Find Suppliers
The next step is to identify suppliers willing to appoint you as their product's wholesaler. As you set out, you will discover that different companies have different sales targets that they may want you to meet. Some will not be willing to supply you directly, but will refer you to their distributors.
Be cautious and ensure you calculate and factor in the profit margins before doing business with them.
Plan Logistics
How you'll transport your goods is something that you must lay down in your business plan before you start the business. The logistics plan
will depend on your proximity to your retailers and suppliers. Also, consider these other factors in your logistics plan:
The cost, speed, and history of the shipper, if you are contracting one.
The manufacturer you choose to work with, i.e., their speed, price, location, and quality.
Acquiring warehouse space. When starting, a small area will be okay. But as you grow, you'll need a bigger space, employees, and even machinery.
Hiring a business attorney to review your paperwork and registration like the business insurance requirements.
Employees are also another factor, as you'll need them to cover the day-to-day operations of the logistics network.
Leverage Technology
Modern technology will help you improve your business and speed up its growth rate. Some of the technology you can consider investing in include:
Customer management software
. It helps you store the client's data, set up automation, view lead processes, and track transactions. The technology also ensures that you don't forget your important tasks.
Inventory management.
This technology helps you stay organized by tracking your upcoming orders, incoming supplies, and stock in hand. The Erply POS system
is a good place to start as its inventory management system helps you avoid missed sales. It sends low-stock alerts to suppliers ensuring you always have stock. Whenever you want to scale your business, there will be a package that offers all the features you need, ensuring you pay for what’s necessary. Sign up for a 60-day free trial
today.
Cloud technology.
Suitable for those working from home and businesses with many locations than need to be run remotely.
Market Your Business
Promoting your brand is very crucial. To effectively market your product, try researching your targeted customer demographics to know what they want. Also, check your fierce competitor to learn their prices and the quality of their products, helping you determine how to differentiate yourself. Some ways to market your business include:
Optimizing your website by making it user-friendly and branding it properly.
Advertising in relevant industry-related publications, e.g., wholesale trade magazines
You can also use the sponsored social media posts on Twitter, Instagram, Facebook, etc
Finally, send direct mails to your potential customers about the product you are currently promoting.
In Conclusion
The steps outlined above ensure that you get a head start and stay on track. Cover the basics by registering your business entity, creating a business plan, employing technology, finding suppliers, and filing for licenses and permits.
We can't promise that it will be a smooth sail, but we can guarantee that the tips we have given you will surely help you weather the storms that come your way.